February 12 Craft Talks February 15 Valentine Brunch

Next Week... February 5 Aram Dobalian, "Emergency Preparedness" Upcoming Programs... February 12 Craft Talks February 19 Kathleen Andersen of Catholic Education Foundation Activities... February 15 Sweetheart Valentine Brunch, Lawry’s May 12 District Breakfast - LAX All Officers and Committee Chairs should (must!) attend Westin Hotel, 5400 W. Century Blvd.

There were several guests. Among our members, SUNNY was with LENNY, PAT accompanied PDG ANDY, and SHIRLEY was with PP PETER. MARK ROGO brought not only his Mom, but Mort Schwartz, who is involved with UCLA. JU DZUBAK had a guest, but I didn't get her name. LEE DUNAYER once again introduced Duke Russell, who originated the Lincoln birthday program at the VA, and Aaron Sanor, who is with UBS Financial Services in BH. And PP STEVE SCHERER again introduced three Special Guests. Scott Fitch is also with UBS and he is sponsored by PEGGY BLOOMFIELD. Marsha Hunt is a TV Producer, and Susan Klein is the Minister at St. Albans, sponsored by ED GAULD. Both Scott Fitch and Marsha Hunt are circularized below.

Duke Russell spoke about the upcoming Lincoln celebration.  It is always on his birthday, February 12th, at the VA – (unfortunately that is also our meeting date).  There will be several speakers, a couple of bands, and Mickey Rooney will provide the Gettysburg Address.  I’ve attended, and the whole program is very well done. At this point, it was discovered that PP DON NELSON didn’t have his Rotary Pin, but, showing exceptional executive authority, President SEAN forgave him this one time!  I should also report that I “rented” a pin to LEE DUNAYER, who claimed that he already owned two – but didn’t have his today.  However, on the plus side, MARCIA and RICK BROUS were pleased to announce a new grandchild, for which they escaped with a mere ten bucks each. Although not present today to defend himself, it was announced that KEVIN BADKOUBEHI had gotten married – an appropriate fine (or perhaps stipend) will be discussed at our next meeting. 

Our Inspirational Moment was provided by President SEAN hisself! It seems that Pat and Mike were doing some street repairs in front of a known house of ill repute in Boston. A Jewish Rabbi came walking down the street, looked left and right, and ducked into the house.  Pat paused a bit from swinging his pick and said, “Mike, will you look at that!  A man of the cloth, and going in a place like that in broad daylight!” A bit later, a Baptist minister came down the street, looked both ways, and scurried into the house.  Mike laid down his shovel, turned to Pat and said, “Pat!  Are you seeing what I’m seeing?  A man of the Church, and he’s giving that place his custom.” Just then, a Catholic Priest came down the street, looked both ways, and slipped into the bawdy house. Pat and Mike straightened up, removed their hats, and Mike says, “Faith and begorrah, there must be somebody sick in there.”

And the good news is that there is still some untold Irish history!  Saint Patrick was born in Britain and is known as a Christian missionary. It is believed that when he was about sixteen, he was captured by Irish raiders and taken as a slave to Ireland. He lived there for six year before escaping and returning to his family.  He entered the church and later returned to Ireland as a missionary in the north and west of the Island. Little is known about the places he worked and no link can be made between Patrick and any church. By the eighth century he had become the patron saint of Ireland. Pious legend credits Patrick with banishing snakes from the Island, though all evidence suggests that post-glacial Ireland never had snakes. One suggestion is that snakes referred to the serpent symbolism of the Druids of that time and place, who Patrick is believed to have fought. SO, when the Irish say that St. Patrick chased the snakes out of Ireland, what they don’t tell you is that he was the only one who saw them!

PP STEVE SCHERER took time off from his recruiting duties to lead Investment Advisors Day. He began by suggesting that investors typically face a new year with a mixture of hope and apprehension – this time around, there is a heavy dose of apprehension. The economy, a new President — there are huge questions marks. There were huge jolts in 2008 – the DOW plummeted 33.8 %, its biggest annual fall in 77 years. The S&P 500, weighed with financials, dived 38.5%, the worst since 1937. The NASDAQ, dominated by technology stocks, dropped by 40.5%. The Russell index declined by only 33.79 %.  Short Treasuries fell by 3%, and long ones by 1.75%.

Now we know what the problem was. Mountains of subprime mortgages were festering in the vaults of this county and the world’s financial institutions. The problem burst like a ruptured appendix when falling home prices led to walkaway defaults by homeowners. By the time the government stepped in, stocks had been falling for several months and selling turned to panic. Then the world’s biggest Ponzi scheme imploded in our faces. 2008 was the year that was.

Now let’s look at several concerns that will dominate as investors look for clues for the next big moves. First, will the recession that officially began in December 2007 be over by the end of 2009?  Sub-questions – will consumers start to spend?  Will banks start to lend?  Will unemployment exceed 9%?  Will housing stabilize?  Will government aid and tax cuts help?  And a second big idea – are we entering a new era of Big Government?  Will we nationalize mortgages?  Will we mandate medical coverage for everyone?  Will we tightly control carbon emissions?  Will we dictate the shape of the auto industry?  Will we force banks to lend? Third big idea – will US foreign policy proceed smoothly? What will happen in the war against terrorism, in Iraq, Pakistan, Afghanistan, India?  Will the Israeli/Palestinian conflict explode?  Will Putin restore Russia as a major player in world affairs? Will China eventually challenge the US militarily? And yes, there are other concerns.  Will the price of oil go up, or down?  Will economic growth in China continue, or falter?  Will the Internet eliminate the print media?  Will Uncle Sam bail out reckless consumers?  Will the US and its trading partners refrain from protectionist measures? 

Before we get to 2009, let’s look at what we predicted for 2008.  The members of WVRC predicted the S&P 500 would drop by 5%. which at least was the right direction.  We said the Dow and NASDAQ would be unchanged.  We also predicted that both long and short-term bond rates would go down.  On the other hand, our Investment Advisors were more precise.  They expected the Dow to close at 13,625 - a 3% increase.  The S&P closing at 1503, a 1 % increase. and the NASDAQ at 2729, a 3% increase. That was definitely illusionary thinking. Also, they predicted that the long-term interest rates would decrease, as would the long-term Treasuries.  Last year our Advisors selected a portfolio of stocks,
including 2 positions in BofA, the Claymore Water ETF, Fannie Mae, Goldman Sachs, Goggle, Merrill Lynch and Qualcom. If you had invested $10,000 in each of the eight stocks, your portfolio at the end of the year would have been worth $35,000, a 56% loss.

Before we get to our Advisors, here is a poll of our “civilian’ members:  We predict the DOW will go up between 5 and 10% this year.  The NASDAQ up the same percentage. The S&P 500, up 0 to 5%.   And now to the  panel. They are charged with predicting the reading for the Dow, the S&P500, and NASDAQ, plus l year and 10 year Treasuries, and a stock “that won’t go down”!

DONN CONNER was first – he is a Principal with Reed, Conner and Birdwell. DONN began by casting a bit of blame on STEVE, since he let people pick financial stocks…He added, as a reminder, that with all the stimulus provided during FDR’s four terms, unemployment was about the same both before and after. WWII was what got us out of the Depression.  The present stimulus of seven hundred billion is about $2,300 per person, plus the nine hundred billion, which is about $2,900 each – maybe we should just give everyone $5,000 and see what happens!  Watch real estate – residential is improving, but commercial is NOT doing well.  It has at least six to nine months before it gets any better.  He is also concerned about the possible creation of a ‘bad bank’ since that would set a price on all the questionable assets.  That puts the Dow at 8500, S&P 900, and NASDAQ at 1600. l year, one/half % and 10 year, 2.5%.His stock pick is HP. He likes their recurring revenues, from ink, for instance.

SHERRY DEWANE was up next, having worked for both a good and bad bank. She is now with Wachovia, and quoted Warren Buffet who points out that the only time you see there are no trunks on is when the tide is out!  She recommends a book by Lyle Ferguson, “The Scent of Money”.  She expects the Dow at 9500, S&P at a thousand, and NASDAQ at 1775.  1 year Treasuries even, and 10 years at 3.25.  She likes Exxon-Mobil, since they have 60 billion dollars in cash, and oil independence is some time in the future.

LEE DUNAYER is with UBS, and he began by reminding us that something that was totally liquid and thus could never go wrong was the auction rate market. And by the end of the year, it was the best performing market around.  He asked some questions – If Citibank, BofA, GM and Alcoa all went to zero, how many points would the index go down?  If all the financials in the S&P went to zero, how much would the Dow go down? He points out that the Dow is a money-weighted index, and there just isn’t much room for it to go lower.  He expects considerable volatility, with the Dow going up about 2 or 3 %.  Both S&P and NASDAQ will be slightly down.  Thus he expects, first, a big dip, and then a big recovery.  He sees the 1-year at .75, and the 10-year at 5.5.  He likes the Vanguard ETF, and thinks it could even have an upside of 20%.

DWIGHT HEIKKILA is a Certified Financial Planner, and wanted us to know that he wasn’t ON the panel last year! He expects the 1-year rate to be 1%, the 10 year 4%. The S&P will go up a hundred, NASDAQ will see 2000, and the Dow at 10,000.  He was in China recently, and likes Ying Lee Green Energy, a solar firm. It has recently gone up about 35%.

DICK ROBINSON is a Registered Investment Advisor. He began by pointing out that a big reason for the drop last year was that the GDP fell 6%, and that most of the losses occurred in the fourth quarter. For this year, he expects a 5% drop during this first quarter, with the drop for the entire year being 3.4%. average. The 1-year should be 1.5%, and the 10-year at 4%. The Dow at 8900, NASDAQ at 1500 and the S&P at 950. He likes Johnson and Johnson (J&J) for a stock pick, since they are much involved with health care. 

LEO TSENG followed, and he is with Merrill Lynch, which now becomes BofA. He began by admitting that he is absolutely flabbergasted that people would show up to listen to people like himself!  In the past, he has been well known for shooting an arrow in the dark to pick stocks, he says, but will still share with us his perspective.  Having grown up in a cash society (in Hong Kong), if you don’t have money, you just don’t buy. You don’t buy on time, you don’t borrow – there is very little credit around. Our difficulties are not over, by a long shot. He, too, is concerned with commercial mortgages. Remember that credit card defaults are still ahead of us. Who owns 10% of Citygroup? The Saudi’s, of course. Many businesses in the US are owned by non-Americans. Now, here is what you want to hear.  Everyone is looking for a quick fix – and there aren’t any!  If you see something that looks really good, don’t do it! He is generally optimistic, but this time is different. The recovery is going to take a long time. We will be lucky if we end up this year the way we started this year. The Dow, now 8100, between 8000 and 8500. The S&P between 800 and 850.  NASDAQ, no change, so 1400-1600.  1 year, .5% and 10 year, between 2.75 and 3%. He feels that he has made so many mistakes that nobody wants his opinion (laughter), but he literally prefers fixed income over equities this year. 5% is a good target. 

SHANE WAARBROEK is also with Merrill Lynch, now BofA. He is different, since he expects “a pretty decent gain this year”. Since 1968 there have been four 35% drops, and the average gain after those drops has been 17%. He expects this to be the worst recession since the Depression. He thinks now is the time to buy stocks, and since bonds and CDs will stay low, avoid them. Anything the government backs is probably safe. 1 year, 1%, 10 year, 3.5%.  He expects about a 15% gain in the market. The Dow at 10,920, S&P at 1038. and NASDAQ 1813. Pfizer is acquiring Lyon Park Pharmaceuticals, and this will make it a big winner. 

PP STEVE SCHERER was last, and his law firm handles investments.  Since time was running out, his predictions were brief.  The Dow up 5%, NASDAQ up 10%, S&P up 5%, with no change in the 1 year or 10 year Treasuries – about where they are right now. He likes Monsanto, and commented that when he chooses a stock he looks at the deep philosophy behind the stock.  Their philosophy is Feeding the World, and since they are specialists in doing hybriderization, they  can produce amazing results.

Whew!  I do hope I have most of these figures right.  Obviously, it is up to each reader to check the source directly, OK?  And thanks to all of you!

Closing Words of Wisdom
Never take life seriously.  Nobody gets out alive anyway.  OR Life is sexually transmitted.

—YOE, Ernie Wolfe