June '09 Letter/E-Mail Update:

May '09 Letter/E-Mail Update:

We are proud to announce that Schannep Investment Advisors, Inc. is celebrating its eight-year anniversary this month as an Independent Financial Advisory firm. Although, our company is eight years old, our brokers average 20 years experience in the business with Bart leading the way at 26.

The financial markets have continued to improve since March and there are signs that this recession could end as soon as the third quarter of this year. Of course, we won’t know it is over until several months after the fact. We do believe this recession is nearing its end and, once again, want to express our gratitude for the faith and trust you have placed in us.

Finally, in the wake of such tumultuous times in the financial markets, beware of unrealistic promises. This is the time when people can be duped into inappropriate investments by unscrupulous sales people. We are of a mind that investors who stay the course with their core investments will be well rewarded. The major indices are up about 30% from their respective bottoms. This is not the time to try and get it all back with some slick market play.

If someone approaches you with an offer that seems too good to be true, it probably is! Please call us for a second opinion. We are available anytime to discuss your needs and concerns.

Thanks again for your business and referrals.

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Client Picnic Invitation:

It’s time for . . . The second annual Schannep Investment Advisors Cookout Come join the fun!

Sunday, May 3rd at Catalina State Park from 2pm to 6pm

Bring your family and friends for plenty of food (barbeque), drinks (beer, wine and soft drinks), music, (The Tortolito Gut Pluckers back by popular demand) and games!

Catalina State Park has hiking trails and bathrooms. All you need to bring is yourself, your family and your friends (and maybe some camp chairs, if you like). We will provide everything you need for a great afternoon at the park.

Entrance fee is waived and parking is free. This is our way of saying THANK YOU for being our clients. We hope to see you there!

Please RSVP no later than April 28th to Candace or Lacey at 544-2500 * Please tell the Parking lot attendant that you are attending the Schannep Investments Event.

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April '09 Letter/E-Mail Update:

What a ride this has been!  We were completely surprised when the stock market broke down through last November's lows to 6,547 on the Dow.  And now, just about a month later (the most recent low was March 9th), we are back around 8,000. March was the first positive month for stocks since last summer. If there is a lesson to be learned it might be when you're on a roller coaster, hang on, don't jump!
 
We hope the equity markets are forecasting an end to this recession with better economic times ahead.   It is good to see many of our favorite mutual fund managers begin to out-perform their respective benchmarks in the first quarter of 2009.  One should never expect smooth sailing in the stock market but remember the old adage, "Bull Markets climb a wall of worry!" 
 
Thank you for your patience and trust during these difficult times.  There has never been an easy recession or bear market that we can recall, so we are forever grateful to have such outstanding folks as clients. 
 
Please call with questions or concerns and thank you for your business and referrals.  

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March '09 Letter:

Now is not the time for statistics, charts or expert opinions! Emotions are running high and the future of the market is beyond our control. Unfortunately, emotions can destroy an investor’s ability to build long-term wealth. So let us focus on the things that we can control: Our actions! We continue to research the marketplace for opportunities that will benefit you when the markets do recover. We also encourage you to meet with us to ensure your investments are still aligned with your current and future goals. Together we can make informed decisions about your investments and discuss what actions you can take today to meet those goals.

In times like these it can be difficult to imagine that things will improve. Sometimes it seems the bad news will never end; but it does. It always has. Historically, by the time we clearly see a recovery in the economy, the markets have already moved higher. Selling your investments and not participating in an eventual recovery is the surest way to lock-in what to date are unrealized losses. The “safety” offered by cash and CDs is only an illusion for long-term investors, unless you believe taxes and inflation are also going away.

We know these are painful times and we are experiencing the pain along with you. We also believe things will get better. Perhaps this belief is the greatest piece of wisdom we can share with you. Belief in the future is what has allowed our country to prosper in good times and survive during our darkest days.

“Patience is also a form of action” - Rodin

Thank you for your business. If you are feeling uncomfortable, we encourage you to call us to discuss your accounts, make an appointment to come in, or simply to commiserate.

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February '09 E-Mail Update:

The DOW recently broke below the market lows established last November. Our take on the recent drop is that it resets the time-frame for economic recovery, meaning we are still likely six to nine months away from the end of this recession. So, we are back where we were three months ago.

FEAR still reigns for stocks, but the bond market has ACTUALLY improved.

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February '09 Letter:

Now that we are over a year into the U.S. economy's longest and deepest post-war recession, it begs the question, what next? Certainly, the downward trends in employment, housing and retail sales have been cause for great concern. The fact is many of the horrible events that economists feared could happen have happened. We are now living in the dark days of recession. It is no longer a terrible abstract concept of gloom and doom in our future. It's here and it's real. But we think it may already be priced into the equity markets.

Ironically, some of the bad news for the economy is good news for investors. We still believe the market bottom was November 20th 2008. If that turns out to be correct, we expect the economy to improve sometime between this spring and this fall. The stock market is a leading economic indicator that usually looks six to nine months ahead. Even still, if history is a guide, unemployment will continue to rise and more companies will fail. That's the way it usually works.

But with the bad news comes some good news. High yield bond yields are at historic spreads over treasuries, and the price of gold is nearing its all time high. The U.S. Dollar has strengthened significantly and interest rates are very attractive for borrowers. Oil prices are almost 70% below their all time highs of $147 a barrel resulting in a rebate of over a billion dollars a day to the U.S. consumer and economy. Our Government is proposing a massive stimulus package, which is expected to pass in the next few weeks. Something has got to give!

There is always risk involved in investing but right now we believe the greatest risk is in pulling out of the stock market and missing the hearty rally that usually follows market bottoms. It is very possible that we may test the November low but we encourage our clients to hang in there and try to focus on their long term investment goals.

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January '09 Letter:

How bad was the last quarter of 2008? It truly was the worst. Recessions are a normal part of the business cycle, occurring once every five years on average over the last 50 years. With every recession comes a number of bankruptcies, buyouts, mergers and of course scandal. This recession exposed an epidemic of questionable debt embedded so deep into the global financial system it resembled a plague. Thus, when the systemic problems of the financial industry were uncovered, they so infected us with pessimism that securities were sold at any price. It became a collective "get me out." Indeed, the amount of money in bank deposits and money markets is now equal to about 80% of the market capital of the S&P 500. That's five trillion dollars!

The world economy is like a very sick patient. The doctors have done, and continue to do, everything they can but ultimately it will take some time to heal. Do we expect a full recovery? Absolutely! Our guess is that the recovery time will take longer than we want but less than the pundits think. Expect more bad news regarding what has already happened, continued rising unemployment, and gloom and doom from the media. That's the way it usually goes.

We believe we are in a new bull market, which began when the market bottomed on November 20th. The volatility will continue, but we expect higher highs and higher lows eventually leading us back to all-time highs in three to five years (the historic average from a market bottom). Bond prices are slowly improving and we believe this will help the financial markets regain some confidence. It doesn't feel good right now but when it comes to investing, when investors feel good things are usually much, much more expensive.

Regarding tax preparation, the Form 1099 mailing deadline has been extended from January 31st to February 15th. This is a result of the economic stimulus legislation enacted on October 3, 2008.

Thank you for your business and we always appreciate referrals – the only way we grow our business. Please call if you have any questions or concerns. Your future is why we are here.

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January '09 E-Mail Update:

The Dow Jones Industrials and the S&P 500 have both closed 19% higher than their respective bottoms. According to Jack Schannep and his timing indicator, this signals a new bull market. On average, the first full year gain of a new bull market is 45%!

However, markets do not go straight up and we expect more volatility going forward as we will continue to see bad economic news, such as rising unemployment, for about the next 6 to 9 months. What this does signal is a change in the market trend, and the trend should now be upward.

While it's true that diversification did not work last year, 2008 will likely be remembered as a very rare exception in market history. In periods of high volatility nearly all assets become correlated. Cash is currently king, but over the longer term cash delivers very modest and often negative real returns. We will look back and marvel at the current mountain of money piled up on the sidelines.

According to Duncan W. Richardson, Executive Vice President & Chief Equity Investment Officer, Eaton Vance management, as of January 1, 2009, between money markets and bank deposits, "cash" represents over 80% of the market capitalization of the S&P 500. Eventually, it seems to us, this money has to go somewhere.

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December '08 E-Mail Update:

Please be aware that J.P. Morgan Clearing Corp. (JPMCC) has been notified that clients have received SPAM/Phishing e-mails that attempt to represent that the e-mail is from JPMCC. Please be advised that these e-mails are NOT from J.P. Morgan. Do not reply to them, access any links contained within the e-mails, or fill out any forms included.

Please note that JPMCC does not - at any time - send direct communications requesting you complete an online form or respond to electronic inquiries.

Any SPAM e-mail may contain any or all of the following:

From:    JPMorgan
Subject: JPMorgan Urgent Notification
Note:     This service message regarding the J.P. Morgan
             customer form

Dear Client: As part of the new security measures, all JPMorgan Access clients are required to complete J.P. Morgan Customer Form. Please complete the form as soon as possible (there will be a link provided).

If you receive any e-mail that says it's from J.P. Morgan, please call us immediately. Do not open or forward the e-mail to us.

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October '08 E-Mail Update:

Buy stocks now! It gets better from here!

The financial news is about as scary as it gets. Emerging markets are plummeting as the rest of the world is experiencing their own version of the sub-prime mortgage melt down. Nevertheless, with this financial calamity comes a rare buying opportunity; the chance to purchase equities at a market bottom. We believe that time is now.

Needless to say, before Monday's surge, the Dow had dropped 25% in three months - 18.15% in just this last week. In the midst of this drop, Jack Schannep, a leading DOW Theorist, had a Capitulation signal at last Tuesday's close followed by 10 ½ % drop in the DOW. We believe that the turnaround occurred with an 11% rise on Monday!

This does not mean all things are rosy. The stock market usually turns six to nine months ahead of the economy so we expect bad economic news and rising unemployment to continue for several months. Nevertheless, as the saying goes "Bull Markets historically climb a wall of worry."

This Bear Market which began on October 9, 2007 lost about 40% in one year. In the previous Bear Market, the DOW also lost about 40% from its high in 2000 to its low in 2003. It took three years to climb back to new highs. That was six years from high point back to the next high point. The last time we experienced a dramatic drop in such a short period was the crash of October 1987. It took two years for the market to reach new highs. That is three years from high to high.

Those of you who were our clients in 2002 will recall that we correctly called that market bottom as a result of Mr. Schannep's Capitulation Indicator on October 9, 2002. Once again, we have a very strong Buy Signal. We recommend that anyone with cash earmarked for investing do it now.

For those who are "all in," we can look forward to better days ahead.

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September '08 E-Mail Update:

The stock market experienced more panic selling in the wake of Lehman Bros filing for chapter 11 yesterday. The fallout could continue as the extent of other financial institutions' liquidity issues is revealed. We continue to have confidence in our overall financial system. Our experience with investments reminds us that in times like these, cooler heads usually prevail. And it's never fun to see the value of one's holdings diminish but unfortunately we all know that this is part of investing. It may help to know that new bull markets are born out of the shambles of old Bear Markets.

Please call us with any questions or concerns. 09/16/08

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August '08 E-Mail Update:

As you may know, Bear, Stearns & Co. Inc. and Bear, Stearns Securities Corp. were acquired by JPMorgan Chase & Co. earlier this year. We wanted to take a moment to bring you up to date on some impending name changes to our clearing firm's broker dealer entities.

Effective October 1, 2008, Bear, Stearns & Co. Inc., the broker-dealer that provides access to financial products and execution services for your account(s), will be changed to J.P. Morgan Securities Inc.  In addition, also effective October 1, 2008, Bear, Stearns Securities Corp., the broker-dealer that provides custody and clearing services for your account(s), will be changed to J.P. Morgan Clearing Corp.

Most importantly, effective October 1, 2008, all checks deposited into your account will need to be made payable to, or endorsed to, J.P. Morgan Clearing Corp.

After October 1, there will be no material change in the current operation of your account(s) as a result of this renaming. You may notice the new names on account statements, confirmations and other correspondence related to your account(s).

As always, we are committed to providing you with an outstanding client experience. We value your business and appreciate your continued support.

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August 2008 Letter:

Sifting through the news for pertinent financial information from today’s media can be frustrating at best.  We often receive phone calls from our clients and friends who are confused or upset by “news” broadcast over the airwaves by the talking heads or printed in the written media expressing opinions versus facts.  Most investors feel better after discussing such issues with us.  What concerns us are those who are too reluctant to call us because they feel like they would be “bothering” us.  It’s no bother, really!

We encourage you to call us with any questions or concerns that you may have.  And we are very aware that there are those who tend to quietly suffer with anxiety when the news is scary or their account statements show losses.  Perhaps you would like to know our thoughts and reactions to economic news and market fluctuations immediately, without waiting for a phone call or a letter.

To that end, we are going to start sending market updates and commentaries by email more regularly than our quarterly letter.  If you would like to receive these communications via email, please send an email to bschannep@siatucson.com, and simply write: “Put me on the client email list.”  Otherwise, expect to receive the normal correspondence via the post office.  If you would like to receive all future communication from Schannep Investment Advisors via email, simply write: “Please send all communications via email.”  We will also post these comments on our website www.siatucson.com under Market Commentaries. 

Please understand that communications from First Allied Securities and statements from custodians, such as Pershing and Bear Stearns Securities Corporation will continue to come via the post office.  We hope you will enjoy this new service.  As always, thanks for your business and referrals and have a great rest of the summer.

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July 2008 Letter:

The technical buy signal we identified in our last letter turned out to be premature.  The major indices are off about 20% from their respective highs last October.  Surely, this is a much better time to buy than to sell.  The extrapolations of returns we expect to get from equities include such pullbacks.

Unfortunately for all of us, our news media and politicians continue to cry the sky is falling.  Many of the talking heads are suggesting that these are uncharted waters and none of this has happened before.  Anyone remember the gas rationing of the 1970s? How about the S&L crisis of the ‘80s and the banking crisis of the ‘90s?  Didn’t real estate plummet in the 1980s? The more things change the more they stay the same.

To be sure, we believe we are in a mild recession.  And yes, residential real estate is struggling, credit is tight, and high oil prices are affecting all of us.  Some businesses will struggle and others will fail.    It has happened before and it will happen again.  Economies are cyclical.  What we are experiencing is a normal part of the economic cycle.  Things will get better. 

Our portfolio models have outperformed the equity markets through diversification  across different asset classes.  We believe stocks are attractive relative to bonds.

Thank you for your business and referrals.

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May 2008 Letter:

The bear market, which began last October, may have ended without the dramatic “capitulation” we have been expecting to see.  Market capitulation is the sudden decline of the broad markets, usually accompanied by very high trading volume.  In essence, investors “throw in the towel.”  Historically, this has been a reliable indication that the bear market has passed.

Since we have not seen the market capitulate, we turn our attention to the charts below.  Recent market activity has risen above the downtrend line for the DJIA, but not for the S&P, until the end of last week.

We are writing to inform you that we believe the worst, if not all, of the recent bear market is over and to encourage you to “re-deploy” available assets into the equity markets consistent with your risk profile.

In our January letter, we suggested that the economy was probably in recession.  So far, the initial reports suggest that we may have actually missed the classical definition of recession (two consecutive negative growth quarters) by the smallest of margins.  Of course, those in real estate and the financial industries may beg to differ!

Regardless of where we have been recently, the equity markets are suggesting that better days may soon be upon us.

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April 2008 Letter:

The first quarter of 2008 was the worst for the US equity markets in five years.  The S&P 500 was down over nine percent.  Along with a slowing economy and probable mild recession, we witnessed a liquidity crisis in the bond markets, the rescue of the fifth largest commercial bank by the Fed and J.P. Morgan, and an unprecedented discounting of municipal bonds.  No wonder there was panic.  We believe cooler heads will prevail. 

No matter how many bear markets one endures they seem to feel the same, horrible.   Here are some thoughts to help us brave the economic storm: 

1)    From a technical standpoint, there is a good chance that March 17^th was the low. 

2)    According to Phil Orlando, Chief Equity Market Strategist with Federated Investments, it takes nine months for the Fed’s easing of interest rates to begin having an effect on the economy.  In May it will have been nine months since the current easing cycle began.  This coincides with when the majority of eligible taxpayers will receive their economic stimulus tax rebate checks.

3)    There is a lot of money on the sidelines.  As of last week, the total value of money market funds exceeded $3.5 trillion, an all-time record high. The total is up $1.1 trillion in the last twelve months. (source: Investment Company Institute)  With money markets and treasuries offering such low yields, stocks look like an attractive choice.

Regarding Bear, Stearns Securities Corp as our custodian for much of our holdings, it appears J.P. Morgan is fully committed to continuing to support the former Bear, Stearns custodian business.  We will make a change of custodian if we detect this support waning.  Otherwise, your accounts are safe, secure, and protected where they are.

Thank you for your business and referrals. 

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March 2008 Letter:

Your holdings at Bear Stearns are not going away!

No doubt you are aware that Bear Stearns is under duress.  The company is suffering from “liquidity problems” as a result of their sub prime loan exposure and the ensuing problems in the financial industry.    We believe Bear Stearns will be taken over by another large bank, such as JP Morgan.  The questions is: what does this mean to all of us who have holdings at Bear Stearns?

First, we do not fear any loss of assets because Bear Stearns has adequate insurance protection between SIPC and CAPCO.  Also, your securities are held at Bear Stearns Securities Corporation, a separately capitalized, guaranteed broker-dealer subsidiary of Bear Stearns. However, in order to continue providing the best possible service, our Broker Dealer, First Allied Securities, said today that they are negotiating  with another clearing firm, probably Pershing, a subsidiary of the bank of New York Mellon.  They believe it will be several months before any such action is completed.

Many clients have concerns about their money market positions.  The money market positions in our Bear Stearns accounts are with BlackRock, a completely separate company.  We are sorry for any stress caused by this news and hope that this explanation has been helpful. 

As always, thank you for your business and referrals.  We will keep you informed regarding the Bear Stearns situation and please don’t hesitate to call if you have questions or concerns.

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February 2008 Letter:

Very little has changed in the economic backdrop since our last letter dated January 18^th.   In fact, as volatile as the equity markets have been, the Dow Jones Industrial Average is actually several hundred points higher than it was just six weeks ago.  Whether we are in a recession or experiencing a “rough soft landing” is still yet to be determined but we believe the more time that passes without a significant drop (another 1,000 points?), the less likely it is that one will occur. 

Year-to-date numbers reflect a stock market that is struggling for direction.  The commodity index is the leader so far, up over seven percent, with bonds the only other index with a slight positive return.  Value stocks are outpacing growth stocks with the MSCI International index sandwiched between them, down close to nine percent.  The Fed has been proactive in an attempt to boost the economy with interest rate cuts and tax credit so we are optimistic regarding economic recovery. 

Tax season is upon us so if you need any help with cost basis or gain/loss figures for 2007 please don’t hesitate to call and please don’t wait until the last minute.  It seems like anything operational requires much more time and many more steps than a few years ago.

By the way if you have called the office and heard a new voice answering the phone, that is Lacey Wright, Rob’s daughter.  Lacey is helping out in the office a few days a week while attending college. 

Thanks you for your business and referrals.

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January 2008 Letter:

Recession.  What does that mean? 

The fourth quarter of 2007 was very disappointing.  It now appears that the Fed was unable to adequately stave off the negative effects of the credit crunch caused by the sub-prime mortgage mess.  As a result we believe we could be in a recession, which explains the significant drop in the equity markets.  It is certainly nerve-wracking when the media forecasts troubled times ahead, ~ but it’s not cause for panic. 

Two very important things to keep in mind are 1) we will not know for sure whether or not we are in a recession until it is well under way.  And 2) Fed Chairman Bernanke, on behalf of the Fed, announced today that they forecast slower growth in 2008 but not a recession.  Again, only time will tell.

The average recession lasts just over a year, and generally ends about the time most people call for things to get really worse from there, and as a result they completely miss the turnaround.  And that is our biggest concern.  It is still very possible that we are experiencing the “rough” soft landing that the Fed has been working to achieve, or even a mild recession. 

Since the Dow Jones Industrial Average is already down about 14% from the highs set in October, if this truly is a Bear Market, much of the damage may have already been done.   If we have done our job correctly you are well diversified across several asset classes, including fixed income, international equities, and commodities, which should lessen any future volatility.  

With all that said, we will be contacting many of our clients in the near future to discuss some fund changes and strategic recommendations that we think are appropriate under the present circumstances.

Thank you for your business and referrals.

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November 2007 Letter:

We are pleased to welcome Bill Fowler, the newest member and Investment Advisor of the Schannep Investment Advisors team.  Bill will be working in a new office near Camp Lowell and Swan.  He is about to complete his Certified Financial Planner (CFP) designation and has valuable experience in both estate planning and taxes.  Bill is married with two children.  Welcome aboard, Bill. 

It’s hard to believe the holidays are upon us.  We are especially grateful to have you, as such a wonderful client.   If you are in Tucson please join us for Holiday Nights 2007 at Tohono Chul Park on Saturday, December 1^st located at 7366 N. Paseo Del Norte, just northwest of Ina and Oracle Road.  This year they will feature a half-a-million lights with holiday cookies, cider, music and the very popular ornament auction, all from 5:30pm to 8:30pm.  As always you are welcome to bring guests.  Please RSVP to Candace as we need to buy your tickets in advance.

Surely you have noticed the equity markets whipsawing up and down this fall.   Economists and investment professionals are well aware that the last recession in the USA ended November of 2001.  The six years since that date represent the fifth longest economic recovery in the last seventy-five years.   It seems like everyday economic news is released that contradicts the previous day’s news.  We expect this to continue until the scope of the sub-prime mortgage debacle is played out. 

Whatever the case may be, we recommend staying the course by following the allocation models and rebalancing when appropriate.  The fed is doing what it can to create a soft landing by lowering interest rates and supplying liquidity (cash).

Thanks again for your business and referrals.  As we count our blessings, we hope you get plenty of time with friends and family over the coming holidays. 

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October 2007 Letter:

What a wild summer!  The sub prime mortgage debauchery caused a chain reaction in the credit markets, damaging several financial institutions and driving local housing lender, First Magnus, completely out of business.  The stock market reeled in fear that the liquidity crunch would bring the already slowing U.S. Economy to a screeching halt.  Then, like a comic book super hero, the Fed came to the rescue cutting the fed funds rate by one-half percent spurring the equity markets toward new highs.  What a ride!

According to Fortune Magazine, the US economy is $14 trillion in size or 28% of the world’s economy and US stocks comprise 45% of the total capitalization of all equities in the world.  Global equity markets have been on a tear with many U.S. listed companies benefiting from the global growth trends. In fact, we believe that the big story is not the weakening housing market, but the growth of foreign economies and their lessening dependence on the U.S.  This phenomenon has propelled earnings and revenues for the past year, and it shows every sign of maintaining its momentum.

As we mentioned in our previous letter, we expect the equity markets to finish the year at new highs.  Here are some reasons why: Seventy-two percent of the total return for the S&P500 over the last 17 years (1990-2006) has occurred during the four months from October –January.  Historically the S&P500 gains 13.7% after each “first rate cut” according to BTN Research.  This is consistent with recent government reports that the U.S. economy grew at a slightly slower, yet brisk 3.8% annual rate in the second quarter, with fresh signs of a surprisingly buoyant job market.

We hope you are enjoying the cooling temperatures as we are.  Can you believe the holidays are just around the corner?  As always, thank you for your business and referrals.

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August 2007 Letter:

Wow!  We are half way through the third quarter and things have certainly been anything but boring.  Although the Dow Jones Industrials is presently about 7% off its high of 14,000, these events are not particularly extraordinary.  So far, we categorize this as volatility, which may or may not lead to a normal correction.  Most of the volatility appears to be due to the sub prime loan problems, which we think is yesterday’s news.  At this point, we believe we will end the year with positive returns.    

For those of you unfamiliar with the story, the astonishing growth in the real estate market led to some moneylenders offering attractive loans with a small down payment to borrowers (many of them speculators) with less than good credit.  As interest rates rose and the real estate market weakened dramatically, many of these lower credit borrowers began defaulting on their loans, thus the market for these sub-prime loans came to a screeching halt, pushing values down.  To make matters worse, many of these sub-prime loans had been packaged into mortgage products that were subsequently sold to investors. 

As a result, many of these mortgage products, some of them hedge funds offered by Bear Stearns, have suffered significant losses.  Some of the lending institutions that were unable to sell the loans are also facing problems.  This is certainly unfortunate, but we do not believe it will be enough to derail our currently strong economy.

As for Bear Stearns, please remember that all of your investments held by Bear Stearns as custodian are not affected by the hedge funds managed by Bear Stearns Asset Management.  You are not invested in Bear Stearns Asset Management, nor are they using your money for their purposes.  In addition, through us, none of our clients own any of the investment products in question.

In summary, we are still bullish on the equity markets at least through the end of 2007.  Thank you for your confidence and referrals.

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July 2007 Letter:

Although June was slightly off, times are good in the market and second quarter returns look great!  July is off to a good start.  As of this date, the Dow and the NYSE broader index are close to all time highs and the FINRAAQ is at a six-and-a-half-year high.  And once again International markets are leading the way!

With International stocks having led the way for several years now we are finding that, as a result, many portfolios have grown “out of balance.”  This in not an issue with IRA’s or other retirement accounts, but in regular taxable accounts rebalancing may result in capital gains, which, in turn, may generate some tax liability.  We wish to remind you that rebalancing is important in controlling risk.  Besides, as Bernard Baruch said, “Nobody ever lost money taking a profit.”

As for news around here, we are adding a new service.  Through our Broker/Dealer First Allied, we have recently teamed up with Franklin Templeton Bank & Trust enabling them to serve as a Trustee or Successor Trustee for a trust.  Family members are often uncomfortable as trustees.  Indeed, dealing with family conflicts and dynamics while remaining impartial is often a stressful and thankless job.   By using Franklin Templeton Bank & Trust, Schannep Investment Advisors can continue to manage your investments within the parameters you have chosen, in the unfortunate event of your death or incapacitation.

These are the dog days of summer here in Southern Arizona but it looks like the monsoons have finally arrived.  We hope you all get a chance to get out of the heat for a while, and wish you all safe and relaxing vacations.  If you plan on being in Tucson on September 9^th come on out to Reid Park and enjoy the free concert put on by The Tucson Pops.  Rob Wright will be the guest artist.  Bring a picnic dinner and listen to great music under the stars.  The concert begins at 7pm.

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June 2007 Letter:

Schannep Investment Advisors, Inc. recently celebrated its six-year anniversary.  During that time, many clients have asked us to speak with their friends, relatives, and colleagues regarding our services.  We have always considered this a great compliment and have happily talked with these individuals about the work we do.  Many of these individuals have become clients as well. 

As part of our ongoing relationships, we thought you might like to know how we approach these requests and the standards we adhere to in making these contacts.

Client confidentiality is our highest priority and the cornerstone of our business.  We maintain each relationship as completely private.  Additionally, since relationships are our business, so is timely, courteous, and professional service.  Last, we take the time to learn each person’s situation, and tailor our financial advice to offer meaningful solutions.

Our goal is to let you know that if and when you would like us to speak with someone you know, we would be happy to meet your request, and will maintain the highest professional standards in doing so.

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April 2007 Letter:

We are very thankful for the many referrals we have received since the first of the year.  Our goal is to provide the best service and individual unbiased advice to our clients.  We truly appreciate the confidence you have placed in us and we do not take it lightly. 

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January 2007 Letter:

Happy New Year!  We believe 2007 will be another good year in the equity markets. As the lows for the year are usually in January, now could be the best time to add money or make 2006 and/or 2007 Roth or Standard IRA contributions.   

The U.S. stock market, as measured by the Dow Jones Industrials, continues to reach new highs entering the fifth year of an upward trend.  As in 2005, international markets were the best market performers for 2006.  These results continue to reinforce our belief in maintaining diversified portfolios of non-correlated assets.   

The economic “soft landing” we have been hoping for appears more and more likely.  The Fed has indicated the next move in short-term interest rates will be to either keep rates the same or possibly raise them.  Consumer confidence has improved and employment numbers are strong.  Although manufacturing is down worldwide, which contributed to falling oil prices, the service sector grew.   As usual, identifying the next leading sector is difficult at best! 

With that in mind, we are introducing a new asset class to our investment models, Natural Resources/Commodities.  For years, we have been looking for a practical way to use commodities or some vehicle that would reasonably represent the commodities sector in our portfolios.   You can expect to hear from us early in 2007 with specific proposals depending on your individual situation. 

New for 2007:  Charitable gifts can be made from IRAs with considerable tax advantages.  Please call for more information. 

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October 2006 Letter:

As we embark on the fourth quarter of 2006, we maintain the hope for a strong finish in the equity markets.  The market is obviously counting on a soft landing for the economy as opposed to a much-dreaded recession.    With a back-drop of falling oil prices and the easing of world tensions, the Dow Jones Industrial Average recently closed above its previous all-time high set back on January 14, 2000.  This event signified that the bull market is not over yet.  The broad-based Wilshire 5000 is also at all-time highs and the NYSE is close, with the S&P500 having only a short way to go.   

We are optimistic about the coming year for the above reasons, and in addition, 2007 is a pre-presidential election year.  It’s amazing that in the 16 pre-presidential election years since World War II, there has never been a losing year in the US Equity markets.  Past performance is not a guarantee of future results.

If you are working, now might be a good time to review retirement planning.  If you do not have such a plan, please give us a call.  Our retirement plan projections might prove quite useful, which has been the case for many of our clients.

If you are over 70½, it is the time of year to calculate and take Required Minimum Distributions from your IRA.  If you do not receive a letter in the next few weeks, please give Donna a call.  Just a reminder, RMDs must be done by the end of the year. 

Now is a good time to review your investment portfolio. Before you know it the holidays will be here, and personal financial matters will move to the back burner. Please call for an appointment to review your investments before year-end to assure that we are doing everything possible to satisfy your investment needs.  We value your business and referrals and look forward to seeing you soon.

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September 2006 Letter:

In case you are wondering why your account hasn’t done much, it has been a very flat market.  It is possible that most of the gains for 2006 may be in the fourth quarter, as occurred in 2004 and 2005.  The growth equity sector has lagged for six years now, and at the risk of sounding like a broken record, we believe it is long over due to take the lead. 

The equity markets have stayed in a trading range and may continue to do so until we get a better picture of the Fed’s intentions.  Oil prices are falling and housing markets are slowing.  In addition, unemployment numbers are low and corporate earnings continue to rise.  Now, it even seems possible the Fed may continue short-term interest rate hikes.

On a personal note, the next time you call or stop by please say hello to our new receptionist/sales assistant Dyann Vaccaro.  Dyann is a native Arizonan completing her Bachelors of Science Degree in Computer Information Technology and is proving to be an excellent addition to our team. 

When working with Schannep Investment Advisors, together, we are following a financial plan or model.  You might assume that your family, friends and neighbors are also following their own financial plans or models, but frequently they are not!  Please introduce us to your friends and give us the opportunity to meet and help them as we hope you are feeling helped.  As always, please do not hesitate to call with questions.

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July 2006 Letter:

While foreign and domestic equity markets were both generous in the first quarter of 2006, domestic markets took it all back in the second quarter.  And then some! 

The Fed has continued raising short term interest rates in an effort to slow the economy.  Indeed, we are beginning to see signs of slowing.  The question is, will the Fed achieve the coveted “soft landing,” or are they leading us into a recession?  The answer is, We’ll have to wait and see.  Either scenario is good for bonds.  A soft landing would be great for stocks, too. 

In the meantime we will likely continue to see a rollercoaster-ride in equities until the status of our economy is more certain.  Unfortunately, in economic terms we rarely know where we are, only where we have been - like driving at night with the headlights on backwards.

In summary, the first half of 2006 has been flat with rising interest rates hurting bond prices and economic uncertainly squelching the stock markets.  Yet, if the Fed achieves a soft landing, which is the goal, the second half of 2006 could be positive all the way around.  Could this be the third year in a row in which all the gains were made coming down the home stretch?  Let’s hope so.

Thanks for your business and referrals, and have a great summer. 

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April 2006 Letter:

Happy Spring Time!   The first quarter of 2006 was a pleasant surprise after the previous two years of slow beginnings.  Despite continued record-high oil prices and bad headlines in the news, the U.S. and Global economies are moving along nicely.   

We think that the Fed will raise rates a few more times this year.  As you can see, international equity markets were strong again, however the domestic small/mid cap sectors led the market in performance.   Although recently the Dow Jones Industrials and the S&P 500 have been choppy, we think 2006 will continue to be a good year for equities. 

Now that we are past April 15^th, it’s time to look forward.  Please consider making any new investment decisions and IRA contributions early to take advantage of time in the market - not timing the market! 

On a more personal note, we are sorry to announce that Donna Constantino has left our company for health reasons.  Although she was only here for eight months, she will be missed.  With that said, after three weeks of interviewing we are pleased to announce the hiring of our new Sales Assistant, Febe Ballesteros.  Please say hello next time you call or drop by the office.  Febe will serve as receptionist and assist Donna Weber with Operations.

We are very thankful for the many referrals we have received since the first of the year.  It is our constant effort to provide the best service and individual unbiased advice to our clients that we hope sets us apart.  We truly appreciate the confidence you have placed in us and we do not take it lightly. 

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January 2006 Letter:

We hope 2006 has started well for you!

We are looking forward to a good year in both the foreign and domestic equity markets.  If eligible, please remember to fund your IRAs early to take advantage of time, the true key to investing.  In addition, as noted on your last statement, if you wish to pay your IRA fees by check we must receive it by February 7^th.

The US Economy continues to surprise on the upside despite eight interest rate hikes, oil prices as high as $70, three hurricanes and negative headlines regarding the war on terror.  The 3^rd quarter GDP was up 4.1%, yet the media continued to downplay the robust economic growth.  The Wall Street Journal called it the “Rodney Dangerfield Economy” because it “gets no respect.” 

Last year the Dow Jones Industrials were up 1.72%, mostly because of dividends, with the S&P 500 up 4.91%.  General Motors was the biggest drag on the Dow, losing 50% of its value.  The good news was our investment models out-paced the major US indices, handily.  The international asset class was the clear-winner with the MSCI EAFE Index up 14.40%.

We think growth style equity funds will outpace value going forward and hope for double-digit returns in 2006.  We also believe international mutual funds will continue performing well with Japan leading the way.  If history is a guide, there is a good chance that the year’s lows will occur this month, which means it is important to be invested now. 

We appreciate all the new clients that came to us in 2005, mainly due to your referrals.  Thank you.

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October 2005 Letter:

September 2005 Letter:

August is usually a slow time of year, but we have been very busy this year with our efforts to bring in a new colleague.  As a result, we are happy to welcome Roger Stubbs, a sixteen-year Financial Advisor and Estate Planning Consultant, formerly with Morgan Stanley.    We also have an additional assistant as well, Donna Constantino.  Donna recently moved to Tucson from New Jersey with her husband and their three teenagers.  Donna Weber will continue her role in Client Assistance, while Donna C. will be helping with operations.  As always our goal is to provide our clients with the best possible service and financial advice.  Roger and Donna C. bring many years of valuable experience to our team.

Our hearts and prayers go out to the victims of Hurricane Katrina.  In addition, the disruptive storm season has been a distraction and no help to the uncertainty in oil prices. The stock market continues to drift in a trading range mostly due to rising oil prices.  This year is looking more and more like 2004, which was flat for most of the year but managed to rally in the last seven weeks.  Fixed income investments have struggled as well in the Fed’s rising interest rate environment.  However, the economy is chugging along steadily so we’ll just have to wait and see what happens.   We do believe that, as in 2004, that there is room for a rally in the equity markets late this year.

There was an interesting article in the Sunday, August 28th edition of the Arizona Daily Star, which stated that, on an inflation-adjusted-basis, gasoline prices are cheaper now than they were in the 1980s.  Prices would have to be in the $3.25 to $3.50 range to be comparable.  So much for the gloom and doom predictions of oil over $60 a gallon! 

Thank you for your business and referrals.  As you can see, our business is growing, and we’re happy to welcome Roger’s clients to the Schannep Investment Advisors family!

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July 2005 Letter:

We just passed the halfway mark for 2005 and the markets have been a rollercoaster ride only to wind up about flat for the year.   The disconnect between the stock market and the economy has continued with a stronger than expected economy but lagging S&P 500, Dow Jones, FINRAAQ, you name it.  The International Markets struggled for the second quarter as well.  Record oil prices, the trade deficit, and the federal spending deficit appear to be the culprits.   However, we remain optimistic for the second half of the year.  Today as we write this letter the Industrials, Transports, and S&P 500 indices each made new recent highs. In fact, the S&P 500 just made a four year high.

As you know, from our previous letter, our Broker Dealer is now First Allied so Round Hill Securities is being phased out of all signage and correspondence.  We apologize for any inconvenience caused by the merger.   So far the First Allied back office and support staff appear to be an improvement.  That’s good for all of us!

If you are employed, has your employer announced the addition of allowing ROTH 401K contributions to your retirement plan beginning in 2006?  You heard right, ROTH contributions! The new rules will allow you to make up to the maximum allowable 401K contributions to a ROTH 401K account.  Like ROTH IRA accounts, your contributions will not reduce your taxable income.  However, all withdrawals taken from a ROTH 401K held at least 5 years and after age 59-1/2 will be tax free, including the earnings!  If you want to learn more about this exciting benefit, please call Tom Cariseo in our office or contact your Human Resources department at work.

Thanks again for your business and referrals and we hope you get a chance for a nice summer

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May 2005 Letter:

Recently you received a letter dated May 5, 2005 from Round Hill Securities informing you of their impending merger with First Allied Securities. We have received a number of phone calls and believe that this letter has caused some confusion regarding the status of our firm. 

First, Schannep Investment Advisors, Inc. is essentially unaffected.  Your investment team of Bart, Rob, Tom, Sherry and Donna is still in tact and still independent.  The changes that are taking place are solely to our Broker Dealer, Round Hill Securities, Inc.

Round Hill Securities is merging into First Allied Securities.  They will continue to provide our ‘back office’ services, which includes buying and selling securities as well as providing cashiering and compliance services.  We believe this merger will have no effect on our interaction with clients. 

Bear, Stearns will remain our custodian so there will be no change to your statements, other than the new broker/dealer name, First Allied Securities, Inc..

We hope this clears up any confusion that might have been created by Round Hill’s letter.  We thank you for your trust and your business.  If you have any questions or concerns, please don’t hesitate to call us.

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April 2005 Letter:

The first quarter was a struggle for stocks and the second quarter, so far, has been more of the same.  Investors have grown cautious waiting to see if the combination of Fed tightening and rising oil prices will drive us into a recession, or merely slow economic growth as intended.   Therein lies the rub.  Economic growth certainly has slowed but we won’t know for sure whether or not we are going into a recession until we are already there.   For investors, a properly diversified portfolio is the best way to face either scenario.

On a more personal note, our Broker Dealer, Round Hill Securities, Inc. has merged with First Allied Securities and as a result they are changing their money market funds.  We apologize for any inconvenience caused by this change as well as the additional paperwork required.  Please call for help if you have any confusion over the forms.

In response to a growing concern among baby boomers Schannep Investment Advisors is now offering short-term college planning for families who have children that will be attending college within a year or two.  Billions of federal aid dollars go unclaimed each year because many middle class families wrongly assume they do not qualify for government aid.  Please don’t hesitate to call for a free consultation if you or anyone you know has children ready to attend college.

Enclosed is our new brochure.  We hope you will pass it along to someone you know who would benefit from our services.  Your referrals are our best source for new business.  Thank you for your trust.

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January 2005 Letter:

Happy New Year!  And congratulations to Sherry Hall for earning her Certified Financial Planner (CFP^®) certification.  Sherry has been working on her CFP^® for two-and-a-half years.  Only 63% of those who took the exam at this time passed.  Way to go Sherry! 

Last year certainly exemplified the necessity for patience while investing in equities.  Although economic data was strong for the entire year, most of the stock market gains came in the last eight weeks – after the Presidential election.  We are pleased that you hung in there and, as a result, enjoyed reasonable gains for the year.  The economy is still growing steadily so we expect the equity markets to continue upward for 2005.

If you are contributing to a retirement plan, including IRAs, be aware that the contribution limits have been raised for 2005.  You will want to make your contributions early in the year to give your investments more time to grow.  You may now contribute $4,000 this year to an IRA, or $4,500 if you are over fifty.

Thank you for your business and we always appreciate referrals – the only way we grow our business.  Please call if you have any questions or concerns.  Your future is why we’re here.

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Securities offered through First Allied Securities, Inc.   A register broker/dealer.  Member FINRA/SIPC.
Schannep Investment Advisors is a registered investment adviser in the state of Arizona.  First Allied Securities, Inc. does not endorse or
support this web site, nor are they affiliated with Schannep Investment Advisors, Inc.