Clearly, equity markets are being driven by government policy at present. Bernanke said Sunday the recession would probably end this year if the government's program to boost the banking industry succeeds. But the Fed chairman also cautioned that the task of improving the banking system is a difficult one. During an interview with CBS' "60 Minutes," Bernanke said Why Wall Street matters? Why fix it first? The lesson of history is that you do not get a sustained economic recovery as long as the financial system is in crisis - Wall Street affects Main Street. His best analogy: If your neighbors house is on fire, lets put it out…we’ll worry about who’s to blame & how to rebuild it later…first priority is to put the fire out (see & read more @ 60 minutes HERE)

Another positive note, last weekend Warren Buffett sent out his long awaited annual letter (www.berkshirehathaway.com ).  We are not alone…The man considered by many to be the greatest investor of all time just had his worst year ever.  His stock is down 50+% over the last year, in line with the broad market.

Some of his interesting comments include: “Whatever the downsides may be, strong and immediate action by government was essential last year if the financial system was to avoid a total breakdown… Like it or not, the inhabitants of Wall Street, Main Street and the various Side Streets of America were all in the same boat.”

“Amid this bad news, however, never forget that our country has faced far worse travails in the past. In the 20th Century alone, we dealt with two great wars (one of which we initially appeared to be losing); a dozen or so panics and recessions; virulent inflation that led to a 21.5% prime rate in 1980; and the Great Depression of the 1930s, when unemployment ranged between 15% and 25% for many years. America has had no shortage of challenges.”

“Without fail, however, we’ve overcome them. In the face of those obstacles – and many others – the real standard of living for Americans improved nearly seven-fold during the 1900s... Though the path has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so. America’s best days lie ahead.”
What is the magic bullet to turn around the markets? That’s the same question asked in every economic crisis. Nobody knows for sure while in the midst of the crisis.  I do know they’re trying many things, & eventually we’ll find it. 

Positive stats: Oil & Copper prices are seeking a bottom. Both represent good leading economic indicators. You should watch their prices.

According to Strategas, a look at the unemployment rate cycles over the last 60 yrs reveals that stocks tend bottom an average of 10 months before the peak in the unemployment rate.  So, as of now, the pundits best estimate is unemployment peaking (maybe @ 10+%) in late ’09 / earl ’10.  In short, it might be too early to run a victory lap, but something to watch.

Making investment decisions based on emotions created by short-term market volatility isn’t likely to help you reach your goals. Instead, focus on the future, and Focus on the 3-Rs: Reassess your risk tolerance; Rebalance your portfolio; & Review your longer-term financial plan. We can help, give us a call for a complimentary review.

Matthew J. Hudgins, MBA, CFA
Mosaic Wealth Management, LLC
3575 Piedmont Road, N.E.
Fifteen Piedmont Center, Suite 1070
Atlanta, GA 30305
MHudgins@Mosaicw.com
ph: 404.405.8080
fx: 404-806-2145
www.MosaicW.com