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September 2008
We have seen extreme volatility in the financial markets over
the past months, as poor investments by some major institutions
in sub prime mortgages and other questionable products have
unraveled. The latest events involving Freddie Mac, Fannie
Mae, Lehman Brothers, Merrill Lynch and AIG, and particularly
the sensational way in which the media has covered these events,
have eroded already low investor confidence, leaving many
people feeling confused and fearful. It is at these times
that perspective is most critical.
Many in the industry are calling the events of the past weeks
unprecedented. However, as we look throughout history, it
is littered with “unprecedented” events. In 1989/1990, we
were plagued by spiking oil prices, a slumping real estate
market and the Savings and Loan crisis. Sound familiar? Then
we had the tech bubble/bear market of 2000-2002. Investors
can poignantly remember these periods of crisis, but how many
people realize that if you had invested in the S&P 500
Index at the beginning of 1990 and held through these unprecedented
events, that by the end of September, 2008 their average annual
return would have been approximately 8.8%?
I believe we will look back on today’s market with the same
kind of “20-20 hindsight” with which we view past corrections
and bear markets. No one knows exactly what will happen in
the short term, however, historically the stock market has
been resilient and has rebounded. I believe the market will
continue to be one of the best long term investments, as it
has always been in the past. We urge investors to stay the
course, to maintain their long term view and to have the courage
to believe that this correction too will pass. We feel it
is imperative for investors to maintain their disciplined
approach if they are to succeed. It is almost impossible to
watch the current levels of volatility without feeling strong
emotions. However, it is another thing entirely to allow those
emotions to derail your long-term investing goals.
At Hennessy Funds, we vigilantly maintain our commitment to
our time-tested, quantitative formulas and to our disciplined,
repeatable investment management approach. We reaffirm our
unwavering commitment to manage the portfolios in the best
interest of our long term shareholders and to serve our clients
with integrity, honesty and candor.
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