Volume IV Issue I – Thursday, January 31, 2008

A monthly newsletter of financial commentary for our friends

If you are an investor, I hope you took some Dramamine over New Years. 2008 has been a rip roaring, stomach turning, roller-coaster ride. We have seen the market this month heading down as much as 10% in some instances. We have seen an unprecedented emergency Fed meeting along with a .75% cut in the Fed Fund rate. We have seen the markets make a 600-point move on the Dow Jones Industrial Average in a single day. We have seen the R-word (recession) in the headlines more and more. We have seen another Fed Cut yesterday of .50%. Are we almost done with the wild ride? Or should we break out the Pepto to get ready for the rest of the year?

There is no doubt that we are in choppy waters. Existing home sales in 2007 were down 12% from 2006 levels. That is the steepest decline since 1982. Financials such as Merrill Lynch and Citigroup have written off billions of dollars in loan loss reserves as well as markdowns on their investments. Other companies have been mentioned in the same sentence as bankruptcy. Countrywide for example saw it’s stock go from $30 per share in 2007 to $6. Just when rumors of bankruptcy began to circulate among an analyst or two, Bank of America stepped in to buy them out. But not all is gloom and doom. Though we find ourselves in the midst of an economic tempest of sorts, there are a few breaks in the clouds on the horizon. Personal Income was up in November. Durable goods orders increased in December. The weak dollar is causing exports to grow every day. The International Monetary Fund is not projecting a recession for the US in 2008. And capital is available, whether it’s from Warren Buffet or overseas investors. Brian Wesbury’s column in the Wall-Street journal expresses that he believes we are experiencing an overdose of pessimism. His article closes with these words, “Dow 15,000 looks much more likely than Dow 10,000. Keep the faith and stay invested. It's a wonderful buying opportunity.” Buying is always tough in down markets, so it might not hurt to take the Pepto regardless.

Here’s good news for all you Oprah fans. Oprah is launching a new network called OWN, standing for Oprah Winfrey Network. She is partnering with the Discovery Channel on the deal. Apparently there is quite a fight for the female viewing audience. She will be throwing her hat in the ring to battle Lifetime and the Oxygen network. Oprah remains one of the most marketable people in the world today. You know you are well known when you can be recognized by first name only.

The NBA is launching a new league soon across the pond soon called NBA China. This is just another example of how US entities are looking overseas for future potential and growth. As a matter of fact, the companies that thrived in 2007 were companies that had overseas operations like McDonalds and Coca-Cola. There are millions of consumers overseas that are hungry for U.S products. These consumers are untapped potential in the minds of big business. Much like the Gold Rush of our American past, we find ourselves in a Global Rush. This Global Rush is a race to claim the overseas consumer. As it evolves, it will change the way we shop, the way we invest, and the way we think. As an interesting closing tidbit, how much would you guess a benchwarmer in the NBA makes as their minimum salary? A scrub in the NBA earns a meager $427,000 per year. That could buy us a lot of Pepto Bismol for our stormy ride!

Chad P. Wilson, CFP

Foundation Bank – a division of McKenzie Banking Company - 731-554-2423

The above is strictly informational commentary and does not constitute any sort of recommendation. Please consult your own financial advisor for specific tax, loan, or other investment advice.