Ten Years On

Friday, September 9th

In yesterday's hotline I mentioned not being able to find my hotline archive from 2001 and the hotline that I sent out right after 9/11 ten years ago. One of our long-time members still had his copy and sent it on to me. (Thank you, David!) I am posting that hotline and you can read it below.

I am also posting our October 2001 issue. Click here to download the PDF. We scanned a paper copy to make the PDF so the quality isn't great and some of the pages are a little crooked, but it still makes for interesting reading.


Subject: Fidelity Investor Hotline 09-13-01

Jim Lowell's Fidelity Investor Hotline by Email

By Jim Lowell Editor, Fidelity Investor

This is Jim Lowell, Editor of the Fidelity Investor with your Fund Update, Thursday evening, September 13.

There are no trades recommended in our portfolios.

Following the American tragedy on Tuesday, the bond markets are open today and the stock markets will re-open on Monday. Frankly, I think that that time has been well spent, with human efforts taking precedence over market events. And, as we return to a fully open market next week, better armed with information, analysis, and action, we will all be prepared and ready.

(Fidelity reopened nearly all of its retail and institutional money market funds yesterday, and today it re-opened several government bond funds. As government fixed-income securities began trading this morning, Fidelity re-opened: Spartan Gov't Income, Ginnie Mae, Intermediate Gov't Income, Gov't Income, Advisor Gov't Investment Income, Advisor Gov't Investment and Institutional Short-Intermediate Gov't. )

While it will take a long time for business to return as usual, it is important to note that while thousands suffered directly from the act of war, and all of us will feel the impact of the event for the foreseeable future, all Fidelity managers are present and accounted for.

In the weeks ahead, there will be an unprecedented level of accounting across all boards and borders. My staff and I have been working long hours wedding what we know about past events to models of potential future ones. (Please visit FidelityInvestor.com for a special market report from Dan Wiener, editor of The Independent Adviser for Vanguard Investors and me — as part of your overall FFSA membership.) The obvious, intermediate term concerns: Exacerbated deflation, war, hyperinflation, follow-on acts against us — and how such events have and may impact our markets and portfolios.

Currently, we can take some measure of solace from the fact that there's a tremendous deal of calm in the face of the natural, knee-jerk reaction experienced in Europe and Asia on Tuesday. And while Asia continues to struggle with its own fundamental issues, the European bourses have been rallying. Our NATO allies have rallied, too.

Through September 10 (the last open market day), the S&P 500 is down 16.5% for the year. The cyclicals-weighted Dow Jones Industrials is down 10.2%. The tech-heavy NASDAQ is down 31.2%.
The Wilshire 5000 Total Market index, the best measure of our markets, is down 16.4. The EAFE, the best measure of the broader international markets is down 23.6%.

Our Aggressive Growth portfolio is down 12.2%, our Growth portfolio is down 11.9%, our Growth & Income portfolio is down 6.3%, and our Capital & Income portfolio is down 3.9%. Every portfolio is significantly ahead of the market for the year, annualized over the past three years, and since inception.

As you know, we remain defensively positioned in every portfolio — the result of our investment discipline's concern over the weakening consumer in the face of a stabilizing economy. Today's University of Michigan's consumer confidence number fell to its weakest level since November, 1993 — and, importantly, all responses were gathered before Tuesday's tragedy. Likewise, initial unemployment claims continued to rise rather than fall. Both factors were determinants for our defensive orientation and remain my fundamental source of concern together with weak earnings. (See your September issue for specific details.)

It's worth noting just how our defense, beyond our equity diversification and our weighting in defensive sectors, currently stands. Our Aggressive Growth portfolio has 11.6% in bonds, and 9.8% in cash. Our Growth portfolio has 10.1% in bonds, and 9.2% in cash. Our Growth & Income portfolio has 38.4% in bonds, and 8.3% in cash. Our Capital & Income portfolio holds 48.2% in bonds and 7.4% in cash.

Our managers, always already the best informed members of the financial community bar none, and remain brilliantly equipped to maneuver in this unprecedented time. We benefit from their expertise in many ways. The cash numbers above, for example, are a reflection of no raw cash position, but the result of the overall cash weighting of the combined funds found in each portfolio. We also remain extraordinarily diversified with well over 500 stocks comprising the equity portion of our portfolios.

The "Beta" of each ad every portfolio best reflects our defensive stance. Beta is the extent to which a fund or stock's value tends to go up or down as the market goes up or down. A growth fund with a beta of 1.5 would most likely go up 15% when the market as a whole is up 10%. (or down 15% when the market is down 10%.) Our Aggressive Growth portfolios Beta: 0.79. Our Growth portfolio's Beta: 0.74. Our Growth & Income portfolio's Beta: 0.42. Our Capital & Income portfolio's Beta: 0.37.

Our investment discipline will see us through the market's near- and long-term moves as it always has. The financial community will continue to send its clear message of strength to the markets and the world. And, like so many senior professionals I have talked with, I have no doubts about our resiliency as a free market and our resiliency as a people to let freedom ring.

Until next Thursday night, or if the Dow moves 3% in either direction, this is Jim Lowell, helping you secure your financial future.