2007 1st Quarter Newsletter

Hello!

Like many of my clients, you have probably seen recent headlines that read something like this: "Stock Markets in a Tailspin" and had at least a little concern about your financial plan and the investments supporting it. After all, market activity has shown unusual volatility in recent months with the Dow Jones Industrial Average (DJIA) hitting an all-time high on February 20th, only to plummet about 416 points (3.3 %) just one week later. Ranking as the seventh most severe drop in history, some of our clients wondered aloud whether they should reduce their holdings.

Fact is no one knows with any degree of certainty the direction the markets will take from one day to another. Too many variables exist in business and the world's economies that could affect market direction at any given time. Many opined that the 3.3% February drop was the result of remarks made by ex-Fed chief Alan Greenspan in a speech in Hong Kong where he said that he couldn't rule out a recession later this year. When cooler heads prevailed, they came to the realization that he didn't actually predict a recession, but mentioned that there is a small possibility, as there usually is, of one occurring. The drop was attributed by others to various factors, including a weak dollar, the Chinese stock market, housing here in the states, sub-prime lending troubles, and a suspicion that the economy is slowing too much.

But let's look at what happened to the DJIA during the year's first quarter to see if concern with such a big one-day drop as occurred in February might have been warranted. For the two weeks following the DJIA's one-day 416 point drop the average drifted mostly lower, finally hitting its low for the quarter some 73 points under the 12,000 mark on March 5th. But at quarter end on March 31 it has recovered to close just shy of where it began the quarter on January 1st, down less than 0.9%.

The point is that long-term investors like you should be aware of what is happening in the stock markets, but not make hasty decisions as a result of what may prove to be an anomaly, such as the volatility we are now experiencing. Because many stocks are unduly discounted during such periods, many professional money managers even take advantage to such volatile periods to add value priced companies to their portfolios. During our next review of your portfolio we will take this volatility into consideration as it regards your tolerance for risk and make adjustments as necessary. As is our custom, you can contact me anytime at 949-788-7700 to schedule an appointment.

Regards,

Andrew C. Karlinski, CFPR

Web:
Email: akfinancial@mscmail.biz
Phone: 949-788-7700
Fax: 949-788-7710

Securities offered through Mutual Service Corporation
Member NASD, SIPC

AK Financial Group is not associated with Mutual Service Corporation. This is not an offer to sell securities, which may be done only after proper delivery of a prospectus and client suitability is reviewed and determined.

This letter represents the general economic outlook of this firm and does not constitute investment advice, nor should it be considered predictive of any future market performance. Past Performance is no guarantee of future results.