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Recent Newsletter

The Decade that Was


The Decade that Was

Have you ever been sitting on the couch watching your favorite sports team as they push down the field, drive the lane, or rally from behind? You know the scene. You have chips and dip on the coffee table and popcorn in your hands. You turn the TV volume up loud and ignore any phone calls. Then as your team scores the winning points, you throw up your hands and say,“We won!”But you weren’t out there on the field or on the court. You were in your living room watching the game on TV. And yet somehow, when they won, you won. This type of experience is called “identification.” You have shirts or hats with the team logo (identification) on it. You identify with your favorite team. You see yourself in them.

As a financial management team for our clients, we view our relationship with them in the same way. When our clients win, we win. Conversely, when they lose, we lose. After the recent tumul­tuous 2008, it is nice to be back on the winning team.

While the equity markets have not yet recovered their highs, the S&P 500 and other major stock indices have risen significantly from their lows in March 2009. What a breath of fresh air!

SO WHAT WAS DIFFERENT ABOUT 2009 compared to 2008? Back when then Bill Clinton was aiming to unseat Bush 41, James Carville, Clinton campaign strategist, coined the phrase, “It’s the economy, stupid.”1This year, it’s the economy.

It’s long been known that the stock market is a leading indicator of economic activity by about six to nine months months.2

Hmmm. Stock market recovers March of 2009. Unemployment rate drops December 2009. Nine months. Looks like the economy, doesn’t it?

Are we out of the woods yet? I don’t know. Do we face another 4Q 2008? I certainly hope not, but remember, my crystal ball is no better than any other. We cross our fingers and hope that the worst is over.

So the question is similar to the one asked of every Super Bowl winner: Can we do it again next year? We certainly hope so! Another year like 2009 and we are recovered from 2008.

HOW LONG WILL THE GOOD TIMES LAST? Truth be told, “good times” are not back. Yes, times were certainly far better in 2009 than 2008, but a look at this first decade of the 21stcentury is sobering.

In a commentary on “the decade that was,” Ron Surz3, President of PPCA, Inc. said, “The U.S. stock market, as measured by the S&P 500, earned 26.5% in 2009, rebounding from a 37% loss in 2008. This recovery was not enough to restore previous losses, however, so we’ve ended the decade with an average annualized loss on the S&P of 1% per year, well below the 84-year long term average return of 9.8% per year. By contrast, bond performance for the year (4%) and the decade (7.4%) was in line with historical averages (6.1%), as was inflation (2.8%). Completing the picture, we’re paying the government to use their mattress, with Treasury bills yielding 0.15% for 2009.”4

What’s the game plan for 2010 and beyond?

Getting back to a statement we made earlier: “When our clients win, we win.” One of the ways we believe we help people win is to encourage them to take a long-term view.

We can liken the difference between long-term and short-term market approaches to a series of stepping stones. Imagine that each stone is a three-month period (calendar quarter). Stepping forward means your portfolio rises in value; stepping back implies a loss. It is expected that for every two or three steps forward to take one step backward. Sometimes, rarely but as we did in 2008, we take a lot of steps backward. For the long-term investor, these steps, while painful, are part of the process. Over time, we can hope all of the steps taken together will lead you to your ultimate long-term goal.

What’s wrong with having a short-term focus? You can easily get sidetracked from your long-term goals. Short-term investors, fearful of a possible drop in stock prices, may take overly bold steps to avoid such a drop.


Hoping to guard against losses, they may try to buy stocks before they skyrocket in price or stay out of the markets to keep from losing money. With stock market volatility a fact of life, you may be surprised that if you are sitting on the sidelines when big daily gains occur, your overall performance could be seriously damaged, as those who were sitting on the sidelines the past nine months can attest.

Our goal throughout 2010 and beyond remains constant—to provide our clients with the best tools, services and advice available to achieve “financial security.” We’ve worked extremely hard during these past couple of years to make sure our clients’ portfolios are properly allocated and believe it will be increasingly important for us to continue monitoring those allocations with the intent to recover asset values and return to a growth mode.

So to conclude this rather lengthy but informative letter, we again stress our commitment to our clients as we work to help them achieve their long-term goals. Obviously, we’re optimistic about the future—we believe with good reason. However, one of the ways we try to help protect our clients’ portfolios from any unforeseen events is our old friend, DIVERSIFICATION. While it doesn’t guarantee or prevent losses, it may help cushion any blows.

We pray that 2010 will be a blessed year for you and your family. We’re here to help, so please call us anytime at «401.943.2210» if you have questions or concerns.


P.S. Now is a good time to re-evaluate your 401ks, IRAs, mutual funds and other holdings to make sure that you are in the appropriate investment vehicles based on your investment objectives. If you are unsure of your current portfolio, whether you’re properly diversified, or whether you’re positioned to take advantage of the next economic cycle, please call our office at «401.943.2210»to schedule a review of your situation.




3Ronald J. Surz is president of PPCA Inc, widely published author and long-time industry veteran. Read his bio here: http://bit.ly/RonSurz

4Surz, Ron, http://bit.ly/Perspectives2009

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