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| AUGUST 2007 NEWSLETTER The most important news this month is the addition of John Ryan as a principal of Dominion Wealth. John brings many years of experience and great wisdom helping clients create order in their financial plans. We are honored he has chosen to further the mission with Dominion Wealth to provide a comprehensive, (I hesitate to use the term) one-stop shopping approach to the complexities of high net worth families. We are also in the process of completely overhauling our website as part of this new partnering. Please visit it when the revisions are complete in order to get a full description of John’s background. The next topic that is on the tip of everyone’s tongue is the subprime mortgage crisis and the stock market swoon that it seems to have caused. This is not the end of the world as we know it. Despite continued media coverage to the contrary, there are simply too many positive indicators in the US and global markets for this to take down the entire financial system. Keep in mind also that these subprime mortgages represent only a 25% slice of all mortgages. Furthermore, the term subprime is used to characterize everybody that is not an “A” rated credit risk. In some cases, like with small business owners, people may not receive an A rating because of the way that cash flows through their tax return. It can often appear that there is no visible means of paying debts as due, when in reality this is not the case. The business owner will be denied an A rating, and could very easily have a credit score showing timely payments for the past 25 years. So, now we review our current situation where a few of these loans go bad and all of a sudden there is a panic or “run on the bank”. Couple this with the fact that it is the middle of the summer (where we tend to historically observe a market pullback) and we now have the entire market being priced by panic selling. Rest assured that once the traders on Wall Street return from vacation in the Hamptons they will begin looking for bargain buys, and most likely the balance between supply and demand will be restored. This has been a good test, however. I always judge client fears by the amount of emails and phone calls that we receive on any given topic. I can count on one hand the requests for reassurance that have come in over the past few weeks. Either you are very busy enjoying summer vacation or you, like us, see this as bump in the road and not the tragedy of a Minnesota bridge tumbling down into the Mississippi. The figurative bridge falling down may be coming soon. The attached reprinted article briefly outlines the same scenario we have discussed for the last six years. The interesting thing is that the article was researched and written by Dan Arnold. Dan has no connection with the H. S. Dent Foundation and its research. He did his own research and came up with very similar conclusions. Yes, we can poke holes in all theories about the future, but I still want you to be prepared for something that may cause great harm to your financial plans. Would you rather have a life raft and never use it or be left the other way around? Best from Dominion Wealth,  | |
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