American Investment Services, Inc.

Disciplined, Diversified, & Cost Effective

Mar. 2007 – How Did We Hold Up?

Financial headline writers scrambled feverishly to explain the market swoon of February 27 which by the end of the day had sent the S&P 500 plummeting 3.5 percent. Soon after the opening bell, Reuters exclaimed:

“Stocks fell sharply at the open…after China’s main stock index tumbled and an unsuccessful assassination attempt on Vice President Dick Cheney in Afghanistan unnerved investors.”

Aside perhaps from establishing Reuters’ apparent contempt for Mr. Cheney, such fleeting commentary is of little use to serious investors. U.S. News and World Report, after all, had a whole different take the very next day:

“…China was only one of many drivers that pushed stocks lower. …Yesterday, crude oil prices climbed back above $61 a barrel. Meanwhile…durable goods fell a surprising 7.8 percent in January—signaling that the economy many not be as resilient as some think. This seemed to support fears that former Federal Reserve Chairman Alan Greenspan raised this week, when he hinted that the U.S. economy could still slip into recession….”

The financial media seems hopelessly compelled to “explain” events that are actually needless distractions for investors. The fact is, markets are driven by countless investors responding to a limitless and constantly changing flow of information. We can only surmise that a headline proclaiming “Increased Short-Term Volatility in Stock Prices as Demand for Equities Falls Relative to Supply” would not sell many newspapers.

Wise investors should ignore the jabber and simply stick with one of our recommended allocation plans. The chart above shows that our hypothetical AIS Moderate Portfolio would have fallen by only 2.3% that day, and that those who did not panic held up just fine.

Also in This Issue:

Tax Filing Note: Placer Dome/Barrick Gold Merger
Good Versus Bad Risk
Going Global in Real Estate
Bad Guys Finish First?
A Matter of Trust
DNP Select Income Announces Managed Distribution Plan
The High-Yield Dow Investment Strategy
Recent Market Statistics
The Dow-Jones Industrials Ranked by Yield