Last Quarter Round-Up

MARCH 3 1, 2 0 0 8

Welcome Spring! At least that is what the calendar is telling us. I don't know about you, but for me the earlier Daylight Saving Time
this year has me thinking it should be warmer than it is. I like DST... I guess I just have to get used to its earlier arrival. I'm ready for the warmer weather, even if it brings extra work around the house. Bring it on!

My partners at Barron & Company, LLP are hard at work, tax time being their busiest time of year. Interestingly, I find that many people think more about their overall financial situation at tax time. In a way this makes sense, because whether you do your taxes yourself or pay someone to do them, you have to gather the data. Perhaps it is the exercise of gathering the data that leads many to think about their general finances. This is a good practice considering how easy it is to allow finances to fall to the bottom of your priority list at other times of the year. I encourage you to use tax time as a way to engage this important annual task. If I can be of assistance in any way, don't hesitate to call.

And the volatility continues. Don't say I didn't warn you... the economic clarity needed to temper the current market volatility has not arrived. The S&P 500 was down -9.44% for the quarter. The economy is slowing down, but the recession we hear so much about in the mainstream media is still unproven. The business cycle naturally experiences periods of slow or negative growth, but recession suggests extended weakness. While the credit crunch is deepening, our understanding of it is improving. I must admit the crash of Bear Stearns came as a shock, but the more I learn it seems evident that their demise was due more to very poor risk management than to systemic financial instability. Our equity strategy last quarter favored large cap stocks and growth while underweighting small caps and value. The fixed income strategy favored inflation-protected and long bonds while underweighting short and high-yield bonds. Quarterly asset class results: Large Cap -9.74%; Small Cap -9.85%; Growth -11.05%; Value -8.54%; Inflation-protected bonds +3.27%; Long bonds +2.62%; Short Bonds +2.28%; Hi-Yield -0.15% (see Notes)

Global Economic Outlook

Our equity strategy this quarter continues to favor large caps and growth. I am expecting the aggressive interest rate cutting to slow down next quarter because those cuts will not fix our biggest economic problem... housing. Until the housing inventory stops growing and the pace of foreclosures slows, this economy won't find stability. Rate cuts help increase other economic activity, but 30-year fixed mortgage rates have barely budged from last quarter. Our fixed income strategy is a hybrid this quarter. I will trim back on inflation-protected bonds and get back into high-yield bonds at what I think are bargain prices. I will add also add a senior loan position to some of the more aggressive portfolios. I intend to maintain long bond positions assuming that interest rates will not go up anytime soon. I am still concerned about inflation and that is the second reason I feel rate cuts will slow down. Inflation is out there as anyone who buys fuel or food knows... it just isn't at the forefront of economic concern at this time.

Keep your eyes open for my new
e-newsletter, Financially Speaking.

This newsletter will focus on money-related issues about which I am often asked. I will pick what I feel are interesting and timely topics dealing with finance, investments or the economy. Better still, readers are welcome to respond via e-mail and request a topic they would like to see covered. I look forward to sending out the first edition and receiving your responses.

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Notes: Asset class & style returns are based on the price-only performance of ETF's & ETF blends with similar respective focus. Asset class and Style results do not reflect the performance of Barron Financial Group, LLP's advisory accounts. Advisory accounts may not contain these investment strategies and may contain investment strategies not described here. Advisory services include asset management fees that are not reflected in these results. Please contact Barron Financial Group, LLP for more information about specific asset class, style or portfolio returns.

Barron Financial Group, LLP is an Investment Advisory firm
registered with the CT Department of Banking

Non-Advisory Securities offered through
Purshe Kaplan Sterling Investments, member FINRA/SIPC
headquartered at 18 Corporate Woods Blvd., Albany NY 12211