“The nine most terrifying words in the English language are, ‘I’m from the government, and I’m here to help.’” – Ronald Reagan

Apocalypse Now? Probably not. But we will be paying for past excesses in our economy for several years. Tom and I do not believe this new $700 billion bailout plan will be more than a big bandaid to stop the economic hemorrhaging.

It seems probable that the American consumer, the backbone of our economy, will be forced to adjust downward his level of spending. Although a prudent measure for most folks, collectively this will be a major drag on Christmas sales which represent a critical part of retail earnings. The consumer has suffered a drop in the value of his home, auto and 401(k) and faces higher energy and food costs. His ability to borrow is curtailed and his confidence in tatters. A very sad picture indeed.

On a positive note, we saw most of this coming and took protective steps to minimize damage to your capital. These steps are working very well. You can compare your nine month return to a 20% drop in the average stock portfolio. We will proceed carefully, but want to prepare for better market conditions.

These incredibly volatile times do provide us with opportunity in the form of high option premiums that we receive when selling covered calls and lower purchase prices for the securities we will acquire as we gradually deploy some of the cash we have accumulated.

We have spoken with some of you and share your concerns for the future. I have never in 45 years of investing seen anything like the recent financial debacles. My hope is that the ship can be righted soon and lessons will be learned for future generations. We will undoubtedly suffer a recession beginning in the current quarter and continuing into 2009. The still unanswered question of how to deal with people who occupy homes they cannot afford will weigh upon the economy for some time.

Please call us anytime to discuss your situation and please refer us to others who have not fared as well as you and seek a better solution to their investing problems.

Very truly yours,

Michael F. Cantlon