Dear Shareholders,
I titled our September newsletter “A Leap of Faith” because in that letter I was encouraging each of you to look past the intensely negative news and visualize a brighter future. I sited several examples of how bleak the investment environment was in the 1970s and early 1990s only to recover and move significantly higher from those depressed levels.
As we enter the last month of 2011 the economic and world news have not seen any improvement – in fact, it may have become worse. The stock market recovery that I had been hoping for, from the September 30th lows, has only marginally materialized. Our stock Growth & Income Fund remains depressed down 12.6%. This does not compare well with the S&P 500 index down 5.1%, but it is in line with the broader based indices like the Value Line 5000 index down 15.3%
and the Russell 2000 down 10.9%.
I know over the years you have had many “keep the faith, baby” speeches from me and this is another. The darkest days for investors are at stock market bottoms. These are dark days. In our last several letters we have made the case that stocks are cheap and that continues to be the case. As I have pointed out in previous letters, stock prices have been very volatile. Daily price swings of three
percent or more happen several times a week. From the March 2009 lows the stock market rallied over 60% – very quickly. This year we have been trading in a
range and currently we are in the bottom of that range. This would not be the time to get more conservative or “throw in the towel.” And, for what it’s
worth, December is historically a very strong month with investors looking for the traditional Santa Claus rally.
Interest Rates/Income Fund
With political and economic turmoil continuing to dominate the news, dollars/euros
have maintained a steady flow into U.S. Treasury bonds. The “fear” or “flight
to safety” trade has pushed the 10 year U.S. Treasury bond yield under 2.0%.
Now, I’m not sure why anyone would want a ten year bond with a less than two
percent yield, but they do. As a result, bond prices have continued to improve.
Our Income Fund is up 4.1% which compares favorably with the Lipper Short-Term
and Intermediate-Term bond indices up 1.15% and 5.09% respectively.
If you have questions with respect to the Annual Report or this letter please call.
Warm Regards,
Dick McCormick
NAV Value as of 11/28/11
Elite Income Fund: $10.44
Growth & Income: $13.38
