The Cornerstone October 2011 “Connect the Dots Forward” If you have not heard of “TED”, I encourage you to go to the website, www.ted.com and listen to some of the speakers they feature. I just listened, again, to Steve Jobs: “How to live before you die”, a very moving presentation especially given his recent passing. “Connecting the dots forward”, is one of his themes. He speaks how we can only connect the dots backward, and we have to trust that the dots we lay down today will connect down the road, especially when we are pulled in other directions. I think that investing always has been that way. We listen to experts and politicians, read charts and analyst predictions and then try our best to make reasoned decisions and – try to connect the dots forward. This leads me to investor psychology, which is very important, because naturally we want to do what “smart” money is doing and avoid what is not working. It sounds easy and rational, but sometimes it’s hard to sort out the noise and volatility of the day-to-day in order to see where to go. I think “Smart Money”, are those investors who tend to look long-term, see the value in an investment, and take into account the management, growth, dividends and future prospects of a company. Sometimes we buy or sell too early or too late, especially with the rapid changes in our economy, but with good quality investments and time, long-term holders usually do very well. These are individual investors who have defined their goals and objectives, their risk parameters and invest with them in mind. Institutional investors, such as pension funds, money managers and companies that buy back their own stock, also have an advantage with their long-term viewpoints. Sir John Templeton, of Franklin Funds and value buying fame once said: “People are always asking me where the outlook is good, but that’s the wrong question. The right question is: Where is the outlook most miserable?” Well you don’t have to look very far this year to find misery, and it’s difficult to be optimistic when we are getting buffeted by the winds of negativity. But waiting until things feel better will usually guarantee you will buy at higher prices. The earning season is fast approaching and for me, it’s hard for me to be bearish when according to money manager Louis Navellier, the S&P’s third-quarter earnings are expected to be about 13% higher than last year’s third quarter. In addition, he reports that S&P stocks are trading at historically low levels of approximately 10.2 times 2012 earnings – this is 25% below the average in the last 9 recessions. I believe these numbers are clear indications that the advantage in this tug-of-war is with the bulls, and stocks will be going higher. With the coming year end, (October already?), it’s important that we attend to investment and tax planning. We will be making calls for appointments but please, if you have the time, call us to arrange a review so that we can go into the New Year well prepared. We look forward to working with you, as always-Thank you very much for your business. Phil 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. The S & P 500 is an unmanaged index which cannot be invested into directly.