Moving Forward, With Treasures from the Past

4Q 2010

Wrapping it up into a single sentence, 2010 could be described as the year in which global equity markets managed to tack on impressive gains despite an anemic economic recovery and a host of other macro concerns. Not only did the world survive, but we realized once again how well societies and companies can withstand misfortune and still churn forward.

In reviewing the statements that follow, you’ll observe the powerful year-end rally experienced in diversified portfolios. For the quarter, domestic equities returned between 10.5% (Large Value) and 17.1% (Small Cap Growth). Gains within the international stock categories were relatively contained by ongoing sovereign debt vulnerability, but ranged from 6.7% (Large Cap Developed) to 11.8% (Small Cap Developed). The emergence of consistent trends within certain commodities allowed Managed Futures to produce a positive return of 6.1%. Rising interest rates, and higher inflation expectations, caused some initial turbulence within most Fixed Income categories. Municipal bonds fell 4.2% as that sector also struggles with perceived credit risks at the state and local levels.

While this recent performance was at least provoked by ongoing government and central bank accommodations (quantitative easing, extended tax breaks, etc.), it’s worth noting how leading economic indicators and even stubborn funds flow data had turned positive by late in the year. At this stage, it’s uncertain whether we’ll get a continuation of positive momentum throughout 2011. That said, it’s important to understand that market outlooks matter less when you know how to proceed in either dark or sunny environments. Market commentary aside, our firm has also taken several steps forward during the past year. While this statement likely serves as your initial introduction to the new logo, most clients are aware that we moved into new offices in mid-December. Despite the work involved with packing, we’re thankful to have re-discovered several “treasures from the past”. One such item was an internal memo from 2003, in which our founder (Bryan Brand) listed 152 individual thoughts deemed worthy of sharing. We agreed, so a sampling of these follows:

• In the long run, client approval will be based more on what we’ve done than what we’ve said.
• Discourage the excessively courageous and encourage the excessively discouraged.
• Advisor pride goes before portfolio fall.
• There’s a lot of trust in Zig Ziglar’s old saying that, “you can get everything in life you want if you help enough other people get what they want”.
• Our integrity must always be non-negotiable.
• Market forecasters are like weather forecasters, but not nearly as accurate.
• One of our greatest, and least recognized, contributions to clients’ long-term financial success will likely be – “mistakes not made”.
• Circumstantial happiness can be bought with money. Joy, on the other hand, is priceless and not for sale.
• Better a high probability of getting rich slowly than a low probability of getting rich quickly.
• Our best client relationships are those where we are mutually accountable.

In this same spirit, our team is committed to retaining your trust and confidence in the coming year and beyond.