January 7, 2003

To Our Clients and Friends:

Core Beliefs

As we end nearly three years of down markets, I want to discuss one of our core beliefs, which is a cornerstone of our investment philosophy. We do not market time (i.e. guess the short term direction of the markets) . We believe that the great long term risk of stocks is not owning them. At the height of the depression in 1932, the Dow Jones Industrial Average sank to 40. On December 31, 2002 the Dow closed over 8341. The intervening period included the Great Depression, four wars, rampant inflation, oil embargoes, assassination of a President, the Cuban missile crisis, a one day drop in the Dow of nearly 25%, etc. What can we learn from the past? The right time to buy stocks is now, the right time to sell them is never, unless you need the money, and the greatest risk is not owning them. All you need to know about prices is that the downs are temporary and the ups are permanent. Stock prices go down all of the time. Never mistake a downward fluctuation for a loss. Markets fluctuate, but they do not create losses. Only fearful investors can create a permanent loss by mistaking a temporary decline for a permanent decline. The enemy of investment success is fear, not ignorance. No panic means no selling. No selling means no losses. It is as simple as that.

Learning from the Past

I have included a short article from Lazard of the same title. It is a good analysis of what happened to investors the last time we endured similar market conditions that we are now experiencing.

As usual, please feel free to call us or come meet with us. We are here to answer your questions, respond to your concerns, and help you make smart decisions about your money. Be sure to let us know if your financial situation changes. If you have a friends or family who might benefit from our services, have them call us for a free consultation.

Very truly yours,

ZRC Financial Services, LLC
A Registered Investment Advisor

By:
         Richard P. Clarke

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