March 2017

Dear Friends and Clients,

I think we can all agree that 2016 was an eventful year, both in and out of the market! In these letters, we attempt to comment on recent events, discuss the year to come, and most important, offer a perspective that helps you rise above the din and take the long view. We want to offer reminders of those wisdom-borne-of-experience lessons that, if we fail to learn the first time, the market (and life) gives us the chance to learn them over and over again.

In the same way that the world saw many changes in 2016, so did this office! Like you, we, understandably, miss David (who, sources tell us, is enjoying retirement immensely). But moving forward, we would like to emphasize the things that remain the same. You still have at your disposal our professionally-staffed office with more than 200 years of experience in the industry. As always, our primary focus is making sure that you meet your financial goals, from building current financial security to ensuring that a safe and comfortable retirement is well within your reach. And we still try to answer your call by the second ring, greet you personally when you come in the door, respond to your emails promptly, and offer frequent reviews of your planning and investments. We continue to fulfill our role as good corporate citizens and supporters of organizations that contribute to our community. As a parting gift, David gave each of us a ceramic dish with the message, “Ability takes you to the top. Character keeps you there.” Going forward, we commit to extending past achievements into a future where we continue to act in your best interest, offer you the best possible service, and make a positive difference in the lives of our clients and our community.

Now, on to the markets – 2016 started with the worst opening month in stock market history and ended the year with a solid overall result, although returns varied widely. Small U.S. stocks led the way, with a whopping 21.3% return (Russell 2000), and large U.S. stocks also did very well, yielding a substantial return of 12.0% (S&P 500). Bonds, however, had a mediocre year, with a return of just 2.6% (Bloomberg Barclays U.S. Aggregate Bond Index), and international stocks did even worse, with a return of only 1.5% (MSCI EAFE Index) with an international economy that is still slowly recovering from the economic downturn of 2008.

It was interesting to see how investor confidence changed during the year. At the beginning of 2016, just 25% of stock investors were bullish on the U.S. stock market after the S&P 500’s paltry 1.4% gain in 2015. But then as the S&P 500 gained 12.0% during 2016, investor sentiment surged to a very bullish 70% (American Association of Individual Investors).

Often when investor sentiment rises to these levels, the market pulls back (at least briefly), which is normal. On average, we have one or two 5% pullbacks each year, a 10% decline once every two years or so, and a 20% decline (defined as a bear market) every three or four years (American Funds). Alas, these downturns are impossible to predict, so as investors, we remain patient and achieve success over time. In one of my favorite investment books, Stocks for the Long Run, Dr. Jeremy Siegel sums it up quite well: “Over the short run, equities are indeed a very volatile asset class; but over the long run, perhaps the most stable asset class of all, delivering the highest returns.”

The current news environment provides almost too much information. Is the market too high? Does international investing still work? What will happen with bond prices and yields? Sometimes, in the face of so much information and so many questions, it becomes very difficult to make decisions. Emotions work against us and our ability to stick to a sound investment strategy. Our advice, as usual, is to be patient, disciplined, and well diversified. The largest of the S&P 500 stocks are now priced over 20 times earnings (PE, or price-to-earnings ratio). At that level, it’s not at all unusual to see a pullback, or at least a period of underperformance. Individual stock selection by investment managers will likely be increasingly important to returns. The broader U.S. market, however, is priced much more reasonably, and the international markets are downright inexpensive, after a prolonged period of underperformance compared with the U.S. market.

The S&P has gained an average of 9.7% per year (total return) over the past 50 years. On any given day, about half the time the market will be up and half the time down, but over the course of a year, the market is up approximately 75% of the time (Jackson BTN Research, January 2016). But investors often get caught up in the day-to-day news and market volatility and can be tempted to do the wrong thing – specifically, to sell while the market is down and buy after a period of strength. We have said this many times, but one of the most important roles we play in advising you, our clients, is to help find equilibrium…to block out the noise and look for balance and perspective.

Text Box: The Risks of Market Timing
Results of Market Timing for the S&P 500 Index (1/1/1961-12/31/2015)
				Annualized Return (%)		Growth of $1,000
Missing the 25 Best Days	5.74	$8,310
Missing the 81 Best Days	0.03	$1,003
Buy & Hold	9.87	$35,500

Source: Bloomberg
In doing research for this letter, I came across this study by Bloomberg, and it is one that I have seen many times throughout my career. Since the market has an upward bias, the risks of being out of the market increase over time. Often, news of the day, politics, economic uncertainty, or other historical blips, cause investors to become fearful and sell their long-term investments. The results can be quite astonishing, and remembering them can remind us of the harmful effects that emotions can have on successful investing:



  Text Box: Enclosed with this letter is a chart that is one of the more important pieces of information we send you. At first glance, it seems a little overwhelming, but it is actually very simple. Each of the major market indices (explained on the back of the chart) is color coded and is the same color each year. So at a quick glance, you can see how each index performed (best performance at the top) for every year going back 15 years. What this chart tells us is how broad-ranging the market can be—how the heroes one year can be the goats the next, and vice versa. It is one of those “lessons” that keeps getting relearned…year after year, cycle after cycle.


So that leads us to our expectations for the rest of 2017, which has had a very strong start. While we think that volatility will likely increase and that the growth that we have seen recently will not continue at this pace, we are optimistic that a strengthening global economy and rising corporate profits may help propel global markets forward, despite the uncertainties. Although valuations of the large U.S. S&P 500 stocks seem a little high, the rest of the U.S. and world markets look quite reasonable. Bond yields are likely to remain low, but they may rise slowly during the year. We expect returns to vary based on asset class, so it may be more important than ever to remain broadly invested and diversified. If you anticipate needing any cash in the next year or so, now may be a good time to raise that cash to protect it from volatility. Again, this is advice that we give every year, and it bears repeating. The principles of discipline, balance, and diversification, and the resolve to focus on what you invest for rather than what you invest in, are the essence of our advisory practice.

This letter is also traditionally the time when we announce the winner of our Guess the Dow contest. Our 2016 winner was Monica M., who enjoyed a dinner with her friends at Landini Brothers – on us! The Dow closed at 19,762, and Monica’s guess was 19,646. Of the several hundred guesses that we received, Monica’s was the 6th highest. As usual, your guesses were generally conservative, although mostly positive, which suggests that you continue to take the balanced, measured approach that we have been advising for so many years. Please let Lichelle know your 2017 “Guess the Dow” entry by March 31st, at or 703-739-4540, and you and your friends may be the lucky recipients of dinner with us, as well as having our unqualified admiration for your investment savvy.

A word about forecasting the market is in order here – there is a reason why we call the contest “Guess the Dow.” We have written about this many times, but the fact is that everyone – from the Chair of the Fed, to the members of our team, to the man or woman on the street – is just guessing when discussing where the market is headed. Some people have access to a lot of data, some are better at analyzing data, some create algorithms that claim a high degree of accuracy, but everyone is still essentially guessing. As always, we will give you our best, objective, and unbiased counsel. And we know that we can rely on you to tell us whether we were right, wrong, or somewhere in-between! If we have not already discussed with you the year ahead and any changes needed or desired in your investment planning, please email or call Lichelle for an appointment or return the enclosed card.

Finally, I want to take this time to update you on our team. Although David is no longer in the office, he and Marcia have not gone far and Alexandria will always be home for them…with more time for grandchildren, traveling, volunteering, and, just recently, being appointed by the Governor of Virginia to serve on the board of the Metropolitan Washington Airports Authority.

As most of you know, we have been planning for David’s eventual retirement for years, and as the three senior partners in our practice, Matt Megary, Laurie Blackburn, and I promise to continue to deliver sound investment advice and service, putting your goals and objectives first, as always. Also, with David’s retirement we became legally obligated to change the team name. We are proud to announce here the new name of our practice: Caudron Megary Blackburn Wealth Management Group of Wells Fargo Advisors. We also want to take a moment and reintroduce all nine of our team members by giving you some insight into who we are and what we do. Please see the enclosed biographical information on each member of our team.

In closing, I would like to say that we never take your trust for granted. Much of our job satisfaction comes from the opportunity to know and serve both you and your family. We are fortunate to be able to take care of multiple generations of clients and even have a few fourth generation clients! We strive to serve the individual needs of each of you, providing sound financial advice and investment planning and making sure we’re here when you need us. On behalf of the entire team – Matt Megary, Laurie Blackburn, JoAnne Dorris, Jessica Jackson, Laura Newton, Lori Polonsky, Chalee Ricciardi, Lichelle Yalung, and me – thank you again for affording us the honor and great pleasure of working with you. We wish you a wonderful 2017, filled with health, happiness and prosperity.

Very truly yours,


Tristan M. Caudron
Managing Director – Investments

The views expressed by the author are his own and do not necessarily reflect the opinion of Wells Fargo Advisors and its affiliates.

Stocks offer long-term growth potential, but may fluctuate more and provide less current income than other investments. An investment in the stock market should be made with an understanding of the risks associated with common stocks, including market fluctuations. Investing in foreign securities presents certain risks not associated with domestic investments, such as currency fluctuation, political and economic instability, and different accounting standards. This may result in greater share price volatility.

Investments in fixed-income securities are subject to market, interest rate, credit and other risks. Bond prices fluctuate inversely to changes in interest rates. Therefore, a general rise in interest rates can result in the decline in the bond’s price. Credit risk is the risk that an issuer will default on payments of interest and/or principal. This risk is heightened in lower rated bonds. If sold prior to maturity, fixed income securities are subject to market risk. All fixed income investments may be worth less than their original cost upon redemption or maturity.

Diversification does not guarantee profit or protect against loss in declining markets.

The Dow Jones Industrial Average is a price-weighted index of 30 "blue-chip" industrial U.S. stocks.

The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market value weighted index with each stock's weight in the Index proportionate to its market value.

The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index.

Bloomberg Barclays U.S. Aggregate Bond Index is unmanaged and is composed of the Bloomberg Barclays U.S. Government/Credit Index and the Bloomberg Barclays U.S. Mortgage-Backed Securities Index. The Bloomberg Barclays U.S. Government/Credit Bond Index is an unmanaged, market-weighted index generally representative of intermediate and long-term government and investment grade corporate debt securities having maturities of greater than one year. The Bloomberg Barclays Mortgage Backed Securities Index is an unmanaged index of mortgage pools of the Government National Mortgage Association, Federal Home Loan Mortgage Corporation and Federal National Mortgage Association.

The MSCI Europe, Australasia and Far East (“MSCI EAFE”) Stock Index is an unmanaged group of securities widely regarded by investors to be representations of the stock markets of Europe, Australasia and the Far East. Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI.





June 2016           

Dear Friends and Clients,

Happy summer!  As the year began with the worst opening month in the stock market in its history, the market (as of the end of May when this letter is being written) is back in positive territory, but not without a lot of bumps along the way.  This is a market that seems to have difficulty finding traction—in either direction—for more than a few days in a row.  If it goes down, it seems to bounce back quickly; and when it goes up, it seems to be reluctant to stay there.  There is no question that the amount of cash “on the sidelines” is a big factor in individual, corporate and institutional investment strategy—the Federal Reserve estimates that there is in excess of $12 trillion in cash instruments earning little or no interest (Wall Street Journal). However, cash is not necessarily an investment strategy; it is a place to hold funds until there is a better place to put it, and that may explain some of the market’s relative strong recovery after a downturn—it is the principle of “buying on sale.”

Not surprisingly, investors often focus on the bottom line valuation of their accounts and do not always consider what is happening “below the surface.”  Using mutual funds as the most common example, on any given day you can see how your funds have performed that day, but what you do not see is how the managers of a fund are handling the overall portfolio.  What are they buying, selling, holding, and rebalancing to enhance value?  In case there is any question, all mutual fund managers want their portfolios to go up, but they will tell you that they are not investing for the day, week or month.  They invest with the expectation that their account will grow over time and see market corrections as opportunity, not the end of the world.  That is the discipline we remind you of on a regular basis. But it is also easy to think that the stock market is some sort of monolithic structure where everyone waits for the word to buy or sell, and someone will explain after the fact why that happened.  In truth, emotion—fear and greed—often becomes a far more powerful motivator than careful analysis of trends or conditions, but objectively there is far more good economic news than bad.  With that in mind, we restate our summary comment about 2016 from our January letter: We expect 2016 to be a mixed, but not necessarily bad year. By mixed, we mean that not all sectors will perform in lockstep, and that is somewhat encouraging (if everything always did well at the same time, then everything would likely do poorly at the same time).

We have written before about the 24/7 news culture we live in—where all events are breaking news and unless commentary is condensed to 140 characters and tweeted it may not get the public’s attention.  At the risk of sounding overly dramatic, I have never seen a worse environment for the delivery of news.  What happened to context, proportionality, or balance?  Lacking that, it is no wonder that people are anxious.  The April 19th issue of the news magazine, The Week, had a fascinating page of data about our world today.  In 1995, there were approximately 39.6 million people in the world with internet connectivity.  In 2005 that number had grown to 1 billion, and by 2015 there were 3.2 billion people using the internet.  The estimate is that by 2020 there will be 7.6 billion people with internet connectivity, which is larger than the current global population of 7.4 billion. As you read this letter, every second there are 7,173 tweets, 53,766 Google searches, 120,607 YouTube videos viewed, 2,481,685 emails sent and 35 million megabytes of internet traffic.  In 1985, the world’s fastest supercomputer was a CRAY-2, which weighed about 5,500 pounds and was the size of a large washing machine.  An iPhone 4 released in 2010 had the same processing power as the CRAY-2 and weighed 4.8 ounces.

Several years ago, the late Václav Havel, author, playwright, and first president of the Czech Republic gave a speech in the U. S. in which he said, “The world is changing so rapidly, we do not even have time to be amazed by it.”  We live in an extraordinary period in the history of mankind with access to information and ideas that were almost unimaginable just a few years ago, but it is also an environment that creates more noise than signals, and part of our responsibility to you is to focus on the signals and filter out the noise.  Not an easy task at the moment, is it?  Recently, I was talking to a group of people about the unceasing news dump we are subjected to and I said my best advice for the next few months (maybe until November 9th or so) is to turn off the television, only read the comics and sports sections of the newspaper, and definitely stay off the internet…unless it is videos of kittens or babies.  I am not entirely kidding.  

In that context, we are often asked two questions:  How will the presidential election affect the stock market and what impact will geopolitical events, especially terrorist-related, have on the market?  The Washington Post had a very thoughtful piece on March 22nd, shortly after the bombings in Brussels, titled, “Why stock markets shrug off terrorist attacks.”  The article noted:

The state of one’s stock portfolio is perhaps not the first thing one should worry about in the wake of the terrorist attacks on Tuesday morning in Brussels.  But even if you were to worry about it, history would provide some reassurance.  An analysis of stock market recoveries after 26 major terrorist attacks since the 1970’s…shows that major stock indices in the target countries took 2.8 weeks on average to return to where they were before the attacks.”

“Investors may have begun to price such disruptions into their stock valuations, decreasing volatility in response to attacks.   They may have already accounted for such events and in the short run, stock markets only react to ‘unexpected’ events.  Sadly, terrorist attacks may not be one of those anymore.”

With regard to the presidential election, as peculiar as our democratic process may be, history is again a source of comfort. The market does not typically react one way or the other to the election outcome, although the prospect of another five months of insults, attacks, commercials, and Super PACS makes me long for the British model.  Monarchies notwithstanding, a few weeks of campaigning for Prime Minister and then an election seems positively enlightened!  In our January letter we wrote about the black swan theory, which is a metaphor for describing an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight. We wrote about that in the context of economic events, but there is no question that the current campaigns—by both parties—have resulted in the political version of black swans.  We are always careful to avoid partisan comments in our letters, so suffice it to say that we are living in interesting times. 

Finally, some thoughts about the regulatory climate in which the financial services industry operates, and how it may be changing.  For several years, there has been debate within Congress and between Congress and the administration (especially the Department of Labor) about imposing new requirements on how financial advisors are expected to engage with clients. You may have seen it referred to as the “fiduciary” rule and been curious as to what it may mean to you…and to us.  The new regulations, succinctly contained in a 1,023 page document, will not be in full force until 2018, and there may be legal and legislative challenges before then, but the essence of the new rules is to expect and obligate a financial professional when counseling you about investments (especially retirement investments), to give advice that is in your best interest.  That is the “fiduciary” rule in contrast to something called a “suitability standard,” which allows an advisor to recommend an investment that, while appropriate, may be costlier for the client.  I do not want to minimize the significance of these new regulations, but I hope there has never been an instance in which you, our clients, have had any reason to think we were not acting in your best interest—both in suitability and costs.  Several years ago, before any of this regulatory debate began, we sat down and asked ourselves the question, do our clients know clearly and precisely the principles that guide us?  The answer was we think so, but that is not something to leave to chance and the result was the enclosure that enumerated six core beliefs that serve as our “North Star.” The enclosure is in the form of a bookmark and we encourage you to read it again and understand how important that is to us and how we work on your behalf.  Also, because it is a bookmark it may be a reminder to avoid television and the internet for the next few months and just curl up with a good book. Most important, we encourage you to ask us questions—about how and why we do what we do…and what it costs.  We preach transparency about costs, advice, and anything we do that may impact your financial future, and we never want surprises…for you or us!  As always, if there is anything you would like to discuss or review regarding your account, please use the enclosed card.

We have written many times that we are well aware that you have choices as to whom you ask to assist you in guiding your financial future.  The trust you place in us is deeply appreciated and valued and never taken for granted. On behalf of the entire team—Tristan Caudron, Laurie Blackburn, Matt Megary, Lori Polonsky, Jessica Jackson, JoAnne Dorris, Laura Newton, Lichelle Yalung, Chalee Ricciardi and me, thank you, and have a wonderful summer.

Very truly yours,


David G. Speck

Enclosures (3)

The opinions expressed here reflect the judgment of the author as of the date of the report and are subject to change without notice.. Any market prices are only indications of market values and are subject to change. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Additional information is available upon request.

January 2016

Dear Friends and Clients,

No matter how severe an economic downturn may seem, investors have never made a mistake betting on the ability of the American system to recover.” Warren Buffett (The Washington Post, December 10, 2015).

Today is Monday, January 4th, the first business day of the new year. I have begun the process of writing our annual letter, and the market (i.e., the Dow Jones Industrial Average) closed down almost 300 points. I do not need to watch television tonight, check the internet or read tomorrow’s newspapers to predict with some accuracy what we will be hearing and reading. It will be some variation on the theme, “the sky is falling,” because that is the world we live in—all information is about right now.

Over the course of the past year (as I do every year), I save articles and comments about the market, the economy and the world in general to help provide guidance to you in our periodic conference calls or letters, but especially for our annual letter. One thing I always save is the first issue of the major business periodicals (e.g., The Wall Street Journal, Barron’s, and the Financial Times) after the December 31 close of the market, because I want to see how they characterize things. This headline on page 1 of The Journal sums it up pretty well: “Stocks Post Worst Year Since 2008.” 2008 (and early 2009) was by any measure pretty bad; it was overall the worst market in 90 years. The Dow was down -34%, the S&P 500, -37%; and the Nasdaq Composite Index, -40.5%. This past year (2015), “…the worst year since 2008,” the Dow lost 2.2%, the S&P fell 0.7%, and the tech-heavy NASDAQ gained 5.7%. (The Wall Street Journal, January 2-3, 2016).

So, it was factually correct to state that this was the worst year since 2008, but hardly the stuff of Armageddon, and this is my frustration with how we get our news and how we maintain perspective. A down year was neither unexpected nor cause for panic, and we have been “suggesting” for some time that a correction of some level was likely and that it is a normal part of the cyclical nature of the market.

But wait, there’s more! Although the Dow Jones Industrial Average (a “basket” of 30 stocks) is the most widely-reported measure of the market, the S&P 500 is generally regarded as a more complete indicator of market performance. The S&P has gained an average of 9.7% per year (total return) over the past 50 years (1966-2015). During that same period the split between “up” and “down” days was 53% up and 47% down. The split in 2015 was 47%/53% (i.e., more down days than up), but if you will allow me a little “rounding off”, what this data tells me is that on any given day, about half the time the market will be up and half the time down, regardless of whether the year ends with gains or losses; and over time the market averages out at a very acceptable level. (Jackson BTN Research, 1/4/2016). But if we allow ourselves to get caught in the maelstrom of market volatility, we will often be tempted to do the wrong thing—sell on the down days and buy on the up ones. We have said this many, many times, but the singularly most important role we play in advising you, our clients, is to help find equilibrium…to block out the noise and look for the signals.

Ordinarily, in our annual letter we wait until the end to tell you who this year’s winner of our “Guess the Dow” contest is, but it occurred to me that our clients are a pretty good indicator of mood and temperament, and because of what I have written above about facts and perspective, I wanted to share some information with you now. The DJIA closed on December 31, 2014 at 17,823.07 and 17,425.03 on December 31, 2015. Of the several hundred guesses that were submitted, only 11 people thought the Dow would close at or lower than the previous year, and the average for all guesses was 18,673.64, or a gain of about 4.8%. In the scheme of things, it seems like you have been reasonably cautious in your market outlook, albeit slightly bullish, and that suggests that you have effectively filtered out a lot of the noise. And to avoid further suspense, this year’s winners are Jean and Jim S., whose guess was 17,421. They and 6 of their friends will enjoy a special dinner with Tristan, Laurie, Matt and me and, of course, a special award commemorating their market acumen…or dart-throwing. Be sure and return the enclosed card to register your guess for 2016, and maybe you will be the lucky recipient of dinner and our unqualified awe at your investment savvy. You may also email your guess to Lichelle at

A word about forecasting the market, though—there is a reason why we call the contest “Guess the Dow,” and not “How will the Dow Close…Precisely?” We have written about this in previous letters, but the unfortunate truth is that everyone—from the Chair of the Fed, to the Speck – Caudron Team, to the person on the street—is just guessing. Some people have access to a lot of data, some are better at analyzing data, some create algorithms that claim a high degree of accuracy, but everyone is just guessing. I did not emphasize that last sentence to make you anxious or less comfortable with our advice, but to simply point out the obvious—no one really knows what will happen until after it has. We will give you our best counsel, unfettered by anything other than our objective considerations, and know that we can rely upon you to tell us whether we were right, wrong, or somewhere in-between!

Since March 2009, the overall market has been in a very strong recovery pattern. Performance in 2011 was largely flat in most sectors, and 2014 was very mixed (the large cap sector was relatively strong, most other sectors were flat to down), but 2015 was, by most measures, the first down year since 2008. Historically, market cycles have a 5-7 year period of up returns and 1-2 of down. A bear market is defined as a 20% or more decline within 2 months, typically followed by a strong recovery.

In August 2015, we had what is considered a true correction (10% decline in a short period), but by the end of October the market had more than regained from that decline and was headed to positive returns for the year…until the last 10 days of December. Any forecasts for the year must always come with the caveat that “things happen”—geopolitical, domestic, climatic, all of the above, but the common denominator is that they are external events beyond our control that can impact the economy, the market, or our mood. With that in mind, we expect 2016 to be a mixed, but not necessarily bad year. By mixed, we mean that not all sectors will perform in lockstep, and that is somewhat encouraging (if everything always did well at the same time, then everything would likely do poorly at the same time).

I do not want to get too wonky on you, but this relates somewhat to the black swan theory, which is a metaphor for describing an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight. In Nassim Nicholas Taleb’s bestseller book in 2007, “The Black Swan,” he argued that traditional financial models that promised an ability to better predict and control financial risk were flawed. These models created an illusion of technical sophistication, but relied too much on observable historical data and not enough on the unseen, rare and dramatic events that could blow up the models and change the world. (Research Magazine, December 2015). I mention this because fear of a black swan could lead to absolute paralysis of action; or it can recognize that unpredictable events can happen and it is best to be prepared for them.

This is why, in every annual letter, we write:

Enclosed with this letter is a chart that may be one of the more important pieces of information we send you. At first glance, it seems a little overwhelming, but it is actually very simple. Each of the major market indices (each one is explained on the back of the chart) is color coded, and it is the same color each year; so at a quick glance, you can see how each index performed (best performance at the top) for every year going back 15 years. What this chart tells us is how broad-ranging the market can be—how the heroes one year can be the goats the next, and vice versa. It is one of those “lessons” that keeps getting relearned…year after year, cycle after cycle.

Financial columnist, Barry Ritholtz, writing in The Washington Post (August 14, 2015), spoke about the mythical advisor who is asked the question, “So given the future is unknowable, what should investors do?” The reasonable answer is as follows: “We don’t know what the future holds, but we can make some assertions based on long-term historical data. We know that holding non-correlated asset classes provides diversification benefits; one of the few free lunches on Wall Street. Hold Large-cap and small-cap stocks in the United States, equities of emerging markets and developed nations, real estate investment trusts, bonds…in proportions that match your risk tolerance. Assuming no major life changes or in your risk tolerance (the direction of the market should not determine your true risk tolerance) rebalance once a year or so in order not to stray too far from your original allocation.”

This principle of balance and diversification, of focusing on what you invest for rather than what you invest in, is the essence of our entire advisory practice. If we have not already discussed with you the year ahead and any changes needed or desired, please let us know you would like to by returning the enclosed card.

As part of my “research” in writing this letter, I also like to read the various monthly financial magazines, especially the year-end guides for investors. Every single one of them has some variation of a cover story, “The Best Investing Moves for 2016.” That was verbatim from one of them. I read those stories; I think they are well-written, thoughtful, and concise. If you follow the advice given, what do you do next year when the advice will be just as well-written, thoughtful and concise…with very different recommendations? I am not critical of these magazines or their attempt to be helpful, I am just reminded that over the years the investments and investment plans that seem to work have the same common elements: Value, quality, good-management, patience, and consistency. Notwithstanding the caveat about the best ideas of the moment, our firm does, in my opinion, an excellent job of analyzing market, economic and political trends and conditions. If you would like a copy of “2016 Outlook-Navigating Risk in a Year of Change,” please return the enclosed card. (Note: If you have online access to your account, you can also read this report electronically or go to the link on our website,

Because it is an election year (not necessarily the best time for thoughtful, civil debate about pretty much anything), I am reminded of an economic/political yardstick that was first formulated during the Carter administration (and which probably contributed to his defeat for re-election). It was called the “Misery Index,” and it was a calculation of the inflation rate and the unemployment rate, and in 1980 it was pretty miserable. The Misery Index is at a 30 year low. (Barron’s, January 4, 2016) Take that for what it is worth, but I think it is worth something.

Finally, something I want to share with you about our team. With the recent addition of Chalee Ricciardi (we are now a team of 10—four financial advisors and six client associates), I was curious as to the total numbers of years we have all been working in the financial/investment industry. So I added it up—226 years of combined experience, or 22.6 years per person. Forgive me if this sounds like bragging, but even I am impressed! What it represents is not just a number, but a commitment to the business, to serving our clients, to representing the best ideals in helping our clients meet their needs and live their dreams. We thank you for that opportunity. We never take that for granted. From all of us—Tristan Caudron, Laurie Blackburn, Matt Megary, Lori Polonsky, Jessica Jackson, Kathy Deitemyer, Laura Newton, Lichelle Yalung, Chalee Ricciardi, and me, Happy New Year and may this be your best year ever.

Very truly yours,


David G. Speck

Enclosures (3)