SPECIAL REPORT

I have been receiving many calls and emails about the recent market activity and thought I’d share my thoughts.

I hate to say this, but most of the recent selloff has been a direct response to the actions our government has recently taken.  The administration has attacked financial companies, proposed punitive taxes on companies that have paid back TARP, proposed a massive budget and congress looking to raise the US debt ceiling again, just weeks after raising it.

This has caused S&P and Moody’s to put the USA on credit watch for a possible downgrade from AAA.  If this occurs interest rates will rise to attract foreign buyers to US debt (China).  This could also cause a contraction in the US economy, leading to a double dip recession or worse.

Also there have been credit warnings for: Greece, Ireland, Iceland, UK, Spain and Portugal.  This has caused the Euro to decline as investors seek safety in the US Dollar.  The stronger dollar has caused some of the selloff in US stocks, since a stronger dollar will hurt US exports, making our goods overseas more expensive.  Therefore the US trade deficit would increase and hurt US companies that sell goods outside the US.

I am sitting tight for now, but many stocks I follow have now hit my target purchase prices.  I will wait to see if the market stabilizes and then slowly add some positions to my clients portfolios.  Remember what Warren Buffett says “Be greedy when people are fearful and fearful when people are greedy.”