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Our economy is built on consumer confidence and we are currently experiencing a national crisis of confidence. You buy a home because you believe it will appreciate in value, you purchase stock because you believe it will outperform “riskless” investments, and when you deposit money into your neighborhood bank you expect it to be safe. Recent events have cast doubt on these very cornerstones of our economic system and have created a level of concern we have not seen in many years. With the government having to come to the aid of Bear Stearns, Fannie Mae, Freddie Mac and a number of banks, it is not surprising investors have pull in their horns.
After weathering the worst June in 75 years, and the worst single month in 6 years, the selling continued into July and on the 15th of the month the market hit a new low for the year, down over 18%, and nearly 24% off the October 2007 high. News that the Federal Government was willing to come to the aid of Fannie Mae and Freddie Mac, combined with an SEC ruling limiting short selling in numerous financial stocks, resulted in one of the strongest rallies in financial stocks in years. This financial rally translated into a rally in the general market and in 5 trading days we regained all of the ground we had lost in July. However, the confidence that created this rally was short lived and all of the old concerns quickly re-emerged and the selling once again commenced. At month end the S&P was down 1% for the month and 13.7% for the year.
There have been two major issues weighing on the market this year, record high oil prices and concern about the solvency of our financial system. With oil prices down a dramatic 16% from the all time high just a few weeks ago and the markets continuing to weaken, it is obvious concerns about our financial system have taken center stage. The good news is that much of the bad news regarding the financial sector appears to already be in the stock prices. The bad news is the best “quick fix” for what ails us is a recovery in real estate prices and that does not seem to be in the immediate future. With that said, we believe the perception is much more severe than the reality and, as with other issues our country has faced, this too shall pass. We are using the current market weakness to invest some of our available cash and to assure our clients are properly allocated. If we do indeed want to “buy low and sell high”, this is a time for buying, not selling.
As always, the key to successful investing is to have a portfolio that is consistent with your investment objectives and risk tolerance. Your individual investment objective is shown on your account statement, please let us know immediately if that objective changes. In addition, we encourage you to take advantage of free internet access to your account(s) by going to our website at www.greenbergfinancial.com and registering for this free service. Lastly, we invite you to listen to our weekly Money Matters radio show each Sunday morning from 8:30 to 10:00 on both 1290 AM and 1400 AM. Numerous investment tools are also available on our website. Please feel free to call us at (520) 544-4909.
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525-5263
(520) 544-4909
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Greenberg Financial
Group
4511 N. Campbell Ave. Suite 255
Tucson, Arizona 85718
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