M A B R Y - C A L V I N

September 30, 2010

“GREED IS GOOD.”

Gordon Gekko “Wall Street” 1987

Dear Client and Friend:

Do you remember the above quote? We do and we disagree. We prefer a more meaningful quote from Warren Buffet who said: "Be fearful when others are greedy and greedy when others are fearful." Greed can be good or bad. It all depends on the motive. By recalling Gekko’s quote, it is not our wish to stimulate a philosophical debate on the merit’s, or lack thereof, of greed. Rather, it is to remind ourselves of another saying with a decidedly philosophical bent: “The more things change, the more they stay the same.”

This saying, like Buffett’s and Gekko’s, is timely. Recall that the first movie “Wall Street” premiered on December 11, 1987. At the time the stock markets were reeling from a “Flash Crash” (Sound familiar) that occurred on October 19th and the markets and investors were in turmoil and fear for the future. Financial Calamity! Ruin! New Paradigm! We know. We were there. Hollywood, as it is prone to do, took it upon themselves to scold the Investment Community, in general, and Capitalism, in particular, for destroying the very fabric of our financial lives.

Interestingly, out of the ashes of “Black Friday” the S&P 500, beginning on January 1, 1988, averaged 17.8% per year over the next 10 years and has averaged 9.2% per year for the last 23 years through last month! Yes… 9.2% per year including the “Lost Decade.”

Of course, history has a way of repeating itself (funny how that happens) and we once again find ourselves in the depths of despair. Financial Calamity! Ruin! New Paradigm! Naturally Hollywood has saddled up and is riding once again to our rescue. “Wall Street: Money Never Sleeps.” premiered on September 20, 2010. While we have yet to see the movie, we are almost certain the “Four Horsemen of the Apocalypse” (Bankers, Brokers, Politicians and Capitalism) all - saturated in GREED - are to blame.

While we do not disagree that unethical, perhaps even criminal shenanigans took place, and while we are among the most vocal advocates that the bad guys should be tried and convicted and then drawn and quartered, that is not our topic today. We are writing today about the “Doom and Gloom” scenarios that permeate our current airwaves and are so reminiscent of the “Doom and Gloomers” of the late eighties.

What appears to be the sentiment of the general investment community now is that this time it is different: That this is a “New Paradigm.” Of course, it is an “Old Paradigm” that markets go down. Sometimes the corrections are violent; most of the time they are unexpected; and they are always, always uninvited. But they should not necessarily be unwanted. It is during these times of great financial distress that we should all remember “The more things change, the more they stay the same.” and that we must "Be fearful when others are greedy and greedy when others are fearful."

Now, since we hope you also believe that history has a way of repeating itself, let us show you a few statistics that might (Our fingers are crossed) play out in the coming months:

·  “… The S&P 500 has produced gains in 18 out of the last 19 midterm election cycles. The S&P has returned an average of 13% in the six months after midterm elections, and 17% over the next 12 months.”

·  “…The indicator works regardless of which party wins control of Congress, but it's really strong when there's a Donkey in the White House and Elephants run the legislature.”

·  “ … In addition to the historically strong performance of the market in the months following midterm elections, the third years of the presidential cycle also tend to be bullish. S&P’s Sam Stovall points out that, since 1945, the market has risen on average 17% during the third year and has done so 94% of the time.”

·  “…In eight of the last eleven years the S&P 500 has posted positive gains for the 4th quarter, with an average gain of 8.8%. Looking back even farther, the S&P 500 has posted 4th quarter gains in thirteen of the last eighteen years.”

Let’s all hope “The more things change, the more they stay the same.”

We cannot end this letter without sharing a Gordon Gekko quote from the new movie:

“If there's one thing I learned in prison it's that money is not the prime commodity in our lives... time is.”

We wonder if Bernie Madoff shares these sentiments…..

Thanks to each and every one of you for your faith and confidence in us.

Dirk Calvin Charlotte Mabry