2008 YEAR END REVIEW©

JANUARY 2009

HOW, IN 2008, KJT INVESTMENTS MADE AN AVERAGE PROFIT OF 16.42% FOR ITS CLIENTS, AFTER FEES, WHILE THE DOW JONES LOST -33.84, THE S&P 500 LOST -38.49% AND THE NASDAQ LOST-40.41%

n light of the disturbing revelations last year regarding certain investment advisors, we believe that for 2008, investment advisors who claim to have made profits reveal the details of their discretionary trading in order to substantiate their claims. THIS REPORT DOES EXACTLY THAT. As you will see in the trades listed below, in 2008 it was necessary to change direction a number of times. To use a football analogy, it required the skill of a broken field runner.

 We have long believed that the secret to successful money management is sound fundamental analysis, adherence to strategy, a strong sell discipline and the willingness to change tactics based on market changes. Further, we take no positions, which, if we are wrong, will prove disastrous. Our clients are further reassured because we also insist on separate accounts with funds held by a third party custodian and monthly reports are issued by that third party custodian.

 As far as we are concerned, there is no such thing as long term investing. Investing is a war and wars are made up of individual battles which must be fought using different strategies and tactics. That does not mean you cannot use the same tactics over again, but they must be tailored to the market conditions which exist at that time. This is in contrast to what has become known as Modern Portfolio Theory which states that individual stock analysis is useless and all an investor need do is diversify and be fully invested. In view of the fact that the stock market is back to where it was 10 years ago, all the gains for a decade have been wiped out and further, since for the past 10 years investors have bought stocks at higher prices, the losses have been even greater. As a matter of fact, using Modern Portfolio Theory,     on an inflation adjusted basis, most investors have made almost no profits for 42 years, when the Dow Jones Index first went above 1,000 in 1966. That was due to the ruinous inflation of the 1970’s.

 We also disagree with rankings of investment advisors which do not include performance results. “Barron’s” magazine specifically states that their rankings do not include performance because the advisors refuse to provide that information. Since performance is 75% of the reason you choose an advisor, any ranking that does not provide that information is useless.

 In our “Year End Review for 2007” posted on our website in January 2008, it reveals that we sold 70% of our clients stocks on July 24, 2007, only 3 months before the market began its serious decline and invested 50% into US Treasury Bonds and 20% in the SDS which is how we entered 2008. Note also that we were months early in calling attention to the serious problems facing Bear Stearns. Also we were correct in declaring that the consensus earnings for the Standard & Poor’s 500 Index in 2008 were much too high at $90 insisting they would come in below $ 60.

 During 2008, as previously noted we had to reverse position numerous times. For example we were short the market in the SDS until early October which was very profitable and then on October 10, the very day that the Dow Jones lost its final 800 points in its 18% decline, we reversed course and bought the Standard and Poor’s 500 (SPY) and within 4 weeks we had made a 14% profit in that position. We also had a 106% profit in three months in our 10% position during the decline in oil prices after the summer.

 In the list of trades on the next page, please note the following:

1.      The percentage figure is the total percent of the portfolios the investment represented when it was bought. The percentages add up to over 100% since we added to the position for new clients and reinvested in other positions profits after selling.

2.      In the date sold column, the word open means that it was still held on December 31, 2008.

3.      The selling price is the date it was sold or the price on December 31, 2008 for positions which were still open at the end of the year.

4.      The word various means that there were a number of trades in the same security and the price was the average price.

5.      Return does not include interest and dividends earned by investments which add to the return.

Kevin J. Tierney

Registered Investment Advisor

LIST OF TRADES

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