“In a bear market, everyone loses, and the winner is the one who loses the least.” – Russian truism

So far, that puts us well among the winners. With the stock market indices averaging a nasty drop of 13% since January 1, you are faring much better. Compare your performance or call us for help.

It is more than a year since we decided discretion was the better part of valor and have enjoyed our defensive posture as the bombs go off all about us. Just last January I wrote you lamenting $100 a barrel oil. Today it is $142. Ouch! Tom and I expect more trouble ahead as the stimulus checks fade and the American consumer faces $4.50 gasoline, falling home values, rising inflation and increasing unemployment. We feel his only recourse is to reduce spending which will deepen our nation’s economic woes.

The twenty-year orgy of overspending and debt accumulation had to end badly. Working off these past excesses will take time. The housing crisis faces an especially difficult conundrum. More foreclosures and lower prices are inevitable. Bank failures will be commonplace.

The good news, we believe, is that our defensive posturing via covered call options, substantial positions in cash, gold and index shorting has, and will continue to provide a higher level of safety and opportunity for gain.

Under separate cover we are sending each of you an update of our Form ADV Part II to fulfill regulatory requirements and provide you a cure for insomnia.

Please call us if all the media coverage of the economic scene becomes too much. Remember we anticipated and planned for this environment and expect to serve you well through its duration.

Very truly yours,

Michael F. Cantlon