Follow-up: Understand the Commotion in the Economy

Monday, 22 September 2008

Dear Clients and Friends,

Thank you for your responses to our email message to you of the other day.  I would like to make a few additional observations about recent days. But first, I would like to share something. Typical of the responses to our email has been the following email from a client (who spent a 30-year career as a banker):

“Thank you VERY much for sending out this update!  Interestingly enough, both R____ and I have been able to watch the recent "financial game shows" without worry or stress. Like I said when we started our working relationship together, we don't mind if our funds do not grow very much, or they stay static; we will be content as long as we do not lose any principal.”
--D. A., St. George, UT  9/18/08

I would like to emphasize that we have every expectation that anyone with traditional-fixed or indexed-fixed annuities will be receiving a respectable return on their account, and not just stay static, but this person had the right perspective because they were focused on the safety of their principal. My main point in  the message of the other day was to reassure you that your principal is not at risk.  In fact, always remember that before anyone can ever get any return on their account, they must first protect their principal!   It’s the principal that must be protected!

Especially if you are a retiree, you must continue to emphasize safety and protection of principal before anything else.  As comedian Will Rogers once said, “I am more interested in the return of my principal than the return on my principal.”  This is what you have hired us to accomplish for you, no matter the tossing about of the economy.  We would like to emphasize that there is no place else, in our opinion, that assures you safety of your principal in the days ahead than how we have positioned your assets… not bank savings accounts, not money market funds, not gold or precious metals, and certainly not stocks, bonds, or real estate. 

So, now is not the time to take risks, no-matter what some newsletter might be saying about “how to profit from the coming crash”!  Stay away from those that would point out some road to easy money at this time.  Many people are especially vulnerable in times like this to “inside tips” in newsletters or late-night infomercials because people will invest on the “hope” of making a gain through some “secret” strategy. Don’t fall for it!  Stick with tried & tested approaches with a proven track record through times like this.

So, while all about us in the economy are losing their heads and panicking, and therefore will be the ones most hurt in any volatility, let’s keep ours planted firmly in the most sensible and safest solutions available to us.  As the couple above noted, you must ignore the sensationalism of the press that must keep their ratings up. (As you know, in my other articles I have not said there isn’t a problem in the economy; quite to the contrary.  I have merely emphasized that you are positioned in the safest place available, a place that rode through the Great Depression without loss of principal.)

Our firm has been through many of these period before: the 79-81 hyper-inflation period, the 87 market crash of 23% in a single day, the 89-91 Savings & Loan debacle, the 2000-2002 prolonged crash after the over-speculation dot-com burst of the late 1990’s, and several bear markets in between.  We have yet to see anything like what we saw in those periods. You’ve hired us as professionals to take you through these periods.  We will do this.

Once again, keep current by visiting our website often where we will occasionally post commentary to our blog.  This week we will post to our blog a piece titled “Crisis Investing.”   It is a piece I prepared on 9/11/2001, and my staff had it mailed out to all clients by 4:00 PM that day. You will find it of interest, and reassuring.

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