By Richard L. Kesner, President
The CommonWealth Group
So, you think it’s different this time. In 1979 the Nikkei 225-stock average was at about 5000. On the last day of 1989 just a decade later, the Nikkei index hit a record 38915.9, up a whopping 492% for the decade.
The first trading day of the new year and the new decade stocks started falling and kept falling over the next three months for a correction of 23%. Many investors were used to buying the lows expecting an increase in their investments. Unfortunately, those investors who put more money into the “depressed stocks received more bad news. The worst had just begun. The Nikkei finished down 39% for the year and kept falling to 14309, 63% from its peak on August 18, 1992.
In the middle 1990’s investors caught a break as the index rallied to over 20000. However, the worst was not over as the index fell to the low for the decade at 12880 on October 9, 1998.
Of concern of course is the euphoria over the technology sector in the United States, which if you looked at a graph closely resembles the rise of both the Dow Jones Industrial Average from 1919-1934 and the Nikkei from 1979-1989. The S&P Technology sector has risen from about 200 to about 2000 in the past ten years. When do we see the correction?
Are we in for the same sort of correction? I certainly hope not. But the euphoria that is surrounding the market at this time is sort of scary. As you know, I do not believe that any person, computer, guru or anything else can correctly time the market over a long period of time. I do believe that it is important to write down a plan and stick with it regardless of how stocks or the markets perform for a short period. Following a plan will allow you to attain the goals you need for you and your family. Long-term investing works if you give the investments a long-term to perform. No one knows which sector or stock will perform the best over the next day, week or year.
COMMONWEALTH HAPPENINGS
With the growth in technology and the growth in Internet use, some clients have asked us if we can download reports to them. While we feel this added service will be a benefit to those clients who want it, we have been concerned with the security of sending account balances and reports electronically.
In order to accomplish this feature we have been exploring opportunities to team up with some Internet providers who have already built secure sites with “firewalls.” We expect to finalize a strategic alliance in the very near future and will be offering to those clients who want it some substantial innovations in the reports they receive plus some additional features not available at your typical Internet site. Expect an announcement before the end of the second quarter.
NEW COMBINED REPORTS
Many of our clients have multiple managers handling their investments. For those clients we previously had prepared a separate report for each manager, and a total report for the entire portfolio. We are now able to produce one combined report, which provides the results for each manager and the total portfolio. The new report looks great and is more compact meaning we all have less paper. However, if any of the clients still want us to produce separate reports for each managed account we will be happy to do so. Please call either Marge or me and we will prepare the individual manager report and send it out to you.
In addition to the above we have been looking for additional custodians to hold clients assets. Many of our clients have been asking to custody assets at Trust Companies. Until recently we felt that the costs for doing this were too expensive and would effect the overall investment return on the portfolio. However, we have recently been able to enter into an agreement with a Trust Company to provide custody services and transactions for one low fee. Any client wishing more information regarding this service should contact our office.
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