Why Patience is a Virtue

1. While we can�t guarantee future results, historically, long-term investors have been rewarded for staying in the market. As illustrated, the chance of assets losing capital in the stock market diminishes over time. During periods of market volatility, investors may feel uncertain about their investments and be tempted to sell. Turn to your financial advisor to help remain 100 percent focused on your long-term goals.While we can�t guarantee future results, historically, long-term investors have been rewarded for staying in the market. As illustrated, the chance of assets losing capital in the stock market diminishes over time. During periods of market volatility, investors may feel uncertain about their investments and be tempted to sell. Turn to your financial advisor to help remain 100 percent focused on your long-term goals.

2. Varying investments respond differently to market upheavals. Illustrated here, the Dow Jones Industrial Average and NASDAQ demonstrate how stocks have often closed down following significant historical events. Note, however, that over time the upward trend is significant. If you have concerns regarding your investments, talk to your financial advisor today. Their experience, knowledge and understanding will help you to plan for your investment objectives and allow you to take control of tomorrow�s opportunities.Varying investments respond differently to market upheavals. Illustrated here, the Dow Jones Industrial Average and NASDAQ demonstrate how stocks have often closed down following significant historical events. Note, however, that over time the upward trend is significant. If you have concerns regarding your investments, talk to your financial advisor today. Their experience, knowledge and understanding will help you to plan for your investment objectives and allow you to take control of tomorrow�s opportunities.

3. Sometimes the obvious thing to do in investing is not the right thing to do. This is largely due to the emotional element of investing. When markets decline and investors get the most fearful, these are actually the best entry points for long term investors, although emotion tells investors the exact opposite. The reverse is true for strong markets, as rising prices of stocks often lead to optimism and buying at high prices. We encourage a long term stance in investing to weather the downturns and benefit from the upswings.Sometimes the obvious thing to do in investing is not the right thing to do. This is largely due to the emotional element of investing. When markets decline and investors get the most fearful, these are actually the best entry points for long term investors, although emotion tells investors the exact opposite. The reverse is true for strong markets, as rising prices of stocks often lead to optimism and buying at high prices. We encourage a long term stance in investing to weather the downturns and benefit from the upswings.

4. The financial markets are almost always climbing some wall of worry. It has been a particularly large wall of worry this year, but consider this, The US economy and financial markets are resilient. If �I were to tell you on 12/31/2007 that: Lehman Brothers, Bear Stearns , AIG, the world�s largest insurance company, �mortgage giants Freddie Mac and Fannie Mae and Washington Mutual, one of the nation�s largest mortgage lenders, would collapse Merrill Lynch would be bought out by Bank of America, and cease to exist as an independent entity, changing Wall Street forever The nation�s two major bond insurers, Ambac and MBIA would be near collapse, leaving in doubt the viability of their business model going forward Oil prices would spike to $150 per barrel (from roughly $90 at year end), driving gasoline prices to well over $4.00 a gallon, an all time high A major hurricane would hit and severely damage one of the main oil refining regions of the US The US dollar would fall to an all time low vs. the currencies of its major trading partners That Russia would reassert itself as a military power by invading Georgia, raising the specter of another Cold War North Korea would threaten to restart its nuclear program Housing starts, home prices, and home resales would continue to decline, and remain pinned at multi decade lows Consumer confidence would fall to levels not seen since the early 1980s and Food prices would soar as talk of a global food shortage loomed GDP growth in the Eurozone and Japan turned negative in Q2 You would have thought that the US economy would be in shambles and that the US stock markets would be down 40% to 50%. In reality, US stocks are down only 15%, in a bear market, but well off their July 2008 lows, and the US economy expanded in the first half of the year and is likely to experience only a shallow recession, at worst, over the remainder of the year.The financial markets are almost always climbing some wall of worry. It has been a particularly large wall of worry this year, but consider this, The US economy and financial markets are resilient. If �I were to tell you on 12/31/2007 that: Lehman Brothers, Bear Stearns , AIG, the world�s largest insurance company, �mortgage giants Freddie Mac and Fannie Mae and Washington Mutual, one of the nation�s largest mortgage lenders, would collapse Merrill Lynch would be bought out by Bank of America, and cease to exist as an independent entity, changing Wall Street forever The nation�s two major bond insurers, Ambac and MBIA would be near collapse, leaving in doubt the viability of their business model going forward Oil prices would spike to $150 per barrel (from roughly $90 at year end), driving gasoline prices to well over $4.00 a gallon, an all time high A major hurricane would hit and severely damage one of the main oil refining regions of the US The US dollar would fall to an all time low vs. the currencies of its major trading partners That Russia would reassert itself as a military power by invading Georgia, raising the specter of another Cold War North Korea would threaten to restart its nuclear program Housing starts, home prices, and home resales would continue to decline, and remain pinned at multi decade lows Consumer confidence would fall to levels not seen since the early 1980s and Food prices would soar as talk of a global food shortage loomed GDP growth in the Eurozone and Japan turned negative in Q2 You would have thought that the US economy would be in shambles and that the US stock markets would be down 40% to 50%. In reality, US stocks are down only 15%, in a bear market, but well off their July 2008 lows, and the US economy expanded in the first half of the year and is likely to experience only a shallow recession, at worst, over the remainder of the year.

5. Historical evidence shows that the trend in consumer confidence has lagged the slowdown in economic growth�usually falling sharply only after the worst of the economic slowdown is over and economic activity is poised to rebound. More importantly, consumer confidence has consistently been a contrarian indicator for the stock market�the worse consumers feel, the better the gains over the coming year. Since 1978, the lower the level of consumer sentiment, the stronger the stock market gains over the coming year, and likewise, the more optimistic consumers are, the weaker the subsequent stock market performance. When consumers are very pessimistic with sentiment below 60, as it is today, over the following 12 months the S&P 500 has posted a 23% gain, on average. Thus, we need to go against our instincts and stay invested to be rewarded.Historical evidence shows that the trend in consumer confidence has lagged the slowdown in economic growth�usually falling sharply only after the worst of the economic slowdown is over and economic activity is poised to rebound. More importantly, consumer confidence has consistently been a contrarian indicator for the stock market�the worse consumers feel, the better the gains over the coming year. Since 1978, the lower the level of consumer sentiment, the stronger the stock market gains over the coming year, and likewise, the more optimistic consumers are, the weaker the subsequent stock market performance. When consumers are very pessimistic with sentiment below 60, as it is today, over the following 12 months the S&P 500 has posted a 23% gain, on average. Thus, we need to go against our instincts and stay invested to be rewarded.

6. The good news about bear markets is that they are followed by periods of extremely strong growth. Looking at medians figures, the typical bear market demonstrates that the S&P experiences price declines of 21%. This is typically followed by a rebound in the next 12 months of 33%. All in all, this nets a 12% positive return. Therefore, the market rewards investors for hanging in through the tough times with strong positive gains.The good news about bear markets is that they are followed by periods of extremely strong growth. Looking at medians figures, the typical bear market demonstrates that the S&P experiences price declines of 21%. This is typically followed by a rebound in the next 12 months of 33%. All in all, this nets a 12% positive return. Therefore, the market rewards investors for hanging in through the tough times with strong positive gains.

7. Looking back at the three other bear markets, the S&P 500 gained 25% within about 90 trading days of the end of the bear market. Of this 25%, about 10% is captured in the first 10 days of the rebound. Therefore, pulling out of the market now and attempting to go back in once significant rebounds are seen could lead to missing a good portion of those positive returns. If there was a fourth quarter rise in the S&P 500 of 25% would result in solid gain for 2008. Looking back at the three other bear markets, the S&P 500 gained 25% within about 90 trading days of the end of the bear market. Of this 25%, about 10% is captured in the first 10 days of the rebound. Therefore, pulling out of the market now and attempting to go back in once significant rebounds are seen could lead to missing a good portion of those positive returns. If there was a fourth quarter rise in the S&P 500 of 25% would result in solid gain for 2008.

8. Imagine starting to invest at precisely the wrong time: at the peak of the market just before a bear market decline. This slide illustrates the effect of a bad market but more importantly the powerful element of patience and a long term orientation. Even if you experience one of the worst time periods for investing, over the longer term, markets have risen and portfolios value have increased.Imagine starting to invest at precisely the wrong time: at the peak of the market just before a bear market decline. This slide illustrates the effect of a bad market but more importantly the powerful element of patience and a long term orientation. Even if you experience one of the worst time periods for investing, over the longer term, markets have risen and portfolios value have increased.