A couple tidbits of information:

The CBOE Volatility Index (VIX) today (Monday, 3/17/08) has reached 35.60 indicating a level of panic in the markets seen very infrequently.  In a flight to safety, the 10 year Treasury has rallied sharply in response and is currently trading at

3.3%.  The question on everyone's mind is this -  are we seeing the beginning of more frustration for investors in the coming months or is it a tremendous buying opportunity?  The attached table illustrates extreme conditions and the after effects and impact for the markets. 

The liquidity crisis that has been present for the past year and the dislocations in the markets, is a process that can best be described as deleveraging.  Essentially, many banks and brokerage firms have invested or loaned out between $10 to $33 for each $1 of capital on their balance sheets.  So, this deleveraging process is causing banks and brokerage firms to significantly reduce the debt and equity outstanding to shore up their own balance sheets which is expected to take time.  So, to soften the impact of this unwinding occurring in a crisis, the Federal Reserve has taken unprecedented action in infusing liquidity and providing access to capital to both banks and brokerage firms.  Not only did the Fed create a lending facility to improve the ability of primary dealers to provide financing to participants in securitization markets, they further decreased the primary credit rate by 1/4 of a point to 3.25% and are expected to cut rates further in their regularly scheduled meeting tomorrow.   As the dollar has dropped in response to the easy money policy in the United States, it actually creates a demand for US goods and services as well as increased interest in US assets.  With all this turmoil discussed above, commodity prices ranging from gold to oil to agricultural prices have risen over 50% in the past six months as equity assets around the world have plummeted.  Our opinion is that in spite of perceived long-term commodity trend upward and financial assets downward, don't be surprised if you see a reversal in the next couple months - particularly since most everyone is leaning in the direction of owning commodities and appearing petrified of equities. 

The final thought is that we are constantly reviewing all underlying asset classes and investments closely to determine appropriate steps of maneuvering your portfolios effectively during these tumultuous times.  Our conclusion is to focus on three strategies:

1) Diversify - maintain diversification between fixed income, equities, foreign securities and alternatives in all markets.

2) Select flexible mandate managers who in increasingly volatile markets focus more on absolute return strategies rather than relative return managers.

3) Maintain liquidity to cover short-term needs - maintain at least 3 - 6 months of cash on hand and perhaps as high as 1 year of cash on hand.

Lastly, consider utilizing IRA opportunities for tax purposes.  Discuss with your accountant allocating money to IRA contributions by April 15th (even if they are not deductible) for 2007, 2008, 2009, 2010.  Why?  Because in 2010, regardless of income level, anyone can convert IRA money to a ROTH IRA plan.  This is valuable because it will create a tax-free pool of capital for retirement forever. 

We maintain our focus on the long term perspective and on your goals.

Jonathan M. Satovsky, CFP, ChFC, CIMA

Chairman & Chief Executive Officer

Satovsky Asset Management, LLC

232 Madison Avenue, Suite 500

New York, NY 10016

O 212-584-1900

F 212-584-1901

www.satovsky.com

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