The Recession Ends…(We think)
Markets Continue to Advance…(We expect)

The third quarter of 2009 marked another truly exceptional advance in investment market values. With the exception of a small negative return in our clients’ commodities positions, positive equity returns elsewhere ranged from the high teens to more than 30% (!) for the three months as a whole.

With these advances, on top of the already very strong recoveries since early March, the losses earlier in 2009 are now dramatically overcome. Clients' year-to-date portfolio returns, net of our fees and other portfolio expenses, show results of about 20% to more than 30%. Nevertheless, as illustrated by the performance of various benchmarks since the summer of 2007, there is still substantial ground to recover from the high levels of recent memory.

Where clients held large exposures in small cap stocks, overseas, or especially emerging markets, the degree of volatility was particularly pronounced -- first very bad and then very good.

Consequently, many take encouragement from the dramatic recovery and look forward to more, through slower-paced, positive results to come. Some commentators remain concerned that this rebound is exaggerated and not sustainable in the face of a not yet convincingly broad, global economic recovery. Even worse, some are concerned that severe disappointments lie ahead and a repeat of substantial declines are in store. Fed Chairman, Ben Bernanke, has already called the recession to be over; Nobel Laureate, Joe Stieglitz, fears continued grim economic times. In the discourse to follow, our Chief Investment Officer, Dr. Jason Thomas, describes Aspiriant's view that the fundamentals of the global economy support a high probability of good long-term investment performance, regardless of what the near term future may be.

The key emphasis in that view is on the "global" aspect. Very unlike past recoveries following deep declines in US markets, this recovery relies heavily on the economic opportunities outside the US as well as within. The opportunity set is now much bigger...the whole world. But risks, correspondingly, are now also of broader dimension, with realizable investment returns relying on the legal structures, market mechanics, currency values, and investor behaviors of many and varied "foreign" environments. So, in one sense, nothing is really new: more return potential and more risk, but where it especially occurs will increasingly, we believe, be outside the US. What was not long ago the G-7 - - and then, to accommodate a newly capitalist Russia, the G-8 - - has just now become the G-20. While it’s still probably at least several years off, there is increasingly serious discussion of replacing the dollar as the coin of global energy trading or even as the world’s reserve currency. Not surprisingly, the dollar has weakened relative to other currencies. While no-one really contemplates...or really desires...a dollar collapse, a slow, continuing dollar depreciation is probably the preference of almost all international monetary authorities as well as popularly elected (or popularly responsive) world leaders. We don’t choose to fight these trends, but rather encourage clients to adopt significant and broadly diversified overseas investment allocations. It is not a bet against the US or in favor of any single country or even region. Rather, it’s a bet on the likelihood that people, around the world, will continue, in the aggregate, and over time, to create substantial value. In our view, that’s a very good bet.

Tim Kochis, CEO

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