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The events of September 11, 2001, left us all shaken and stunned. I was in New York City
that day, attending an investment conference with Susan McGee, our President and General
Counsel, and John Derrick, money manager for our tax free, money market and equity funds.
There is no way to put into words what people there were witnessing and feeling. When I
originally sat down to write this message, I envisioned that the domestic economy and its
counterparts worldwide would shake off the stunning events of September 11 within a quarter or two,
despite the massive loss of brainpower and everything that accompanies the catastrophic
loss we all suffered that day.
The Federal Reserve has reacted quickly with interest rate cuts, and the U.S. and its NATO allies (as illustrated on the Shareholder Report cover) swiftly united to protect our civilization from this form of terrorism. However, it now appears that any sustained economic recovery has been delayed well into next year. Keep several important facts in mind as this unprecedented, unsettling year winds down and we look for signs of recovery in 2002:
We are in the midst of a massive rewriting of the textbooks on market recoveries, based on a new set of rules and a playing field we’ve not visited before. While the forecasts, projections based on historical movements and "normal" market psychology were derailed by 9/11, we have experienced recessions and large-scale crises – several in the twentieth century as the graph illustrates – before, and our country, economy and markets have rebounded thanks to the combined impact of increased government spending, widespread home ownership, a secure banking system, a more diversified labor market and lower interest rates.
I take great comfort from knowing that investing in the stock market is still the best way to make money long term. Temporary volatility is a given in this business, and any money you will need within the next few years should probably be in a relatively stable investment vehicle such as a money market fund. Revamped earnings model introduced To meet these challenges internally, we are proactively and progressively altering strategies and tactics to meet the new realities of the marketplace. Our basic investment strategy is to focus on growth, and we are rigorously monitoring our investment models to improve fund performance on a relative basis to our competition. Recently, we introduced our first dynamic macroeconomic/microeconomic earnings model for the All American Equity Fund. Our frustration with Wall Street forecasts led to reassessment and creation of the model’s second generation – a more robust, time-sensitive process designed to meet the needs of a rapidly changing market. Benefits of diversity serve the gold funds Gold’s portfolio diversification qualities have rarely been spotlighted more than in the aftermath of 9/11. Gold historically becomes a security blanket for investors when anxiousness and uncertainty set in. Our Gold Shares Fund deserves mention for its one-year performance compared to the S&P 500 and the Nasdaq (see chart below).
We continue to work harder, smarter and faster than ever before to deliver the products and services you expect. Our size and agility serve us well as we anticipate, and respond to, market and economic challenges. You should feel secure in the knowledge that your investments are safe, and a wise course of action may be to thoughtfully assess the markets’ status before making any drastic changes. This is the greatest country on earth, and these challenges will only make us stronger and more resilient. Sincerely, 
Frank Holmes Chairman, CEO & Shareholder |
