Challenges Facing Investors Weigh on Markets:
Take Action Now to Help Protect Your Portfolio
(February 13, 2008)

There are many challenges facing investors today that continue to weigh on the markets: Economic growth in the US and around the world is slowing; the US economy is sliding into a recession; the housing market continues to deteriorate; and the subprime mortgage and credit crises are lingering longer than most people expected.

January was one of the most unnerving months for equity prices in a long time, as investors grew increasingly concerned about a recession in the US coupled with a general global economic slowdown.

It’s easy to make a pessimistic case for the outlook:

• The financial sector is under severe duress (thus far, fourth-quarter 2007 earnings for the S&P 500 Index-companies are 20% lower than they were a year ago – primarily because financial-sector earnings are more than 100% lower over the same period);¹
• Housing shows little signs of bottoming;²
• The manufacturing and service industries are contracting;³
• Employment is slowing,⁴ and
• Consumers are under growing pressure to reduce spending.⁵

The good news (yes, there is some out there) is that the US Federal Reserve is aggressively cutting short-term interest rates, and other banks around the world are or will likely follow the same path. One should not underestimate the power of monetary stimulus. As well, in the US, the corporate sector entered this downturn in a fairly strong position. Hiring was not excessive during this cycle and therefore, in our view, it’s unlikely we will see aggressive job cutting. In addition, it’s comforting that, historically, similarly decisive negative Januarys, for equities, (such as we have just experienced) resulted in universally positive performance 12 months later.⁶ Of course, there is a lot of volatility along the way and past performance is no guarantee that the same results will occur in the future.

At Weiss Capital Management, we recognize that the financial markets and economy may have tougher headwinds still to face. Our investment team has weathered these conditions before and, where appropriate, in our managed programs, has taken the necessary steps to help reduce risk.

If you haven’t done something to reduce your exposure or to help protect your longer-term holdings against declining markets, then now’s the time to seriously consider doing so. 

We invite you to look closer at our managed investment program, the Weiss Bear Strategy. It was designed specifically for the type of conditions we’re facing now and has a proven track record during bear-market conditions. 

This specialized investment strategy has been utilized by our clients since December 2000 and is designed to hedge against falling stock and/or bond prices. In other words, when these markets are declining, the Weiss Bear Strategy is designed to go up.

To find out whether the Weiss Bear Strategy is suitable for you and how you can open an account, click here, call us at 800.814.3045 or send an email to WCM@WeissCM.com and we will be in touch right away.

The opinions expressed are subject to change without notice and may not come to pass.

• ¹ Bloomberg, Summary of Fourth Quarter EPS for S&P Stocks by Sectors, Wendy Soong [February 11, 2008]
• ² Merrill Lynch The Market Economist, pages 6 - 12 [February 8, 2008]
• ³ Bloomberg data, February 28, 2002 through January 1, 2008
• ⁴ Bloomberg, Initial Jobless Claims Fell 22,000 to 356,000, Bob Willis [February 7, 2008]
• ⁵ Bloomberg, Retail Sales Probably Fell in January: US Economy Preview Shobhana Chandra [February 10, 2008]
• ⁶ Market Analysis, Research and Education (MARE) group, a unit of Fidelity Management & Research Co. [January 17, 2008]