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March 27, 2008 The Bear Sleeps Forever Bear Stearns, the venerable 85-year-old Wall Street investment firm titan, has collapsed under the weight of its sub-prime debt and its corporate culture of greed and recklessness. While the ultimate disposition and fate of “The Big Bear” will likely play out in Shareholders meetings and crowded courtrooms, my guess is that Bear Stearns will become the ‘poster child’ example for generations to follow of what went wrong during the credit crisis of 2008.
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LPL FINANCIAL SERVICES CONTINUES TO GROW Given the current tumultuous situation in the investment banking system, I thought it might be useful to point out the stark contrasts between that situation and the one at our own broker/dealer – LPL Financial. Our broker/dealer has a thoroughly different business model than the financial institutions that have been troubled of late. LPL Financial, one of the nation’s five largest brokerage firms, does not provide loans to hedge funds or other speculators, and does not create proprietary products of any kind, including leveraged closed-end funds. This firm does not hold any securities on their own books that are open to market risk, and does not engage in investment banking. Because LPL Financial does not engage in these practices, it is better able to withstand shocks to the markets. In the early 2000’s when the technology equity valuation bubble burst, the company remained stable with no fall in earnings and no layoffs. LPL Financial provides my practice with industry leading technology, service, research and a wide array of investment products, with great care taken to avoid the overly risky products that have now imploded. LPL Financial is our partner with a sole focus on you and your investment goals, free of conflicts, hidden agendas, or opaque balance sheets. Our broker/dealer will not need a loan from the Federal Reserve--- or a bailout from J.P. Morgan-- or a capital investment from China or Dubai. THE FINANCIAL MARKETSThe Fed, the Treasury Secretary and our ‘responsible’ Financial Institutions are continuing to take the necessary steps to provide liquidity into the world’s Banking system. Consistent with what I have recently been writing to you, I firmly believe that the credit crisis will soon ease and things will begin to get back to normal as we enter the 4th quarter of 2008. I also believe that the mega-dose of stimulus being injected into the financial system will become an inflationary problem as we move into 2009, but that issue can be dealt with later. Yet again, I will stress that the best investment strategy is to stick with your effective game plans, and avoid the tendency to over-react to daily events, whether negative or positive. While we firmly believe in this long-term perspective, we do, of course, also believe in providing clients with vigilant client portfolio monitoring, re-balancing and tactical short-term tweaking. For clients with an aggressive bent, I will add that after watching the markets over my 30+ years in the industry, I know that there is always opportunity created when panic and adversity reign. For those of you in the opportunistic category, you can call me for further discussion. Until next time, Austin A. Frye, MBA, JD, CFP® Securities and advisory services offered through LPL Financial-- Member FINRA/SIPC
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