Greetings!

I'm not expecting the U.S. currency to go much below its low of .637 against the Euro unless the Fed does more US dollar devaluing activities. It certainly may, but how much more can the US dollar go down when it's already been devalued 46.5% against the Euro over the last 6 years? The Fed is not in that position right now where it's lowering interest rates. Probably the number one way to cause a currency to be devalued is to lower interest rates. However, we did see the Chinese lower interest rates in this last week of September. One day after saying it would set up a facility to buy commercial paper directly from corporate issuers, the Federal Reserve early on October 8 issued a joint statement with five other central banks around the word that it would reduce interest rates. The banks include the European Central Bank, the Bank of England, and the Canadian, Swedish, and Swiss national banks.

So this devalues all the world currencies at the same time. When you see interest rates being lowered like this it can put pressures on the price of precious metals and commodities causing them to go up.

"Federal Reserve Chairman Ben Bernanke agreed Wednesday with the consensus of market economists that there are signs of a broad slow-down underway in the U.S. economy, but offered little insight into the Fed's thinking about the timing of any turnaround. Bernanke only said the economy would "gradually pick up" as financial markets return to normal and the housing contraction runs its course. But he left out when he expects these two events to happen. Despite the grim growth outlook, Bernanke said that the Fed's concern about higher inflation is still on par with its worries about slower growth. He said both remain "significant" concerns for the Fed." - by Greg Robb in a article titled Bernanke Vague About Timing of Turnaround, September 24, 2008 from Market Watch.

"Stephanie Smith, a clinical psychologist and the Colorado public education coordinator for the American Psychological Association, says Americans overwhelmed by the financial crisis should focus on what they can control. "We can control how much we are spending on eating out," she says, "or getting our latte or getting our new fall clothes."

Taking a break from reading or watching all the bleak financial news can be beneficial, too. "We don't need to know the gory details" because this can increase anxiety, Dr. Smith says. Families should consider a five-minute rule for discussing the banking crisis and then move on to less anxiety-inducing topics, she says." - by Eleanor Laise, Jennifer Levitz and Shefali Anand from the article Wall Street Got You on Edge? Join the Club, published September 18, 2008 by The Wall Street Journal Online.

I think that we are halfway through a secular bear market that began at the beginning of 2000. At the beginning of 2000, U.S. stocks had a price to earnings ratio of over 40 and was approaching its peak price earnings ratio which it would later hit of 43/44. Historically, the 82.5 year average of the S&P 500 is a price earnings ratio was 15.98. So basically, just about anything above 21 on a price earnings ratio is expensive and anything below 9 is cheap. To give you an idea, in 1982 the price earnings ratios for the S&P 500 had hit about 6.5 and from 12/31/1982 to 12/31/1999 it had a compound annual rate of return of ~14.8%. On the other hand, from 12/31/1999 thru 09/30/2008 the S&P 500 (US stocks) has a compound annual rate of return of -3.02%. Right now we have a current price earnings ratio of somewhere around 23/24 and I think that price range ratio is going to go below 10.

So over the next several years, I think the U.S. stock market in general will remain in a bear market until it gets revalued. This is how the bubbles of mania and fear work, people fall in love with an investment as they did with U.S. stocks and run them all the way up as they did over the 18 years from 1982 to 2000 and we had a tremendous increase in the number of financial planners and financial advisors and stock brokers and investment advisors in our country all purporting U.S. stocks as the only way to go. Now the pendulum has swung and we're 7.5 years into this bear market for U.S. stocks and we still have a ways to go, in my opinion. So fortunately you found a good strategy (the TDP®) to invest and that's true diversification. I think the SVG is also going to offer a way to increase account values during the next few years as the US stock bear market continues.

I would guess a 10% total return increase over maybe the next four or five years for the S&P 500, until we see the price to earnings ratio down below 10. This would be a compound annual rate of return of less than 2%. So I believe an investor in strictly large cap US stocks will grow their money a little bit but there's better ways to do it. I am confident that the SVG and the TDP are two excellent ways to do that over the next several years.

I believe we're just going to have to be patient and wait it out and when that price earnings ratio gets below 10 for the S&P 500 that's the time to really start throwing some money at the U.S. stock market again. But until that time, I think it remains over-valued (historically) and something that we want to be careful if we're going to put money in the U.S. stock market. If you have any friends or family members that you know of that are suffering from the buy and hold theory of only investing in US stocks and working with another financial advisor themselves, please let them know that at least your financial advisor believes that the U.S. stock market is still in a secular bear market and probably doesn't look that good the next 5 to 7 years. They would be the perfect person for me to work with moving forward in a secular bear market for US stocks.

"Keep your head down the bullets have to let up eventually. We're all in this together. May the Lord bless you and your family." - written to me, on October 1st, 2008, by a client of mine named Link.