By proceeding, I acknowledge that I have read and understood the Disclosure and Copywrite Statements.

Dear Clients,

Ordinarily, I would not inundate you with so many musings in a matter of days. However, yesterday’s market action was notable. You may be wondering what happened to the stock market and what the implications might be for your portfolios. As I have mentioned in previous remarks, I have been preparing your portfolios for some stormy weather in the capital markets. The storm may be close at hand.

The volatile action in the markets yesterday should serve as a wake-up call for investors that have slipped into 2006’s market induced complacency. The S&P 500 fell approximately 3.5% in Tuesday’s trading session, erasing three months of impressive gains in a single day. All of the major indexes buckled under massive selling pressure amid extremely high volume trade. Few stocks survived the fall as declining stocks outnumbered advancing stocks by a ratio of 12:1 on the NYSE. The catalyst? China’s stock market fell 9% on Monday night, setting off the frenzy in the U.S. stock market and other global markets. These events beg the question, “why would a sell-off in China ignite such fear in U.S. markets if investors are confident that our “goldilocks” economy is so impervious, the stock market so attractively valued, and our real estate markets on such solid ground?”

I don’t know, but the explanation must run a little deeper than “investors just got a little spooked by the news from China.” I might point to a couple of concerns weighing on the market psychology; Former Fed Chief Alan Greenspan’s warning of a recession in 2007, a difficult U.S. housing market, down beat economic reports, decelerating corporate earnings, historically rich stock valuations, increasing inflation pressures, growing trade deficits, heightened Middle-East tensions, and resurgent energy prices. These things can make for a challenging investment climate.

You may find it counterintuitive when I say that our investment strategy has the potential to perform well in this environment. I can only make a general comment about how our portfolios faired yesterday. However, I’m pleased to report that, while the S&P shed a jaw-dropping 3+ percent, the Catamount managed portfolios held up quite nicely. Today, the portfolios advanced respectably. Rest assured that I will continue to monitor the situation closely.

Greg