American Investment Services, Inc.

Disciplined, Diversified, & Cost Effective

Dec. 2009 – Lessons of a Decade

“Federal Reserve Chairman Alan Greenspan said the central bank is already developing plans for a world without Treasury securities and gave members of the bond industry something of a nudge to begin their own planning. . . . Mr. Greenspan expressed confidence that worker-productivity gains will continue, enabling the nation’s debts to be paid off relatively soon.”

Gregory Zuckerman, “Greenspan Encourages Bond-Market Professionals Prepare for World Without Government Debt.” Wall Street Journal, April 30, 2001

Mr. Greenspan’s exuberant turn-of-the millennium forecast clearly missed the mark. But in fairness, the Fed Chairman was hardly alone. The decade yielded
numerous erroneous predictions that should remind investors that forecasting developments in capital markets is a precarious business:

“On May 19 [2001], Apple will open a swanky new retail store—the first of as many as 110 nationwide—at Tyson’s Corner Galleria mall outside Washington. . . Since PC retailing gross margins are normally 10% or less, Apple would have to sell $12 million a year per store to pay for the space. ‘I give them two years before they’re turning out the lights on a very painful and expensive mistake.’”

Quotation attributed to David A. Goldstein, president Channel Marketing Corp.

Cliff Edwards, ‘Sorry, Steve: Here’s Why Apple Stores Won’t Work” Business Week, May 21, 2001

Adjusted for splits, Apple shares that sold for $23 in April 2004 closed at $390.86 on December 18, 2009.

“Stick with storage . . long term, this simple fact is true: A company can postpone buying new PCs or upgrading its network, but it can’t stop producing digital data. The stuff must be put somewhere, and it increasingly gets stored in many places . . . Buy EMC Corp. at $44 per share”

“ is the exact opposite [of eBay]; it faces—and has yet to solve—all the problems of offline retailers. Sell Amazon at $12 per share.”

Stephanie N. Mehta, “Ten Tech Trends to Bet On.” Fortune, March 19, 2001.

EMC shares closed at $17.34 on December 18, 2009, down 60%, while Amazon shares closed at $128.48, up 907%.

“Washington Mutual’s back-to-basics banking—and customer service—attracts the average Joe and leaves rivals in the dust. . . . That focus has served Washington Mutual and its shareholders well.”

Jon Birger, “Leader of the Pack.” Money, July 2002. Washington Mutual was seized by federal regulators on September 25, 2008.

Also In This Issue

The Roth Conversion And Tax Risk
Promises, Promises
The Death-Defying Death Tax
The High-Yield Dow Investment Strategy
Recent Market Statistics
The Dow Jones Industrials Ranked By Yield
Recommended Investment Vehicles