September 2000

The NASDAQ composite lost 12.70% in the month of September and the Dow and The S&P 500 Index each lost 5% for the month. Weaker profits from a weaker economy were to blame. Even though the Fed has no interest in raising interest rates, the lower earnings, high energy prices and Europe's weak currency will continue to keep things on edge as we move into the winter months.

The Wall St Journal reports that over the past 20 years, stocks have tended to be soft in the third quarter and then bounce back in the fourth. Recall that the NASDAQ Composite rose 48% in the fourth quarter of 1999. In the past, election seasons have proven to be beneficial for the stock market. This year should not be any different since both candidates are promising tax cuts that will assist the market.

Value stocks have shown signs of life this year after under performing for most of the past five years. Value stocks of all cap ranges outperformed growth stocks through Sept 1st. Large cap value stocks climbed 12.70% compared with a loss of 3.8% for large cap growth stocks. I continue to diversify between both styles of investing.

A very disturbing trend is that more investors are using their retirement plan money to trade. Retirement plan providers say they have noticed individual investors in 401k plans using short term strategies with some moving in and out of their funds weekly or even more often than that. Some investment companies have taken the rare step of placing limitations in certain 401k trading because of the activity. Investors don't do much good for themselves by trading funds or stocks, says Terrance Odean, a professor at UC Davis. His study found that investors who traded most frequently had the worst returns for a five and a half year period ended in December 1996. During that period, the average household earned an annualized return of 15.3%, frequent traders earned an average annualized 10% and a value weighted market index earned 17.1%.

Putnam Investments sponsored a study, "Advice in the Internet Age", where half of those surveyed had sought expert advice in the past year, citing financial pressures (84%), information overload (60%), and the desire to delegate some responsibilities while trying to keep up with the pace of the modern world (46%). Success in the market no longer depends solely on how smart people are, what information they hold, what academic degrees they've earned, the experience they've gained or the systems they use. Increasingly, success depends on how well people handle their emotions -what some would call emotional intelligence, says Richard Geist an investment consultant and psychologist. Three of those qualities have particular relevance in today's market: the ability to match personality to market niche, the capacity for decentered awareness (why people interpret something the way they do), and how people deal with success and failure. He goes on to say that even when people think they are making investment decisions based on rational financial and market understanding they are actually making decisions based also on internal, emotionally determined criteria. Thus success and failure often occur when least expected. Advisors who have been trained to understand their client's emotional needs and cognitive style can serve an important function in helping investors to decenter from their emotions and match their personality to an investment niche. With this in mind, it becomes increasingly important that financial advisors are trained to understand how to evaluate the clients' emotional lives as well as their financial lives. That is why I have enrolled to become a Certified Coach to better serve my clientele. Check out http://www.coachu.com, http://www.ccui.com, and http://www.teleclass.com.

Every 3.6 seconds someone dies of hunger. 75% are children. You can make a difference as you surf the web. The charitable shopping company, GreaterGood.com produces http://www.thehungersite.com. Web surfers can donate food to the hungry simply by clicking their mouse buttons and looking at some ads. Click on Donate Free Food and you will see a page with ads from sponsors that will donate food to the United Nations World Food Program in exchange for your eyeballs. But you don't have to click on the ads for your donation to count.

My search has ended, and I have found a wonderful office space at 30 S. El Camino Real Suite 203 San Mateo, CA 94401 to move into at the beginning of December. There will be four offices and a conference room- plenty of space for the firm to grow into. My new email address is Fern@afdadvisors.com and phone numbers will remain the same. Directions are enclosed.

At this time of Thanksgiving celebration, my thoughts turn gratefully to you with warm appreciation for all the support and referrals you have given me. Thank you!