Position Clarification

Many of us are feeling ”overloaded” by what we read and see about the U.S. economy, as well as what is happening in Europe and many third world nations. To put it as succinctly as possible: I am bearish on where the world stands currently. Accordingly, I will be taking a more reserved position. I have begun to underweight--by a substantial amount--the equity positions in each of our four fundamental categories (Conservative, Moderate, Growth and Income, and Aggressive). To give you an example, the allocation for a Growth and Income portfolio would normally be about 60% equities and 40% fixed. With the changes we are currently making, that portfolio will only be about 20% equities, about one-third of what I would normally allocate. You might wonder why I wouldn’t just get rid of all the equities. The answer is, I could be wrong! In addition, I am moving away from indexing, such as the S&P 500, and small stocks, and am going with managed portfolios of large- and medium-sized companies. I believe that, in times like these, the actual management of large stocks will offer better performance. I also like dividend-paying stocks. In the portfolios for which I have discretion, I have allocated few or no international equity positions because I believe they are too risky. In the long run, I am very bullish on the U.S. as I believe that the U.S. has four major attributes that no other country can equal: a stable government, the highest productivity in the world, the best overall quality of goods produced in the world, and inexpensive and plentiful energy supplies (especially natural gas). My perspective is that, once we are past the upcoming U.S. elections, Europe quiets down, and a decision is made on federal taxes and spending, it will be time to re-enter the stock market in full force. I expect these issues will all be resolved by the early part of next year. In the meantime, I remain cautious. Ed Mallon