Market Commentary - Client Letter  - October, 2007

Quarterly Market Commentary, October 2007

(as prepared f or clients)

The enclosed valuation of your investments and the reference benchmarks of indexes in the tabulation below give the impression that not very much of interest happened in the summer. Beneath the small net changes in broad indexes there were roller coaster-like price changes, and panic-like fears to be eased before recovery could get underway.

Name of Index
Year To
DJ Industrial * 12,463.15 13,408.62 13,895.63   3.63%     11.49%    
S&P 500 * 1,418.30 1,503.35 1,526.75   1.56%     7.65%    
DJ Wilshire 5000 14,257.55 15,210.65 15,362.14   1.00%     7.75%    
Nasdaq Composite 2,415.29 2,603.23 2,701.50   3.77%     11.85%    
Russell 2000 Growth 395.51 431.41 430.85   -0.13%     8.94%    
Nasdaq Biotechnology 798.39 802.68 854.37   6.44%     7.01%    
Dow Jones Internet Service 59.12 67.69 64.73   -4.37%     9.49%    
Nasdaq Telecommunications 235.02 260.77 289.22   10.91%     23.06%    
Nasdaq Computer 1,052.81 1,152.54 1,213.95   5.33%     15.31%    
        *Not adjusted for dividends            

You have seen and heard a surfeit of news concerning the excesses in home building, and in the financing thereof. The difficulties encountered therefrom are beyond anything previously experienced, for the effects spread quickly throughout the valuations of homes and throughout capital markets here and through most of the world. Thus, there was the twin effect of stresses within the capital markets and outside in a major industry. Sectors of strength in the stock and bond markets withstood the sectors of weakness. Meanwhile, in the economy little-affected industries are prevailing. Patterns of large sectoral weakness amid large sectoral strength were, it seems, driven into place in ways that will characterize both the stock market and the economy for months to come. A memorandum giving interpretive reasons for such expectations is included in this mailing to you.

We believe your holdings are aligned with prospects for enterprise and industry growth. Meanwhile, a slower overall economic pace need not be a hostile environment for the valuation of shares, and of many other financial assets as well.

We wish ever to remind you of our pleasure in serving your interests, hoping, always, to perceive what is best for you.


R. Hugh A. FitzpatrickJames Fitzpatrick