Second Quarter Newsletter

                As we write this, summer market activity has brought most year-to-date domestic market indices to flat or slightly negative levels. We have seen significant economic weakness in China and Greece finally reached the crisis point which had long been anticipated, putting much pressure on the euro. Just recently, Puerto Rico's government was unable to make interest payments on its "moral obligation" utility bonds.

                Our own economy seems to have hit the summer doldrums. Consumer spending has been disappointing in the last quarter, and is expected to show more of the same as economic reports are released in the days and weeks ahead. Americans still carry significant consumer debt at a time when the Fed is on the threshold of raising rates.

                Earnings reports have been somewhat disappointing overall this year. Gold prices have fallen dramatically, and as August begins, major oil companies are forecasting that oil prices will remain lower for longer than had been expected. This has put more pressure on the energy sector, which has already suffered year-to-date declines.

                If you still have Puerto Rico bonds in your portfolios with us, you will know we have had conversations about the few selective bonds you continue to hold. We are closely watching the situation in Puerto Rico. At this point we are still seeing that insured municipal bonds, those with specific priority payment structures, and sources of revenue from which to pay interest and principle, are trading near and perhaps above par. One reason for this may be that large tax free funds which continue to hold some Puerto Rico bonds are favoring these particular issues. If you have any concerns about this area, please give us a call.

                We continue to hold healthy cash positions. We are monitoring our current equity holdings, as well as some areas we feel could present good entry points in the weeks ahead, should there be a pull back. While we are prepared to protect gains and minimize losses as events unfold, this is a good time of year for our investors to review their goals and risk tolerance. If we haven't had the opportunity to review these with you recently, let's take a look at your portfolio and risk tolerance together in the next few weeks.

                It is not too early to begin thinking of income taxes either, making sure Required Minimum Distributions from IRA's are completed before year-end. If you will have unusually high income to declare this year, we should review offsetting strategies which may be available. Meantime, we hope you enjoy the remaining weeks of summer with loved ones and friends.

                                                                                We thank you for your continued confidence in us,

                                                                                                                                                                The Galarneau Group