Late September 2011 – Economic Update Why do we have volatile markets? One reason is due to large buy and sell programs initiated by computers and unfortunately, these electronic manipulations cause more movement than the markets deserve at times. There is talk of limiting these entities from trading in this fashion, but so far, little has been done to curb this activity. Of course, over time, it is believed that the computers will have little effect on a major trend, so it seems we have to endure volatile markets at times and try to see past them. The Federal Reserve, last Wednesday, released that they would enact the “Twist”. This is an action designed to raise short term interest rates and lower long term interest rates. For the most part, investment professionals think this is a positive action but the additional release by the Fed of current economic conditions in a negative tone was received poorly by the markets. News of China showing a slowdown in growth is also causing concerns and is thought to be some of the reason behind the weakness in gold prices this week. Europe’s news has not improved, which is why where possible we have lowered exposure there along with reducing the BRIC holdings (Brazil, Russia, India and China). Long term, we think these will be areas of continued growth, but it makes sense to be a bit more careful through this volatile period. Through the next month or months, we think we will continue to see markets rise and fall, but along the way we are hopeful that some solutions will start to emerge and the world will look less ugly. Many of our media outlets know that “bad news sells” and unfortunately there doesn’t seem to be a shortage of that these days – but behind the scenes, there is some good news. Corporate profits remain strong and interest rates are low. Many corporations are taking advantage of these conditions and issuing debt (bonds) at record low interest rates. The proceeds of these debt offerings are used to buy back their stock at cheap prices or they even are buying other companies at what they consider to be bargain prices. Additionally, corporate insiders have been aggressive buyers of their company’s stock. There is only one reason to buy stock of the company you work for – you think it is low in price and you think it will ultimately go up. So, we wait. One prognosticator that I frequently read believes this process will take us through Thanksgiving. This is around the time the Super Committee of Congress promises to have made some decisions by regarding the debt and deficit. If between now and then you have questions or concerns, do not hesitate to contact us – we will be here to respond to you. – Mark The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. * Stock investing involves risk including loss of principal. LPL Financial Research and Yahoo Finance.