Summit Wealth Management, Jacksonville | formerly Eagle Wealth Management, Inc., Joseph M. "Jette" Browne, CFP®

Happy New Year Everyone!

As many of you know, I enjoy playing golf, even with my fairly high handicap. One of the things I like about golf is it’s a game of honor. There are no referees. You keep your own score, call your own penalties and play the ball as it lies. I think the same principles should apply in managing money.

I hope I’m not dating myself too much if I say that the Stanley Kubrick epic science fiction film “2001: A Space Odyssey” is one of my all time favorites. One of the most memorable parts of the film for me was when the HAL 9000 computer revolts against the astronauts and attempts to lock the lead astronaut, Dave, outside the space ship, marooning him in space. Well the modern day version of HAL appears to be trying to take over on Wall Street, too.

My stepfather passed away this year back in October. He was 98 and had lived a long and active life. Born a year before the Titanic sank, he graduated from college during the Great Depression and served with distinction in World War II... But it was in his years of retirement that I learned or reconfirmed fundamental lessons about life in retirement which help me advise clients preparing to navigate through this same phase of their lives.

I’m not particularly fond of thriller movies, probably because I still remember so vividly how frightened I was by the “shower scene” in Alfred Hitchcock’s famous movie “Psycho” which I saw when I was 18 years old. If you are a fan of thriller movies, you know that the quiet mood and music just prior to the violent scene gives away a sense that something is not quite right and you ready yourself for something dramatic getting ready to happen.

The investment environment so far in 2009 has been pretty choppy, to put it mildly. We saw the collapse of a stock market rally that began back in November and now we’re into another bear market rally that began in March. This rally, too, looks a little shaky and I personally suspect it will collapse the way the last one did. So what is our strategy?

In one of his most famous wartime speeches, Prime Minister Winston Churchill, after the first victory by British soldiers over a Nazi army in Egypt, told his audience that this victory was not the end, it was not even the beginning of the end, but he felt it was probably the end of the beginning.

With all the stressful news these days about the “credit crisis” and the serious risks it is bringing to our overall economy, I thought it might be helpful to try to simplify all of this a bit and thus reduce our stress.

Successful investors over the full market cycle, both up and down, tend to be those who play good defense when a market is in a correction like the one we’ve been experiencing of late.

I like to tell folks that the best money you make in the market is the money you don’t lose during a correction and the math really bears this out (no pun intended).

The stock markets have been selling off very heavily over the last several weeks and I know from experience that this sort of sell off and all the heavy media attention it attracts tends to make investors anxious and worried. So, I wanted to touch base with everyone to assess what’s happening, what we’re doing about it, and why I believe it will all come out okay.

During the first half of the year, euphoria reigned in the markets based largely on speculation about mergers and acquisitions (M & A) strategies. Hedge funds and other institutional investors were pouring money into the market chasing these M & A expectations and the market indices ran up nicely. Meanwhile, the ominous matter of a collapsing residential real estate market went largely ignored. Besides, the party was going so well and the wine was so very fine.

Finally in late July the black horsemen of sub prime mortgages crashed into the party and the revelers were cut down on the dance floor.

The securities markets have been making some wild moves, both up and down, recently and all of this volatility is getting a lot of attention in the media. At times like these, I like to touch base with everyone and share what I see is going on.

In the “ElephantWatch” newsletter last year, I discussed the dominant role of institutional investors and hedge funds in the current market place.Well, once again, some of this crowd has gotten into trouble and the markets are reacting.

Although stock prices generally rallied last quarter, a pretty severe pull back occurred in the bond markets. That caused virtually all bonds and bond funds to decline in value for the first time in almost a year. It seems that the fixed income markets have gotten pretty nervous, in part because of serious concern about the health of mortgage backed securities, especially those backed by mortgages to sub prime borrowers.

As I began to compose this quarter’s newsletter, a popup alert from the Wall Street Journal appeared on my screen announcing that the Dow Jones Industrial Average was down for the quarter for the first time since June 2005. The actual decline was quite small and this alert reflects the general tendency of the financial media to over hype what’s happening to the Dow. No serious money manager pays much attention to the Dow because it’s composed of only 30 companies, most of which are old mature blue chip stocks which don’t reflect very accurately what the economy or the market as a whole is doing.

The real question is, what does a moderating of the stock market imply for our investments going forward?

As 2006 draws to a close, I would like to thank you all personally for the special trust and confidence you have placed in me as your investment advisor. 2006 has been a very busy year for Eagle Wealth Management with much to be thankful for and for many lessons learned which we can apply going forward.

One lesson learned was an old lesson...

One of the most profound experiences I had in this business was in the late summer and early fall of 2000: the S&P 500 index made a run at its all time high much as the Dow Jones Industrial Average has been doing lately. Technology stocks were on the rise, cheered on by broadcast analysts. I became swept up in this enthusiasm and positioned my clients into portfolios of the most popular growth stocks of that time to help them enjoy the good ride up in wealth.

But there were warning signs out…

A reminder to keep an eye on the herd and be patient!
The stock markets have been pretty bumpy the last few months and that reminds us of the importance of patience and discipline in our investment process. Since May 10th, all the indexes are down, with the small capitalization stocks down the most at about 12% over this period. The softening of the real estate markets and the general concern about the pace of consumer spending has created a decidedly cautious tone for investors.

A primary goal of this newsletter is to share the process behind what I am doing, what I am researching and learning, and how I am applying all of this to each client’s wealth management goals...