2008
Client Letter
December 18, 2008
Dear Valued Clients and Friends,
Given the events of the past year, it seems appropriate to say a few words about the U. S. economy and stock market as 2008 draws to a close.
There has been much written already – and there will be much written going forward – about the economic crisis of 2008 and the events that led us to this point. The root cause of the current environment is that throughout the economy excessive capital available for investment fueled excessive risk-taking behavior. When coupled with a severe shortage of common sense, this behavior resulted in large segments of the general population and many participants in the financial services industry simply ignoring risk. When all the dust settled, it did not matter if you were an owner of a house in Stockton, California, or a credit default swap - you ended up owning an asset that was purchased with a lack of understanding of the potential risks involved, and for which ultimately there were few buyers.
We have no magic answers as to what the length and breadth of the current recession will be. While virtually all of the accounts we manage for our clients have significantly out-performed applicable benchmarks, returns are still negative. And while much uncertainty and illiquidity remains, we offer the following thoughts:
- GDP growth has slowed across the globe, and we are 12 months into a recessionary period which, based on history, is likely closer to the end than the beginning. Regardless of what you might read or see on TV, the current situation, while serious, is not nearly as bad as the 1929 to 1933 time-frame.
- With the seizure in lending in recent months, public officials and institutions around the world have provided a massive infusion of capital and stimulus into the capital markets to jump start the economy and lessen the crisis.
- Markets will eventually begin to anticipate positive future economic activity. Trying to time that occurrence is an exercise in futility.
- Many investments are priced at low, compelling valuations.
Stewart and Patten will do what we always do in a time of excessive anxiety – be it negative or positive – namely, remain calm and manage our clients' assets cautiously and with a long-term perspective. Our investment philosophy has worked for the last 65 years. We continue to believe it will be the most prudent way to invest your money going forward.
There is no question that there is much to worry about with regard to economic matters. But in spite of all those concerns, it our strongest wish that you and yours enjoy family, friends and fellowship during the holiday season.
Sincerely,
The Principals and Associates of
Stewart and Patten Co., LLC
