Fagan Associates Archive for October, 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

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!

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

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