AlphaProfit Sector Investors' Newsletter: October 13, 2008 Bulletin

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AlphaProfit Newsletter: October 13, 2008 Bulletin

Subject: The October 2008 Crash

Dear Valued Subscriber,

Stock markets around the world have plunged over 20% since September 30. Amidst rising uncertainty, we encourage you to assess the need for changes in asset allocated to equities. We urge you to make changes to your investments gradually and to avoid acting in panic. We are making no changes to the model portfolios or recommendations at the current time.

Stock prices around the world have relentlessly declined during the first 10 days of October. Broad U. S. market averages like the S&P 500 and the Dow Jones Wilshire 5000 are down nearly 23%. The Morgan Stanley EAFE index, a commonly used benchmark for foreign markets, is down 22%.

Confidence in the financial system has eroded and efforts announced by the U. S. Treasury Department and Central Banks worldwide to date have had limited effect in stemming the run on banks and on the equity market. Financial institutions have become increasingly reluctant to lend to each other. Stock prices are being driven less by company fundamentals and more by macroeconomic fears, hedge fund failures, and mutual fund redemptions.

On Friday evening, finance ministers from the G-7 nations met at the U. S. Treasury Department to develop a plan for stabilizing financial markets and restoring the flow of credit.

While it is hard to know precisely where the current downdraft will bottom, our sense is that we are nearing the end of this panic-selling phase. The 1,215-point intra-day reversal in the Dow Jones Industrial Average on Friday is an encouraging sign. We believe volatility will remain high in the days ahead. If credit availability improves from coordinated action by governments and Central Banks worldwide, we may see some sharp rallies in stock prices.

Notwithstanding the possibility of this near-term positive, it is too early to forecast when and at what level stock prices will ultimately bottom. To some degree, this will be determined by the extent and magnitude of damage caused to corporate earnings prospects.

The range of possible outcomes remains wide. In a better case scenario, efforts being made by governments and Central Banks worldwide may work to bring about normalcy relatively soon without permanently impairing corporate franchise values. A worse case scenario is one where most economies come under the grip of a prolonged global recession.

Given such heightened uncertainty, we encourage you to maintain adequate cash reserves and to have appropriate diversification across asset classes in your overall portfolio. We encourage you to review your investment portfolio and assess the need for changes in asset allocation considering your investment time horizon and risk tolerance. If your investment time horizon is relatively short, it is appropriate to consider pruning exposure to equities. Regardless of the situation, we most importantly urge you to make changes to your investments gradually and to avoid acting in panic.

We are making no changes to the model portfolios or recommendations now. We continue to monitor developments and will inform you ahead of time if we decide on making changes to the model portfolios or recommendations.

Sincerely,
Sam Subramanian
AlphaProfit Investments, LLC
Ideas. Insights. Results.
http://www.alphaprofit.com

Notes: The AlphaProfit Sector Investors' Newsletter™ is for information purposes only. AlphaProfit Investments, LLC is not soliciting any subscriber to buy or sell any security. Nothing herein should be construed as an offer to buy or sell securities or to give individual advice on investing. Before buying or selling any mutual fund, exchange-traded fund, security, or investment, read the prospectus carefully. For securities held in brokerage accounts, read the broker's specific terms and conditions which apply to trading of the securities. AlphaProfit Investments, LLC cannot and does not give any assurance that the present or future model portfolio changes will be profitable. Past performance is not a guarantee for future results. Factual material is obtained from sources believed to be reliable and is provided without warranties of any kind. AlphaProfit Investments, LLC is not responsible for any errors or omissions. AlphaProfit Investments, LLC neither is associated with nor receives any compensation from any of the mutual fund companies, brokers, or entities connected with the exchange-traded funds mentioned in the newsletter. Please review our Terms and Conditions of Use and Subscriber Agreement which is available on our website at www.alphaprofit.com; they govern your relationship with AlphaProfit Investments, LLC, including, but not by way of limitation, use of this newsletter. No part of the AlphaProfit Information may be reproduced or re-transmitted in any manner without written permission of AlphaProfit Investments, LLC.