Hi Everyone,

Since I last wrote you in August, the market has continued to take us on a rollercoaster ride. One day the market is down 300 points because of Greek debt fears. The next day it’s up 300 points because Greek debt fears ease.

It’s hard to know precisely what is driving the market up and down on a daily basis in spite of the media’s attempt to explain. The market tends to move in the short term based on greed and panic. It’s alternately driven to those extremes by the noise/news of the day and the ensuing momentum that’s created. Currently we are clearly in the panic mode of that binary switch.

As I stated in my last letter, the market hates uncertainty. And I believe it’s this overriding theme that is driving the market more than any one individual story. At present, U.S. corporations (the market) are in relatively good shape with lots of cash in their coffers. The problem is that they are unwilling to spend that cash on new investments and jobs until they get some clarity in the political arena. Most of the economic problems out there are eminently fixable, but for whatever reason our political leaders have not been able to muster the will to address these issues. The lack of leadership worldwide has been disappointing at best.

The bad news is that until we get some concrete steps in place to address the economic problems that confront us the market will more than likely continue its bumpy ride. The good news is that market fundamentals as measured by most historical standards look good and in the long run the market will follow those standards. In other words, if we can make it through this period of uncertainty there will be ample rewards down the road. One other immediate benefit to the current malaise is that 30 year mortgage rates have come down to 4% and below. If you were thinking of refinancing now is the time to do it.

I’ve been in and around the investment management business for the last 30 years and I’m sorry to report that the emotional component of investing never diminishes. When the market goes up we feel secure, when the market goes down we feel at risk. But, one of the other things I’ve learned during that period, is that if we let our intellect override our fears there is usually a substantial reward at the end of the turmoil. If you’d like to discuss things in more detail please give me a call.

Your Partner in Emotional Fortitude,

Jim McCusker