Regarding the future, we are eternal optimists. We believe in American ingenuity, free markets and our capital system. Long term, it's the best place to invest.

Regardless of your political views, America will have a new historical figure in the White House in the near future. Be optimistic! It should get Wall Street excited as well. A paraphrased quote from Standard and Poor's, "Euphoria surrounding elections will spill over to Wall Street". Standard and Poor's reports: since WWII, September is historically one of the worst months for the stock market. There is one exception. Presidential election years have positive returns. Let's hope this trend continues.

There's more good news. The economy. We haven't experienced the technical definition of recession (two quarters of declining GDP) that the media has been promising for months. In fact, GDP was revised significantly upward for last quarter. Core inflation is very tame. Both the Personal Consumption Expenditure (PCE) and Consumer Price Index (CPI) are tame at 2.4 and 2.5% respectively. We are not ignoring headline inflation (which includes fuel), but we are watching oil prices drop precipitously. Because of this and the stance to stay quiet during presidential elections, it is doubtful the Federal Reserve will raise interest rates this year. The rate cuts that began close to a year ago are just starting to work their way through the system.

So, what's going on? These current volatile markets are a result of a protracted bottom. This correction, which began in the 4th quarter of last year, has gone on far longer than WH Cornerstone expected. We have seen three distinct benchmark bottoms this year. They are as follows:

• On January 22 the S&P 500 closed at 1310 as a result of the Society Generale trading scandal
• On March 10 the S&P 500 closed at 1273 as a result of the Bear Stearns bailout by Federal reserve
• On July 15 S&P 500 closed at 1214 as a result of oil at $148 a barrel as a result of the Fannie Mae/ Freddie Mac problems arise

So, what should you do in these times? Here's what WH Cornerstone is recommending:

1. Shut off CNBC! If you are investing for the long term, don't let the hype get the best of you. Fear and greed run Wall Street. We're feeling the fear from the greed.
2. Take stock in your goals and aspirations. Make sure your asset allocation is commensurate with goals. Rebalance for the future.
3. Watch cash flow. Save more, if you can. Scrutinize all expenditures. Make sure cash is safe. Double-check that your bank is FDIC insured. Make sure all brokerage accounts are SPIC insured. Schwab, Fidelity and TD Ameritrade are all fully insured.
4. Take losses. Take a good look at your holdings, and consider harvesting some tax losses. Sell the "ABC Growth Fund", put the loss in the "tax bank", and buy the similar "XYZ Growth Fund". If you are not comfortable buying in this market, then dollar cross average into the fund.
5. Trim back on high quality investment grade bonds and treasuries. Safe money has been stock-piled into these asset classes. Yields aren't stellar, and the issues may be over-valued. Unfortunately, not too many substitutes exist for this asset class. You may consider a high quality, national muni fund or state specific muni fund. Munis perform very well when tax increases are on the horizon.
6. Convert IRAs to Roth IRAs. Consult a tax advisor before completing this one. With the S&P 500 down 20%, it will cost a lot less to convert than it would have last fall.

In closing, "Scientists have joined poets in declaring that money really won't buy you happiness. Happiness is not something to acquire and saved up; it's something you pursue." Money Magazine, September 2008. Timely perspective!

Please advise us promptly if there are ever any changes in your financial situation or investment objectives. Feel free to give us a call if you want to discuss anything further.