The S&P Index was down 37.5% last year.  As painful as that has been for many investors, our economic system was in serious need of some pruning.  Much of the growth which supported the higher values was nourished by loose lending and excessive debt.  When problems were finally discovered, instruments and institutions were so entangled it will take years to separate much of the garden from the vines.

Generally, I think TV economists are useful as entertainment only.  Their predictions are worthless because the endless complications of our economy make cloud pictures seem stable. This situation is different.  We do not have to know what the scenery will be like over the hill, but we do know the condition of our engine, and some of the cylinders are not firing.

As spending shrinks, the consumer will not be able to support duplicate businesses such as Linens and Things and Bed Bath and Beyond.  We will not need a Best Buy and a Circuit City. For a while, there will be fewer companies and less employees, excess store space, and lower revenues to the government.  With this reduced universe, we cannot expect the stock market to regain its previous value until the economy has had time to recuperate-not for months, for years. This is not a cynical position; it is reality which offers great opportunity to some investors.

The last century saw two periods in which the market stayed in a trading range for decades before corporate earnings became strong enough to support new ground.  Conditions now indicate that we have been in such a period since 2000 and it could continue for five to seven more years.

That does not mean market investors will wait that long for profits, but it does mean active management will allow the investor many opportunities to make and take profits while the inactive investor watches the pot that doesn’t boil.

Two years ago, my son Jacob was in his sophomore year of study pursuing that degree, and was just finishing his Christmas break.  He took the time to pull me aside and confide that he was becoming somewhat disillusioned with his current course of study.  He had spent some time working in my office over the previous summer and liked the environment, not only of the office, but of the career in general.  Our conversation led to his asking if he might be able to work with me and build a career in this industry.  I am certain you will not find my reply ‘hard to believe’.

He has held other positions over the last few years and changed his major to business.  The light at the end of the tunnel has finally arrived and his college career is over.  I was particularly pleased that I was not the employer of last resort; working with dad was a “choice”.

You will see him in the office, fortunately for him, as the ‘younger and handsomer’ Niedermeyer.  He is very excited to meet our clients and begin working as a member of our team.  I am excited and very proud to watch my son begin a fine career with a wonderful company.

Some of Ford’s most alarming business innovations were a short work week and outrageously higher compensation for his employees. Ford wanted his employees to make enough to buy his cars.

His goal was to decrease the price to a point where people all over America could afford to travel in an automobile. After he acquired princely wealth, Henry Ford decided to price his cars below his cost so even more Americans could travel. Shareholders did not agree and the Supreme Court sided with the shareholders.

Now, the condition of the economy is forcing auto companies to liquidate inventory to raise cash and to clear lots. One hundred years later, the consumer can now buy a Ford, or a Chrysler, or a Chevrolet below the manufacturer’s cost. It took some patience, but one of Henry Ford’s greatest ambitions has been achieved

In Abraham Lincoln’s second annual address to Congress December 1, 1862, he stated, “The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise with the occasion. As our case is new, so we must think anew, and act anew. We must disenthrall ourselves, and then we shall save our country.”

Recognizing the significance of this year’s market volatility, we made numerous adjustments. We gleaned a vast amount of knowledge from the events and we confirmed our belief in our Seasonal investing strategy and our Bond Management Program. I believe 2009 will bring a challenging environment for investing but will also provide great opportunities. This year will require a definitive plan to be successful and, as a member of the team at G.L. Smith and Associates, I know we have a plan in place to take advantage of this year. We are thinking anew, acting anew, and we are embracing 2009 with great expectations.

Monty Python’s Spamalot – An irreverent parody on the legend of King Arthur, the Knights of the Round Table and the quest for the Holy Grail is told in hilarious and haphazard fashion. February 17-22. (Broadway Theatre League, 256-518-6155 or visit www.broadwaytheatreleague.org).

Panoply Arts Festival – This weekend festival, ranked in the “Top Twenty Events” by the Southeast Tourism Society, offers the perfect family environment through activities that children, teens and adults can enjoy. Friday, April 24 – Sunday, April 26. (The Arts Council, Inc., 256-519-2787 or visit www.panoply.org).