Investment Recap Second Quarter 2008

The second quarter was positive for our stocks versus -2.7% for the S&P500 and -1.7% for the Russell 3000. (It would have been even better if not for substantial market retrenchment during the last two weeks of June.) As we noted in last quarter’s comments, we added to stocks early this year, and we have taken some profits during the past quarter. The market “bottomed” in January, and again in March during the Bear Stearns bail-out. Since then we had a more than 10% rally, but the extraordinary rise in oil prices, coupled with the threat of interdiction in Iran, and generally negative economic rhetoric from the two political candidates have put us back into a market malaise.
In our opinion, investors are getting themselves overly pessimistic and depressed over the continued unwinding of the financial crisis, the headlines related to the housing bust, and the growing reality of a U.S. recession. We would point to the prospect of intervention to prop up the dollar, thereby lowering oil prices (which are in a bubble, not unlike tech in the 90’s), the ongoing repair of financial company balance sheets, and the likelihood of some opportunistic, headline grabbing, mergers and acquisitions in the coming months, turning pessimism into optimism, and “fear into greed.”