September 2010

Kreitler Financial:

As the summer comes to an end we are pleased to provide you with our September Newsletter. The big story is The Great Recession continues and we remain in very uncertain and challenging times. The rate of change we are facing is phenomenal. We believe the financial future of the world still could go in several different directions, both in the short term as well as the long. We have adjusted our thinking so that we believe change and uncertainty are "normal" and are part of our lives. It has become a foundation for the way we run Kreitler Financial. We know that humans resist change and uncertainty is un settling, but once we admit change and uncertainty are with us and will continue to be with us for the foreseeable future, it really is easier to contend with.

There are many ways the economy could go, both in the United States and globally. Inflation, deflation, double dip, surprising improvements in GNP; all are possible. We have never been in an environment like this and government responses are still truly a great experiment. The experts cannot agree on whether government stimulus will work or not.

Now for the good news. When we meet or talk with most of our clients, we find they are dealing extremely well with the uncertainty, and in virtually all cases their plans to achieve their financial goals are still in place and fully achievable. On our part, we continue to seek out ways to try to hedge our clients against the bad stuff while also trying to position them to benefit from new opportunities. Even in times like these there are ways to profit. Our goal is to seek them out.

We believe the foundation for the great financial storm was the sound use of debt. Debt, when used properly, is an important part of our economy and economic growth. This has been true for hundreds of years. Periodically, man misuses debt which is what happened. In this case, throughout the developed world individuals, governments, and organizations spent too much with the "promise" to pay in the future. The collapse of the housing market was only the pin that pricked the much bigger bubble.

Because we are a global economy the problems quickly spread from the US to the rest of the world. Grecce's credit problems became Europe's version of what we faced. In our June Newsletter, we commented that California is similar to Greece and now California and other states are in the news. The face problems, not only because their budgets are running current deficits, but because many made unfunded promises for employees' retirement plans. These are only being gradually recognized.

After the country resolves the state problems, we still must act to deal with the unfunded Federal promises of Social Security, Medicare and now Health Care. To fulfill these promises would bankrupt the country. Something will have to change. It took years to create these problems and it will take years to resolve them. We should be wary of proposals for quick fixes, particularly those that want to return to where we were just several years ago. We know where we were was not sustainable.

The United States is very resilient. Our ingenuity to solve problems is in our blood and second to none. Winston Churchill said, "You can always count on Americans to do the right thing - after they've tried everything else." Right now the political change in the country is very rapid, at a rate I would not have thought possible six months ago. Because everything is happening so quickly, it is not possible to reliably forecast the outcome of the upcoming elections. In retrospect, the elections may not be as big a deal as many proclaim. I suspect when we look back on them we will view the elections as just another milestone along the way to the New World we are traveling to.

We keep stressing our Multi-Scenario Investment strategy which recognizes the uncertainty and acknowledges that we don't know what the future will bring. We select investments that we anticipate will work under different scenarios, trying to hedge against adverse events, but also to select managers that we think understand what is happening and have the potential to benefit from these turbulent times. We have continued to recommend small shifts in portfolios, which over time have become substantial. We initially reduced exposure to stocks and bought bonds, but recently have become concerned with the bond market. Over the last couple of months we have been seeking other conservative investments to provide additional diversification with conservative returns. Incidentally, bonds have done unusually well this year (through August), and in most of our clients' bonds were able to more than offset small stock losses.

We will have our next Wednesday at Mory's at the Graduate Club on September 22nd. Mory's, the club, has recently reopened. We will hold the October 20th luncheon there. We will let you know November plans as we get closer. These informal luncheons remain a wonderful way for clients and friends of Kreitler Financial to informally meet and discuss a wide variety of topics. If you haven't attended, we encourage you to sign up to see what it is all about.

The rebranding of Kreitler Financial has been a major success. Many of you attended our "launch" party in May which was great fun. We are very well positioned for future growth and recognize that change is a constant. We will continue to work with it to benefit our clients. Additionally, our intention is to use these challenging times to grow Kreitler Financial. We feel truly honored to so many of you work with us and we can assist you in achieving your lifetime goals. You are a wonderful group of clients.

Charlie KreitlerBob Kreitler
The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Robert Kreitler and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. Investments mentioned may not be suitable for all investors. Past performance may not be indicative of future results. Diversification does not assure a profit or protect against a loss. The S&P 500 is an unmanaged index of 500 widely held stocks that's generally considered representative of the U.S. stock market. Individuals cannot invest directly in any index. Precious metals including gold, are subject to special risks, including but not limited to: price may be subject to wide fluctuation; the market is relatively limited; the sources are concentrated in countries that have the potential for instability; and the market is unregulated. International investing involves additional risks such as currency fluctuations, differing financial and accounting standards, and possible political and economic instability. Also, investing in emerging markets can be riskier than investing in well-established foreign markets. There is no assurance any of the trends mentioned will continue in the future. Investing involves risk and investors may incur a profit or a loss, including the loss of all principal. Dividends are not guaranteed and must be authorized by the company's board of directors.
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