12/17/2009 Historical Post

From: Dale Beals Financial Wisdom

Subject: Seasons Greetings

Date: December 17, 2009
Dear Clients and Friends,

Happy Holidays! I pray God’s blessings on you and your family during this special time when my family celebrates the Incarnation of God as Jesus the Messiah.
It’s been a wild year in the markets, with very good gains in most stock indexes. Here is an interesting chart to put things in perspective from www.dshort.com

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The chart beautifully shows Four Bad Bear Markets over the last 90 years, with the blue line representing where we have been recently.  Isn’t it amazing that we are still down about -29% from the top in 2007 after all the recent gains this year?
A year or so ago, I wrote you that we don’t believe in predicting the future and then making big bets with your money. Instead, I wrote, we develop possible scenarios and let the market tell us which scenarios appear most likely. Then, we adjust our asset allocation to benefit from the most likely scenarios, while staying flexible all the time. This approach allowed our clients to avoid big losses in 2007 and 2008, so we are doing OK, even without huge gains this year… we’ve still beaten the market as defined by the S&P 500 and slept much better than many folks. (Past performance is no guarantee of future results)
Right now, we seem to be at a tipping point between three almost equally likely scenarios:
1. Inflation becoming very high with rising interest rates and potential damage to the US Dollar;
2. Prosperity returning, with mild inflation, stable interest rates, and gradually improving employment.
3. Recession / Depression with another downturn in asset prices and the economy.
Right now, the US Stock market has been chopping sideways for about 6 weeks in a very narrow range.  In fact, it hasn’t done this since the top in October 2007.
So, while I can’t predict which scenario will win, I do expect a fairly big move one way or the other when one scenario begins to win out over the others.
My Holiday Question to you: Is your investment strategy flexible enough to make you money whichever way things go?
If you are with our firm, I believe the answer is “Yes!”. If you aren’t, check our web site and give us a call during the holidays.
Merry Christmas.
Dale