Fagan Associates Commentary

May 13, 2009

Good Morning!

Despite the broad, bullish run-up in the stock market, the greater, longer-term issue remains as to whether the stimulus money, let us call it "kindling," will be enough to catch fire and light the bigger logs, the economy at large. The stimulus package, coming from the public sector, is intended to be the spark that lights the private sector. Indeed, the credit markets have begun to loosen up a bit, consumer confidence is rising, the downward trajectory of the economy is leveling off. However, we will eventually need to see GOOD economic news, job creation and solid consumer spending numbers in order to convince us that we have a longer-term bull market on our hands. Time will tell.

Dennis Fagan
Chris Fagan

May 8, 2009

Good Morning! Food for Thought.

Conspicuous consumption is as welcome in 2009 America as a houseguest straight from a Mexican vacation. Frugality is in - Americans are returning bottles for the deposit instead of sipping Grey Goose on the rocks. After decades of spending next week's allowance, we are actually saving more than they are spending. Although we applaud this newfound American penny-pincher but think he is s short lived.

Both stock and bond markets are sensing an improving economy and acting accordingly. Yields on the 10 year treasury have risen dramatically over the past two months. From a low of sub 2%, the 10 year has ballooned to a yield of 3.17%. The treasury market is a haven for the "safe" investor so rising yields indicate bond investors are fleeing these safe investments for more riskier areas. The stock market after an abysmal start to 2009 is basically flat for the year. From its bottom in mid March, the S&P 500 has advanced more than 20%. This is another indicator that investors are projecting better times.

We are advising investors to strike a balance between risk and safety. The smaller investor is underinvested in the riskier areas of the market. Clinging to money market cash and CDs, many investors are accepting low returns for safety. We believe that the gulf has never been wider between what investors are most comfortable doing and what they should be doing.

The stock market has come a long way in a short time so investors should be careful "taking the plunge" but many opportunities abound for investors with long term horizons. Great companies are on sale. We believe that the American economy is getting ready to grow again and with it will come the market.

Say goodbye to the "frugal" American. Honestly, it was no fun while it lasted.

Dennis Fagan
Chris Fagan

May 4, 2009

Good Morning!

Investors continue to wade into the stock market on pull-backs, resulting in a sideways to upward bias. We find this action, encouraging to say the least, but also believe that a correction, the cause of which is unforeseeable of perhaps up to ten percent, is quite possible and would ironically be welcome as it would allow investors an entry point. Many find the rally encouraging with some believing that it is the beginning of at least a cyclical, if not secular, bull market. Time will tell. Skepticism is high. However, regardless of the nature of the rally, after the period of consolidation or correction noted above, we believe that this rally still has legs. We find it encouraging that the economic, corporate and consumer data has been coming in at or above expectations, indicating to us that the fifty-five plus percent drop from the top as registered by most major indices had priced in a severe recession. As noted above, don't be surprised if equities take a breather. We have stated repeatedly since the beginning of the year that Mortgage-Backed, Corporate and General Obligation municipal bonds are very attractive relative to treasuries and we strongly recommend that investors take advantage of this. If you are looking out over the next two to five years, stocks offer compelling opportunities. As noted above, be certain to add to positions on fear and weakness rather than strength.

Dennis Fagan
Chris Fagan

April 20, 2009

Good Morning!

Stocks rallied for the sixth consecutive week as investors continued to use pullbacks to accumulate or add to existing positions. Although modest, after such a run-up, many find the rally encouraging with some believing that it is the beginning of at least a cyclical, if not secular, bull market. Time will tell. Skepticism is high. However, regardless of the nature of the rally, we believe that after a period of consolidation that could begin at any time, this rally still has legs. We find it encouraging that the economic, corporate and consumer data has been coming in at or above expectations, indicating to us that the fifty-five plus percent drop from the top as registered by most major indices had priced in a severe recession. It also has not hurt that President Obama has begun to look more decisive in his handling with the economy as well as other domestic as well as international affairs. Add to this the relaxation of mark-to-market accounting by the FASB and the fact that the downward trajectory of the economy appears, at least for the time being, to be slowing. That said, investors have a major hurdle to overcome over the next month or so as companies report first quarter profits. As noted above, don't be surprised if equities take a breather. However, we would use pullbacks over greater than five percent to establish or add to positions.

As noted over the past two months, Mortgage-Backed, Corporate and General Obligation municipal bonds are very attractive relative to treasuries and we strongly recommend that investors take advantage of this. If you are looking out over the next two to five years, stocks offer compelling opportunities.

Dennis Fagan
Chris Fagan

April 7, 2009

Good Morning!

Good morning! Stocks appear in a mode of consolidation after the twenty-some percent run-up that we have experienced over the past four or so weeks. A low volume consolidation, similar to a sprinter taking a breather rather than continuing on, almost certain of collapse from exhaustion, would be healthy and allow for future gains. We will see how this turns out. The fact that we are entering earnings period should muddy these waters. We believe that, when all is said and done, earnings will be "very bad, but in line with expectations," thus allowing for the stock market to exit earnings season sometime in early May at or around these levels. This is not a bad thing as the consolidation we noted above needs time to complete. We'll see how this turns out.

As far as bonds/fixed income is concerned, we continue to like mortgage-backed funds, general obligation national municipal bonds and high-grade corporate.

Dennis Fagan
Chris Fagan

March 23, 2009

Good Morning!

With most major equity indices having recently bottomed between 53% and 58% off their highs set October 9, 2007 investors are left with several related questions. Do they still have faith in the financial system of the United States as well as in our business and political leaders? If the answer is "yes" and you turn out being correct, then now is most likely one of the best opportunities of your lifetime. If the answer is "no," then use the bounce that we are going to see today to get out. Please keep in mind that if you answer "no" and are wrong then your life will most likely be changed forever. The same could be said for those answering "yes." However, the probabilities are with those individuals. It is with those that think that this is a deep recession, but one that America will climb out of and ultimately end up becoming more productive.

We will answer "yes," not because we are patriotic or lemmings, but because we believe that the creativity of American business will ultimately prevail, albeit with additional justified regulatory hurdles to overcome.

Dennis Fagan
Chris Fagan

March 6, 2009

Good Morning! Some food for thought.

• Historically, the stock market is a discounting mechanism. Therefore, it bottoms approximately six to nine months ahead of economic turns for better and for worse.
• During the 1970's Unemployment peaked above 9%; Inflation was above 10%; the Fed Funds Rate was 20%. We recovered from that.
• If President Obama has bitten off more than he could chew, perhaps some moderate Democrats will begin to buck his policies.
• There are no pessimists at the top and no optimists at the bottom.
• You have $120,000 in cash between your IRA and your Brokerage Account.
• Gold is a hedge and not an asset class.
• The labor market is a lagging indicator. Employers do not wish to lay off so that they put it off until they have to. Historically, this is late in the recession.
• Come Autumn, year-over-year earnings should begin to grow again. See point 1.
• The S&P 500 is down more than 56% from the top. At what point has the economic recession been priced in?
• If the United States cedes some of its economic might, this doesn't necessarily mean that the U.S. stock market, with a large percentage of its sales abroad, will continue to falter.
• If you believe that we are dealing with an economy whose only precedent is the Great Depression, then you must decide how much of your money, in addition to the above, you wish to put into your "ark." The probability of this is difficult to determine so, for most investors, is a personal decision.
• Investors will most likely exit this bear market severely underweighted in stocks.
• Is it really "different" this time? If so, was it different during the "dot-com" era? Was it different during the "housing boom?" No, trees do not grow to the sky nor do carrots grow to China!

Dennis Fagan
Chris Fagan

March 2, 2009

Good Morning!

Stocks look to open below the 7,000 mark as investors are continuing a "NO CONFIDENCE" vote regarding the plans by the current administration to stem the crisis in the financial services industry as well as revive the economy. We certainly do not pin any of the blame for the economic mess on the Obama Administration, but do believe that this same administration has done very little to increase confidence by investors. We continue to use wide windows to add to securities and appreciate the patience of our clients during these trying times. We will once again recommend that should you have any questions or concerns, please don't hesitate to contact us at 279-1044.

Dennis Fagan
Chris Fagan

February 20, 2009

Good Morning!

Stocks remain under pressure as investors throw up their hands in response to the damaging rhetoric that is coming out of Washington, Wall Street, and Main Street. Both the bearish as well as bullish camps have valid arguments as to where stocks (and therefore stock funds, stock based ETF's) are headed. For example, "are we headed into a more serious recession or perhaps toward a depression?" "Why has President Obama only accentuated the negative?" "With the major indices off fifty percent from their all-time highs set during October 2007, haven't we adequately priced in this recession?" And so on. And so on. We will try to encapsulate our concern with one or two questions that most likely will fall in the favor of the bulls. They are as follows - (1) Is this a permanent transfer of wealth from the private sector to the public sector? (2) Have we accelerated the slippery slope toward socialism and therefore a transfer of economic responsibility from the individual to the government? We sincerely believe that the answer to question one is that during hard economic times the public sector should stimulate the economy. However, once the private sector picks up steam that transfer of funding should be given back to the private sector. Number two, time will tell. This requires patience and a belief that the private sector, the individual is the true creator of wealth. If this slope toward socialism continues the United States will cede its position as the dominant global economic power to another nation or other nations.

Given the above, what does this mean for our portfolios? On the equity side, we remain steadfast in our belief that the potential reward of investing in equities far outweighs the current long-term risk. Perhaps we have another ten or fifteen percent to the downside. However, we believe we have four to five times more potential on the upside. Regarding fixed income, we will stay high quality as well as short-term and look for higher interest rates once the economy begins to recover.

Both of us are here to field any calls that you may have and ready to answer your concerns. Please feel free to contact us.

Dennis Fagan
Chris Fagan
(518) 279-1044

February 17, 2009

Good Morning!

Stocks look to sell off early as the global financial services industry remains under severe stress. Today, in Denver, President Obama signs the stimulus package which the stock markets is reacting to with a thud. However, as we go throughout the week we should get further clarification on TARP II as well as steps the administration is likely to take to stem the decline in the housing market. That said, we are at critical support levels for stocks and we therefore watch this closely. Longer term, we think that those that purchase equities at or around these levels will be rewarded and will judiciously join that camp.

Dennis Fagan
Chris Fagan

February 11, 2009

Good Morning!

The stock market handed Secretary Treasury Timothy Geithner a resounding vote of no confidence yesterday, reacting to a plan it deemed as vague and inadequate. Despite this reaction, we remain relatively optimistic that we are MUCH closer to the bottom than the top of this bear market. That said, we are retaining a good level of cash in case the bear has more room to run.

Dennis Fagan
Chris Fagan

February 2, 2009

Good Morning!

Stocks continue to remain under pressure, but holding the psychologically important Dow 8000 mark as January came to a close. The S&P 500 notched its worst January on record. Let us continue to remind investors that setting a bottom in the stock market is a process rather than an event, as is the road to a recovery in the economy. For those more taking a more pessimistic view, you have to decide "how big of an ark to build." Despite holding an abundance of cash as well as high quality securities, we continue to believe that an improving credit market should begin to manifest itself in higher stock prices over the long haul. Corporate earnings, although dismal have more-or-less come in line with expectations as has the dour outlook put forth by CEOs. The economy has also taken a hit which more than likely will continue through at least the first three quarters of 2009. The question is, "has the more than 40-percent decline in stocks priced in this severe recession." As with any bear market, both the bullish and bearish camps have valid points. In our camp, we believe that the pendulum is slowing and in an uneven fashion shifting from selling into strength over to buying on weakness. Also, as noted over the past two months, in our opinion, the bond market currently offers "once in a generation" opportunities relative to treasuries and we strongly recommend that investors take advantage of this. Regarding equities, and as noted for the past two months, we have changed our posture from a defensive one to an offensive one, noting that investors selling at these levels are in company with those who must sell and those who are panicking, historically not a profitable group to join. If you are looking out over the next two to five years, stocks offer compelling opportunities. However, if you are looking out over the next two to five months, there may be a better time. That said, given the multi-hundred point daily swings in the stock market, be certain to add to positions on fear and weakness rather than strength.

Dennis Fagan
Chris Fagan

January 26, 2009

Good Morning!

As we enter the first full week of the Obama Administration, we do so with some cautious optimism regarding equities, but realistically recognizing the fact that Rome was not built in one day. The recovery of the stock market will take some time, but with the fundamental belief that we are NOT entering a depression-like environment, we think the reward vs. the potential downside risk is substantial. We are hearing from listeners to our radio show as well as clients and non-clients alike that we wish to become more conservative. We think that assuming your asset allocation one, two and three years ago was correct and assuming that your objectives have not changed, that this would be a mistake. We believe that there is opportunity for investors in the stock market over the long-haul. We also think that corporate and municipal bonds hold relative allure.

To all those who read this morning posting, please feel free to contact us for clarification or to arrange a meeting.

Dennis Fagan
Chris Fagan

December 16, 2008

Good Morning!

If two weeks ago, an investor could have predicted that approximately ten well-known blue chip companies would either issue earnings shortfalls, predict weaker than anticipated business prospects or announce layoffs; that both the Producer and Consumer Price Indices would plummet; that most economic data would be weak; that there would be a scandal on Wall Street unlike no other; that JP Morgan would anticipate business during November was much weaker than expected - what would you have predicted the direction of the stock market?

Well, we are up over the past two weeks which begs the question, "have investors priced in this severe recession?" We think they have and as long as the news does not get much worse, we are in the processing of forming a bottom, a process that may last several more weeks, but will ultimately prove profitable for those brave souls with more than an eighteen month time horizon.

On the bond side, we continue to see opportunity unlike any other in our twenty-five year careers.

Dennis Fagan
Chris Fagan

December 5, 2008

Good Morning!

The Labor Department will release the NonFarm Payroll Report for the month of November which, by all accounts, will be dismal. The consensus estimate is for a loss of 350,000 jobs with some economists projecting nearly 500,000 jobs being shed. We would use any substantial sell-off to work down cash. The reaction is based on our belief that the stock market has mostly priced in a severe recession. We see upside potential approximately two to three time the downside risk.

Dennis Fagan
Chris Fagan

November 17, 2008

Good Morning!

Stocks remain under pressure this morning after dropping nearly 400 points over the last hour of trading on Friday. As we have noted many times (too many than we would have liked), do not try to catch the bottom allocate assets to help meet your longer-term (three plus years) objectives and remain in cash for all needs shorter than this time frame.

We liken this crisis as an economic version of World War II. Budget deficits ran up to 30% of GDP during World War II and even if the U.S. runs a $1 trillion deficit, that still amounts to less than 7.5% of GDP. That said, once we get past this mess, the government must use fiscal restraint.

Bottom line for investors, buy on weakness in the market, not the kind of which may be a day or two, but when fear is elevated, even from these levels. High yielding stocks with solid balance sheets and payout ratios (dividends as a percentage of earnings) below 60%. Look also for opportunities in the corporate fixed income markets and preferred stock.

Dennis Fagan
Chris Fagan

November 14, 2008

Good Morning!

Stocks rebounded sharply yesterday after mildly piercing their mid-October lows. As we have noted time and time again, if you are inclined to purchase equities here, make certain that you BUY ON WEAKNESS rather than on strength. Given the daily price swings in the market, you might be able to pick up an investment several percentages below where they close at the end of the day. That said, we have met with many of our clients, reaffirming their goals, objectives as well as easing their concerns by evaluating their complete financial picture, including defined benefit pension plans, Social Security, and Real Estate holdings, among other issues. We suggest you do the same.

As we have noted within past commentaries, we believe that "generational" opportunities exist in the fixed income markets.

Dennis Fagan
Chris Fagan

November 12, 2008

Good Morning!

Stocks look to head lower again as investors are increasingly anxious that this economic malaise may last WELL into 2009. What have we done to try to make certain that our clients come out the other end of this bear market and are in a position to prosper at that point? We have continued to move up the food chain to high quality companies with strong balance sheets and/or have maintained a high level of cash. We have used some of this cash to lock in Certificates of Deposits and short-term U.S. Treasury Securities. We have also looked at alternatives to common stock and stock only equity funds such as corporate bond/bond funds and preferred stocks, some of which yield over seven percent.

We are aware that this is a time of extreme concern and share that concern. Should you wish to get together to discuss your account, please don't hesitate to contact us.

Dennis Fagan
Chris Fagan

November 5, 2008

Good Morning!

Regardless of the which side of the political aisle you reside, we feel confident that a new President, President-Elect Obama, will breathe a breath of fresh air into the United States. This morning, we arise with great hope that the efficiency demonstrated by President-Elect Obama during the campaign can be duplicated in his Presidency. That said, we strongly believe that, due to his intelligence, his vision, his charisma and his apparent ability to bring opposing sides together, President-Elect Obama will transform the economy into the likeness of President Clinton rather than President Carter.

Only in America can an individual rise from modest means to the pinnacle of political power. Most importantly, it is a great day for America. That said, we sincerely hope and also believe that it will ultimately be viewed as a new dawn for our economy, our respect from other nations and our citizens.

Now for the nitty-gritty. The presidential election could not have gone better for your investments. Not only will there be a change at the top, but there will also remain checks and balances from the House of Representatives and Senate. We will watch with great anticipation as President-Elect Obama names his cabinet members, hoping that this will be done in an expeditious, but well thought out manner.

Once again, congratulations to President-Elect Obama. We hope and pray for his success. God bless America!

Dennis Fagan
Chris Fagan

October 24, 2008

Good Morning!

Stocks look to move sharply lower this morning as markets in Europe and Japan have closed down anywhere from 6% to 10%. Enough of the pep talks. Enough of the hang in there. Enough of the stocks are bottoming. (This we have not said.) However, we will say that our clients are appropriately positioned to meet their long-term objectives. As we always often say, we invest the assets of our clients not for good times, not for bad times, but for a lifetime! If you have any doubt that this is NOT the case, please feel free to contact us!

In addition to all of the above, we will continue to move up the "food chain" to more stable equities and, in addition, see once in a generation opportunities in bonds (municipals and corporate bonds) relative to U.S. Treasuries. Furthermore, we have ample cash in client accounts to weather the storm.

PLEASE FEEL FREE TO CONTACT US WITH ANY QUESTIONS!

Dennis Fagan
Chris Fagan

October 14, 2008

Good Morning!

Stocks mounted a rally of historical proportions yesterday as investors cheered the coordinated moves between global central banks to strengthen and recapitalize the financial system. That said, much work remains to restore confidence between banks and within the commercial paper market. Furthermore, the rally yesterday was just as volatile and indicative of a schizophrenic environment as when stocks were plunging.

Bottom line. This will take time, but we do believe these actions by the Fed and U.S. Treasury will ultimately work. Investors would be wise to begin putting assets back into the market, but on a systematic basis. Also, watch at what level investors step back in after this rally ends and a pullback occurs. That will tell a lot about the health of the stock market. On the fixed income/bond side, look at high grade corporate bonds, convertible preferreds and general obligation municipal bonds/bond funds.

Dennis Fagan
Chris Fagan

p.s. It looks like the stock market Gods made a tradeoff yesterday, a massive rally for a loss by the New York Giants! Despite the fact that we are big Giant fans, we'll take it!

October 13, 2008

Good Morning!

Stocks look to rebound this morning after a nearly 20% drop in stocks just over the past five trading days. At Fagan Associates, we believe in the long-term benefits of ASSET ALLOCATION. That is your assets split amongst equities (stocks or equity mutual funds), fixed income (bonds or bond mutual funds) and cash. The allocation of which is determined by your objectives, tolerance to risk, financial obligations, etc... With this in mind, during market downturns you are going to take hits, but if history is any guide, the achievement of your long term objectives will remain intact. That is what has worked for us and other investors in the past and that is what we believe will continue to work.

With this in mind, there have been eleven bear markets of more than 40% with only one of the eleven shaving more than 50% from the Dow Jones Industrial Average, that being the 89% loss by the Dow during the Great Depression. With this in mind, if one were to think that we are going into a depression-like economy, sell now. However, if you believe as we do, that this pain will not compare to the Great Depression, then, with the Dow down more than 40% from its peak, now is a good time to nibble. We started this last week and absent any specific directives to the opposite from our clients, will continue to do so. We also believe that now is a fairly good time to look at high-grade corporate bonds and General Obligation Municipal Bonds.

Dennis Fagan
Chris Fagan

October 8, 2008

Good Morning!

Stocks were pounded yesterday down to multi-year lows as a lack of coordinated action by central banks around the world sent investors for cover. That said, this morning, apparently in response to this mounting economic crisis our Federal Reserve along with other central banks cut interest rates across the board by 0.50% hoping to steepen the yield curve and re-liquify the banking system. In our opinion, at some point in time over the next quarter or two the economy will bottom and so will the stock market. We have moved up the food chain, eliminating some investments that we believe will not rebound from this global economic slowdown and either moving into other investments or raising cash, where appropriate.

We believe that, over time, America and our stock market will recover from this financial crisis. We believe that we will look back five years from now and wonder why we sold stocks during October of 2007. If you don't concur that get out and stay out.

Dennis Fagan
Chris Fagan

September 26, 2008

Good Morning!

Stocks AND BONDS (the credit market) are under severe pressure this morning as politics and the upcoming Presidential Election appears to have trumped the general good of Americans and the American economy. Suffice it to say that we have reviewed client accounts several times each week making certain that investors are taking appropriate risk for their long-term objectives. Despite the fact that the picture is pretty ugly right now, we do believe that ultimately, and perhaps not too late, the politicians will make the right decision.

Please be certain that we have also reviewed the fixed income side of our client accounts for potential issues and, at this time, are comfortable with our holdings. Given these uncertain times, please be advised that we will make changes, when appropriate, without regard to holdings periods, etc...

However, for now, we do believe that we are appropriately allocated for their difficult market environment.

Dennis Fagan
Chris Fagan

September 19, 2008

Good Morning!

For the first time the Federal Reserve, the U.S. Treasury Department and both sides of the political aisle took steps to put out the fire on Wall Street that was rapidly spreading to Main Street by eliminating short-sales on more than 700 financial services firms until at least October 2nd and seriously considering a Resolution Trust type Corporation like the one that was set up during the early 1990s to bail out the savings and loans in an effort to "put in a box" the bad mortgage loans until it can sell them off at a better price. The government is also considering providing FDIC-type insurance to money market funds.

Bottom line, the Federal Government is taking a howitzer to the financial mess rather than a b-b gun in an attempt to correct the systemic risk. This is a big step toward correcting the mess, but will not bring the inventory that exists in housing down from eleven months to where it has historically been, six months. That will take time. We continue to hold cash and will continue to buy on weakness . As we have noted time and time again, the risk over the next twelve to twenty-four months continues to be being out of the stock market rather than in.

Any questions, please call us at 279-1044.

Dennis Fagan
Chris Fagan

September 17, 2008

Good Morning!

Stocks are tumbling again, tremors from the Lehman Bros. earthquake two days ago, the AIG bridge loan from the Federal Reserve yesterday and the indiscriminate dumping of Morgan Stanley and Goldman Sachs stocks today. That said, we firmly believe that our clients are positioned appropriately for their financial objectives, investment time horizon, financial obligations, family considerations and agreed upon tolerance to risk.

As always, any questions, concerns or a determination of account status, please call at 279-1044.

Dennis Fagan
Chris Fagan

September 15, 2008

Good Morning!

The stock markets are reeling in response to the bankruptcy filing by investment firm, Lehman Brothers along with the ailing American International Group. For all of our investors as well as readers of our website, we recognize that these are trying times but urge all to focus upon their objectives, recognize that their assets have been allocated according to meeting with each of our clients and, together, determining an appropriate asset allocation based upon those objectives, tolerance to risk, time horizon, financial obligation, other sources of income and family obligations. That said, should you have any questions or concerns, please don't hesitate to call.

Dennis Fagan
Chris Fagan

September 10, 2008

Good Morning!

After a vicious selloff yesterday, we have received several telephone calls and e-mails from concerned clients, wondering how they are doing. With this in mind, we thought it would be a good idea to remind everybody that their portfolios should accurately reflect their objectives, tolerance to risk, time horizon, and financial obligations. Their portfolios are allocated into three class, equities (stocks, stock based ETF's and no-load mutual funds); bonds (no-load mutual funds, fixed income ETF's and individual bonds) and cash (money markets). WE STRONGLY ADVISE ALL TO EXAMINE THEIR ENTIRE PORTFOLIOS RATHER THAN JUST FIXATE UPON THE EQUITY PORTIONS. Furthermore, it is during these times when investors tend to become nearsighted and are unable to recognize long-term value. Finally, we have developed your investment strategy together to accurately reflect your needs/objectives. Please keep these points in mind and if you would like to meet with us, please call or e-mail.

Dennis Fagan
Chris Fagan

September 4, 2008

Good Morning!

Stocks are getting pummeled as investors fear that falling energy prices are a symptom of a slowdown in the global economy. Compounding investor anxiety is the lack of market leadership. Seldom will you see any sector lead for more than a day or to, if that, until investors move to another sector. With this in mind, we are trying to limit losses and raise cash as the market attempts to find a bottom during the historically challenging month of September.

Dennis Fagan
Chris Fagan

August 11, 2008

Good Morning!

Tumbling oil prices help stocks to their largest weekly gains since April. Oil prices fell to their lowest levels since May 1st and investors used this decline to purchase stocks despite weak earnings reports from AIG as well as government sponsored FannieMae and FreddieMac. As we have over the past couple/three months, despite cautious over the short term, we remain optimistic that over the next few years stocks are the most attractive asset class and despite the lackluster stock market and weak economic data thus far in 2008 remain steadfast in that outlook. We therefore believe investors "would be wise to begin to nibble" at stocks as we believe that we are less than ten percent from the bottom. If you are looking out over the next two to five years, stocks are relatively attractively valued. However, if you are looking out over the next two to five months, there may be a better time. As we often say to our clients, there are portfolios built for good times, portfolios built for bad times, but we build them to last a lifetime!

Dennis Fagan
Chris Fagan

August 3, 2008

Good Morning!

Stocks continue to remain volatile on a daily basis, but rangebound week-to-week. Furthermore, at least over the past month, there has been a clear rotation from energy to the less cyclical/early cycle sectors. As we have over the past couple/three months, despite cautious over the short term, we remain optimistic that over the next few years stocks are the most attractive asset class and despite the lackluster stock market and weak economic data thus far in 2008 remain steadfast in that outlook. We therefore believe investors "would be wise to begin to nibble" at stocks as we believe that we are less than ten percent from the bottom. If you are looking out over the next two to five years, stocks are relatively attractively valued. However, if you are looking out over the next two to five months, there may be a better time. As we often say to our clients, there are portfolios built for good times, portfolios built for bad times, but we build them to last a lifetime!

Dennis Fagan
Chris Fagan

June 27, 2008

Good Morning!

Here's hoping for at least some stability here today given the 300+ point drubbing the Dow took yesterday. Please read our commentary yesterday for a more detailed look at our market outlook. Bottom line, we believe that our U.S. stock market will have a lot of trouble making any substantive headway until oil prices break.

Dennis Fagan
Chris Fagan

June 26, 2008

Good Afternoon! I dare say "good" afternoon despite the fact that as we write this update the Dow Jones Industrial Average is down 263 points.

As noted above the stock market is selling off on several factors, namely the downgrading to sell by Goldman Sachs of three market bellwethers over the last two days, Boeing, Citigroup and General Motors. Citigroup is now at its lowest point in a decade and GM has not traded at these levels since 1975. The market is also suffering from either lackluster earnings reports or lackluster outlooks from Oracle Corporation and Research In Motion, the manufacturer of the Blackberry smartphone. All of this begs the question, what have you done about it? We continue to remain cautious regarding the market over the short haul and have adequate cash that we will ultimately put to work. However, we FIRMLY believe that investors who put money to work at or near these levels will be amply rewarded over the next twelve to twenty-four months.

Any questions or for a portfolio review, please call.

Dennis Fagan
Chris Fagan

June 24, 2008

Good morning!

We continue to remain on the defensive and for good reason as after the closing bell yesterday, UPS projected that second quarter earnings would be well below estimates due to high fuel costs and reduced demand. That said, as the market moves lower we will continue pick away at energy, global industrials, technology and consumer staples.

Dennis Fagan
Chris Fagan

June 2, 2008

Good morning!

Stocks in the United States look to be under a bit of pressure this morning as investors and consumers continue to wrestle with the impact of $4.00/gallon gas prices on their respective wallets. As noted within our "Weekly Recap of the Financial Markets," we believe that upward movements in oil/gas prices will have a negative impact on stocks. Conversely, downward movements should be beneficial for stock investors. Our best estimate is a continuance of the trading range that we have been in for quite some time until we get some more definitive resolution on the energy crisis.

On the fixed income front, we recommend caution as it appears that the higher energy prices have begun to spill over into other parts of the economy. Furthermore, several Officials of the Federal Reserve Bank have indicated that interest rates are at appropriate level, suggesting that, absent an unforeseen event, further rate cuts are unlikely.

Dennis Fagan
Chris Fagan

March 12, 2008

Yesterday's rally was a welcome relief from the daily drubbings of stocks. That said, we will look for a follow-through prior to making any commitments. However, yesterday's rally also has proven that there all willing and capable investors with money on the sidelines that will appear should the stock market again become oversold. Add to that the old Wall Street mantra of "don't fight the fed" and we believe, stock investors will ultimately be the victors.

In conclusion, buy on weakness.

Dennis Fagan
Chris Fagan

March 11, 2008

Good Morning

The Federal Reserve announced that it was expanding its lending program. "Under this new Term Securities Lending Facility (TSLF), the Federal Reserve will lend up to $200 billion of Treasury securities to primary dealers secured for a term of 28 days (rather than overnight, as in the existing program) by a pledge of other securities, including federal agency debt, federal agency residential-mortgage-backed securities (MBS) and non-agency AAA/Aaa-rated private-label residential MBS."

More than the tax rebates or interest rate cuts, this move by the Fed cuts right to the core of the problem – loosening up the credit markets. This, in conjunction, with testing the January 22^nd low by the equity markets should at least provide a substantial bounce for the stock market. We'll see if it lasts.

Regarding the fixed income markets, the moves by the Fed outlined above, not only sets the bond market back on its heels, but perhaps also portends more liquidity ahead and the top of the bond market (low in interest rates).

Dennis Fagan
Chris Fagan

March 7, 2008

Good morning

Stocks are looking to open sharply lower as the Labor Department reported that Non-Farm Payrolls for the month of February fell by 63,000 far below the consensus estimate which was for a flat payroll report. As we noted in our letter to clients during early January, we projected a choppy/downward moving market during the first half of 2008 with the stock market rebounding during the second half. With this in mind, we will continue to dollar cost average into stocks on weakness and recommend that investors stretch out their time frames and begin to look for values that may be profitable over the next one to two years rather than one to two months. Build positions and look to upgrade your portfolio.

Regarding fixed income, be VERY careful out there. The credit markets have seized up and that is being reflected in municipals, mortgage bonds and low-grade corporate bonds. On the flip side, we continue to find value in Inflation Protected Securities.

Dennis Fagan
Chris Fagan