MARKET UPDATE 2002
This is certainly a very anxious time in the marketplace. Please be assured, I am not "asleep at the wheel" and I do not like what is happening now anymore than any of you. Many of you may be wondering what is going to happen and how it's going to affect your account.
This bear market will surely go down as one of the longest in our history and when it will end nobody knows for sure, but my experience tells me it will be when everyone least expects it.
You have many valid questions and concerns, and I hope the following comments by President Bush made on June 26th, 2002 at the Group of Eight Summit will help lessen some of your fears. Reported by Federal News Service, June 26th, 2002:
"The market isn't as strong as it should be for three reasons. One, corporate profits. There is no question some sectors of our economy are recovering (slowly) from the slow-down, but they'll recover.
"Secondly, there are still some concerns as to whether or not the United States and our friends and allies will be able to prevent further terrorist attacks. There are some concerns about the capacity of the enemy to hit us again. And I want to assure American investors and our friends that we're doing everything we possibly can. The Government's on full alert, attempting to run down every hint and every lead.
"And thirdly, there are some concerned about the validity of the balance sheets of corporate America, and I can understand why. We've had too many cases of people abusing their responsibilities and people just need to know the SEC is on it.
"Our Government's on it. After all, Arthur Andersen has been prosecuted. We will pursue within in our laws those who are irresponsible.
"Having said that, I do believe the economy is strong, and I know that most people that run businesses in American are aboveboard, honest, care deeply about their employees and shareholders." George W. Bush, June 26, 2002.
It is difficult to see the future when you are caught in the middle of a major storm. You can't think clearly; yet rational, clear thinkers will view this financial storm as a major opportunity to get in the market--not get out. Remember the definition of investing…Using your capital to achieve your long-term goals and dreams. Dreams such as educating your kids and grandkids…being able to do what you want to do, when you want to do it in your golden years and not being afraid you won't have enough money to do it…
While many of us should candidly evaluate our true tolerance for risk and investing time frames, confronting the short-term painful periods such as these is the price we pay for the superior long-term gains, which historically have come from investing in securities of all types for extended periods of time.
In August 2000 I did a newsletter on Bear Markets and included the brochure published by Forum for Investor Advise, entitled Bear Essentials. It may be a good time to summarize that brochure.
The six essentials that they recommended were:
1-Stay cool, the Bear may not affect you, Diversification makes a difference, Investment income cushions market downturns, Take comfort in history.
2-Call for Help, Most financial planners know a lot about bears.
3-Get some perspective, Bears are pretty common, With your financial professional, look at how your investment has done during previous market downturns, Time is your ally.
4-Move slowly and with great care, The worst thing you can do is panic, Doing nothing can help you keep tax consequences to a minimum, If you're a mutual fund investor, explore exchanging shares from one fund for another fund in the same group, Remember what has always followed a market decline: a market gain.
5-Consider actually feeding the bear, Investing when share prices are low buys you more shares, You may be able to increase stability by adding bonds or international securities to your portfolio.
6-Remember that the bear will eventually go away, Sooner or later, all bears go back into hibernation. It’s a matter of when.
If you would like another copy of this brochure I still have just a few left and would be glad to send you one.
Also Valueline June 28 Conclusion quote "Clearly, there are some risks for investors to consider at this time. There also are opportunities occasioned by a positive interest-rate outlook supportive inflation data, the likely durability of the business cycle, and the promise of improving corporate profits. Investor patience is needed, but should be rewarded."
As usual, if you feel a need to talk, just give me a call.
P.S. You can visit most of our past newsletters, as well as other helpful items by visiting our web site at www.financial-architects.com.
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jpw@financial-architects.com
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