Dear friends,
 
It’s a new year again. Hello to old friends and welcome again to all the new people who have joined us recently.  It has been an interesting decade. The Capital Markets were much better in the second half of 2009 than same period 2008. Though most portfolios have bounced back significantly, there is always work to be done, as we attempt to capitalize on opportunities presented by over sold condictions due to high emotions in the market place. In short, we believe that the negative effects of the correction in the real estate market will be with us for some time, but the hurricane has passed and the world economy has a brighter future, particularly in the US.
As real estate investments are typically the largest for the average investor, severe negative corrections tend to have a more lasting impact on consumer spending power, confidence level and the overall economy. The resulting slack in economic demand cause businesses to take defensive measures such as cutting payroll spending. This, unfortunately, has resulted in higher unemployment (US10%) that was already entrenched by labor competition from the emerging economies. This cycle could otherwise be self- sustaining to produce a severe prolonged recession. However, it is our view , that the global stimulus investments and the coordinated efforts of the Obama administration, the Federal Open Market Committee, the US Treasury Dept., and the G20 central banks, significantly reduced the frozen liquidity/credit demand issues, as risk averse banks are reluctant to lend  to . The coordinated effort was a monumental task in preventing the destruction of the global capital markets and the banking systems which had invested heavily in illiquid mortgage instruments used to finance the boom in real estate transactions. Presently the markets reflect renewed confidence: DJIA* 6,648 March 2009 to 10,653 Jan 2010 and S&P 500* 679 March 09 to 1,144 Jan 2010.
While there are concerns about future inflation given the US Debt ($12T +), and the continued low cost of capital, the future looks brighter in our view, as increased competition from developing economies and the new US administration has produced a political willingness to tackle long term structural economic weaknesses such as, the US $300b dependency on middle eastern oil, the crippling health care costs, our declining education systems - K-12 and the need for better financial regulations. The growth in this competition is constructive, it not only provides investment opportunities, it creates more peaceful trading partners that can better afford our high price innovations. From IPods, Smart Phones, the Entertainment Industry, and Med.Tech. Da Vince surgical systems and soon autos, the US continues to produce innovative economic engines from a highly productive labor force. In light of the recent experience, the acknowledged global interdependence demand coordinated systemic financial regulatory efforts. Now, new regulatory bills in Congress will regulate mortgage practices, move us closer to the Glass Steagall Act, and reduce the leverage used by investment banks, which are now commercial banks.
Going forward, we will continue to seek opportunities in the global markets across all grades of investments. In light of the prospects for global economic recovery and possible future inflation, we continue to add short to medium term convertible holdings as a means to address both possibilities. With two significant market corrections in nine years, we are mindful that this can recur given the liquidity and the magnitude of emotional reaction to news/events in present day markets. We have deployed a discipline, which includes additional custodians (J.P.Morgan and Deutsche Bank) to help mitigate the effects of possible future recurrences. Here we seek to grow capital by periodically and incrementally redeploying assets emphasizing fixed income type investments with these custodians, a further attempt to reduce the emotional human factor.
We believe all investors, where applicable, should take advantage of potentially tax-exempt investment Roth IRA accounts The tax costs should be a managed process. In the second quarter we hope to roll out a limited partnership fund for qualified investors. It will remain consistent with our socially responsible investment principles. We believe good capitalism can be constructive and consistent with good practical ecology management. We therefore, seek to capitalize such compatible businesses. For more on any of the above, please consult your Client Advisor.
Thank you for your business. 
Sincerely,
 
Norval Thompson
Investment Manager                                                                                                                                 see disclaimer