To All Clients:You will be pleased to know your rate of return for 2008 was 8.92%Thank you all for empowering me to re-balance accounts when needed to achieve positive results in this down market. First, a brief about what has happened over the last couple of years and where we are today. We know that there is a grand super cycle of valuation in the stock market. Stocks go from cheap to expensive in the course of many decades. Now they are going through a great revaluation. In May 1974-82 era, stock indexes in the broad and diversified US market traded at less than 10 times earnings and yielded more than 5%. In the 2000-08 peak, prices soared above the 20 times earnings and industrial stock yields dropped well below 2%. Stocks are in the process of returning to similar levels. This bear trend is worldwide and encompasses every sector of industry. With FTSE global index down 44% year to date, (the global index excluding the US market is down 48%). Basic materials are down 52%, financials down 49%, oil and gas 48%, industrials 46%, utilities 43%, telecommunications 45%, and technology 41%. There is no guarantee it is going to stop here. Due to the factors evident outlined in the second paragraph above we have maintained a defensive stance and preserved your capital. If you look at your ending June ‘06 to June ’07 statement you will see that your return was in excess of 10%. That was the end as you can see by your December 31, 2007 statement showing returns of just over 2%. However, we are very pleased to position our clients with a positive return this year as indicated above. In light of worldwide financial crisis I will be keeping us parked in fixed income Government of Canada bonds segregated funds. A segregated fund simply means that the assets are segregated from the financial institutions assets. For example, the bond fund we are currently parked in has considerable assets. But those assets are individually owned by each unit holder. Even if the Life Insurance Company went bankrupt it would not affect that bond fund. What will rates of return be for the next few years? Even for the most experience veterans it's a real guessing game today trying to buy and sell at the right time for profit. We will endeavor to pick our spots and keep you ahead of the game. Buying opportunities will present themselves when the markets hit rock bottom. The TSX has gone from 14,000 to as low as 8,500 in 2008. Some say it could hit 5,700. I will watch this closely for you. If you have any questions, please do not hesitate to call. Sincerely, Keith L. Hatton, CLU, CHFC, CFP, TEP Chartered Financial Consultant |