newsletter
A Few Comments
October 2008
Enclosed is our fall KMS Client Quarterly Newsletter. Just a few comments…
Did Anybody Hear a Whistle? Wouldn’t it be great if we had a
whistle to let us know when a market top or market bottom has been
reached? Of course, if there were
such a whistle there would be no market because all of the buyers and sellers
would be gone at the same time.
After all, it’s the difference of opinion that makes the market in
the first place. For
every seller there has to be a buyer and vice versa. That’s why we continue to stress
having a sound investment strategy and sticking with it rather than getting
caught up in the short term trading trends.
A Chance to Capture Some Capital Gains Tax-free While
the tax considerations of when to sell a security or an investment is one of
the factors in the decision, you don’t want to let the tail start wagging
the dog. It’s not the primary
decision.
Term Life Insurance Rates Have Been Falling for Years We recommend checking
your term life insurance rates every three to five years. If you’re still in good health,
it’s quite possible you can buy the same insurance for a lower
premium. However, cost is not the
sole determinate when deciding whether or not to change life insurance
companies. So be sure to check with
us before a change is made, the change must be done carefully to avoid unwanted
consequences.
Global Growth Adding to Global Girth Isn’t it
interesting that as we become more affluent we become more obese? Something we have to work really hard at
to overcome.
As usual, if you have any questions or concerns, be sure to
give us a call.
P.S. As you know,
the news has been extremely negative the last several weeks. Markets are making wild swings, but we
have not changed our positions or strategy and we’re not recommending any
changes for you at this point.
Remember, making investment decisions in the midst of market turmoil
without having a good strategy in place is generally not the best thing to
do.
We have been through markets like this in the past and we
will get through this one hopefully in the near future. Remember what Sir John Templeton said in
March 1994, “This time is different are among the most costly four words
in market history”.
A good friend and client, who is a realtor, once told us,
“People aren’t going to stop buying homes and people aren’t
going to stop investing in the stock market.”
P.S.S In addition to our quarterly
newsletter, we have enclosed a letter from Jim Rothenberg, Chairman and
Principal Executive Officer of Capital Research and Management Company (the investment
adviser to American Funds). It’s
comforting to know that investment managers do their best to remain
level-headed during times like this.
Oops! We apologize for the error in our August newsletter with the dates on the Notable Events in the History of American Taxation showing futuristic dates. Listed in order are the correct dates. 1787, 1791, 1815, 1828, 1862, 1881, 1913, 1917, 1926, 1936, 1945, 1964, 1974, 1981, 1986, 1990, 1993, 2001.
A message about the current
market from the chairman of Capital Research and Management Company
Dear
American Funds shareholders,
During
my 39 years with American Funds, I have seen many turbulent markets and know
how hard it is to avoid getting caught up in the here and now. This is
especially true when the media bombards us hourly with news, speculation, and
rumor. I also know, though, that as long-term investors we must focus on the
real world underneath the noise and mesmerizing flow of data.
That’s
why I think it’s helpful to share a few thoughts about the current
market.
Let
me begin by reflecting on some other challenging moments that are seared into
my memory. I remember the collapse of the Nifty Fifty in the early 1970s, the
first and second oil shocks in the 1970s, the savings and loan crisis in the
late 1980s, and the tech bubble that ended in March 2000.
Each
of these experiences was different, but there was a common lesson in all of
them. In each case, investors and our financial system survived. We will
survive this moment as well.
As
I look forward, I think it’s important to note some of the emerging
economic forces that may indicate that we are beginning to find a way out of
this situation.
The
outlook for inflation, oil and commodity prices is generally improving. The
housing market, although still in turmoil, is behaving logically. Inventories
of unsold homes are large. In response, housing permits and starts are at
record lows, and home prices have fallen. With lower prices and declining mortgage
rates, housing sales are starting to show signs of life, which over time will
clear inventory out of the system.
On
another front, our government has broken new ground in its efforts to solve the
nation’s financial problems, and I believe it will continue to provide
needed liquidity, particularly as the specter of inflation and stagflation
recedes. I’m far from being a Pollyanna and I certainly recognize the
brisk headwinds and crosscurrents we face. In fact, when this turbulence
settles down, I believe the pace of economic activity will be slower. In
addition, investment results almost certainly will be lower than the
double-digit annual returns that some investors may have come to expect during
the past 15 to 20 years.
I
mentioned earlier that each period of market turbulence is unique, but the same
question tantalizes us: When will this end? No one can predict market turns
with certainty. Perhaps the best example is offered by one of the darkest
moments in our nation’s history. In April 1942, we were at war and we
were losing.
The
emotions of the moment always distract us from our purpose. Knowing that, I
sincerely believe that staying the course is the right plan. I am convinced
that over time we will get through the present financial problems, and our
nation and individual investors will prosper again.
My
message to our shareholders, clients, and financial advisers is the same. When
the market is in turmoil, we think you turn to us not to do something
different, but to do what we have always done: Pay attention to risk, rely on a
thorough and global research effort, and invest for the long term.
Investing
is always full of ups and downs, but over time, well-diversified portfolios
managed by prudent organizations can provide the answers for the needs of many.
We need the courage to stay focused, not solely on the markets, but on the
research process that has been the backbone of our shareholders’ success
for decades.
Jim Rothenberg
Chairman and Principal Executive Officer, Capital Research and Management
Company
Investors should carefully consider the investment
objectives, risks, charges and expenses of the American Funds. This and other
important information is contained in the prospectuses,
which can be obtained from your financial professional and should be read
carefully before investing.
Securities
through KMS Financial Services Inc.
520.884.7550
jpw@financial-architects.com brienne@financial-architects.com
3971 E. Paradise Falls,