Welcoming Year End

Where do we go from here? With Christmas, Hanukkah and Kwanzaa now clearly
in sight and consumers and investors in a relatively good mood we should
have a nice quiet conclusion to the trading year. December has virtually
mirrored the rest of 2009. We witnessed promising signs on Home Sales,
Employment and Leading Economic Indicators. Each time a data point was
released the market appeared ready to roar ahead only to quickly lose
momentum and close with a ho hum. We recently saw Dubai taken to the brink
of collapse only to be reeled back from the edge by big brother Abu Dhabi.
The market trembled for a day only to recover fully the following week.
So, again where do we go from here? Barring another external shock to the
market the path of least resistance marginally favors the bulls.



The employment picture continues to improve somewhat modestly month over
month. Productivity remains strong. With an even incremental uptick in
revenues corporate earnings should be set to impress. While credit remains
elusive to some, conditions are much improved from the dark days of early
2009. The Federal Reserve is forcing money out of safe havens into the
lending pipeline. But, there remain bottlenecks and clogs on the way down
to the consumer. Unclog the pipes and look out above.



One last positive note to share, the Federal Reserve just executed another
reverse repo in the amount of $180,000,000.00. Sure that is a drop in the
bucket when considering the Feds balance sheet has ballooned to in excess of
$2 trillion. What does this mean? The Fed offered out $180 million of
Agency notes (Freddie and Fannie) to the market. After reviewing all the
bids for the notes, they allocated the Agency debt and extracted $180
million green backs from the system. The importance is the Federal Reserve
is sending two signals to the market, 1.That they have a plan and the tools
to remove the excess liquidity from the market when the time comes. 2. They
believe we are, economically on firmer ground and the time for the
extraction of liquidity is coming soon (in context soon may be 6 to 12
month).



This doesn't mean a rate hike is right around the corner merely the Fed may
begin to tailor its focus to one of balance between stabilizing and
promoting growth in the economy while being a vigilant inflation hawk rather
than the deflationary spiral they've engaged for the past two years. For
now we remain aggressively invested and anticipate remaining so through year
end. We are working on our 2010 outlook and projections and look forward
to sharing with you soon.



Thank you again for your patience and confidence in these very challenging
times. Have a terrific holiday.



Yours in pursuit of the Kwan.