December 2009

We are pleased to introduce our new electronic newsletter with this mailing that in the future will be sent out by email to our clients. Viewpoints is designed to be a more timely form of communication on topics of interest which compliment our broader quarterly commentary, Our View from Mill Street.

This particular issue of Viewpoints is a follow-up conversation from our economic forum we held last December at The International Tennis Hall of Fame. The ensuing year was certainly dramatic in every respect, and while we can all breathe at least a temporary sigh of relief, we are not alone in our view that the financial system has not healed as much as it might appear on the surface. A financial calamity of the magnitude we have experienced in the last 18 months does not just go away overnight. The Fed continues to spur investment and speculation with its enormous injection of liquidity and essentially free money. For the moment, the financial markets have stabilized, but the larger economy has yet to recover.

Economic forecasts are as varied today as they ever have been in our experience. No one really can foresee with certainty what the future holds in the economy, politics, geo-political security issues, or stock prices. This colors our central investment strategy which is to manage risk rather than chase reward. We have enjoyed a rebound in our portfolios this year, and together with the fact that we avoided the draconian extent of the market collapse last year, we are pleased with the overall results for this epic two-year period. As it turned out, our economic commentary written last December painted a pretty accurate picture of the year ahead, but we repeat Churchill's admonition that "it is always wise to look ahead, but difficult to look farther than you can see."

Finally, in compliance with Rule 204-3 (c) of the Investment Advisers Act of 1940, we are making our annual offer to send you our current brochure and have attached our privacy statement.

With our very best wishes for a prosperous New Year.