TREES INVESTMENT COUNSEL VIEWPOINT (Q3 2008) 

In this letter, we will abstain from statistics.  It is safe to say that all are well aware of the unprecedented decline in stock markets around the world and the complex challenges in the credit and housing markets that we are facing.  Clearly things have unraveled significantly beyond where anyone anticipated, ourselves included.  Fear and no confidence are ruling the day.

As painful and hard as it is to stay the course, we feel strongly that this is the wrong time to exit or change investment strategy.  We make no assurance of when we will see rosier days, and we are not smart enough to call a bottom.  However, we see far more upside than downside, with solid companies trading at a fraction of the price and valuation (P/E) as they have historically, yet we are painfully aware of the palpable panic that is encompassing investors, companies, lenders and workers alike.  There is no question there is a lot of uncertainty and portfolios have suffered measurably.

Strong steps are being taken to right the ship by governments, employment is still reasonably high, albeit declining somewhat, and oil prices have slid precipitously contributing to a diminished concern of inflation.  The world and our nation are certainly experiencing slowing growth and maybe even a few steps backward, but the wheels are turning, just at a reduced pace.  It is hard to say if the pending leadership change in the United States is having any impact.  Needless to say, as usual, the media is promoting a short-term vision and scare tactics which are hard to ignore.

Americans are both resilient and impatient.  But there is no silver bullet or quick fix, so patience is required to wade through the debris and most importantly to rebuild confidence in the system.

As we mentioned in our last Viewpoint, given the decline in the stock market, most accounts have room to be rebalanced toward equities to reach their target debt/equity levels.  We had some cash and raised a little more this quarter selling lass favorable assets.  We look for opportunities to dip our toes back in as markets steady.

October 17, 2008