Gaining Financial Confidence

Welcome to the inaugural issue of “Everything’s Relative!,” a timely update on our investment strategy, the markets and other relevant financial and investing topics.

Where Did You Get the Name?

Those of you that know us well know that virtually all of the investing we do is based on a method called "Relative Strength" that maintains that it is possible to identify and track those areas, or sectors, of the market that are stronger than others. In our strategy, we divide the markets into nine (9) sectors and own the "strongest four (4) as long as it is one of the strongest five (5)." When a sector drops out of the top five, we sell it and buy the sector in the top four we don't already own. (Now, I can see some of you covering your ears, holding your heads and muttering, "We know, Neal, we know!" but good things bear repeating - like the sound of my voice!!)

Anyway, we plan to update you in this forum as a way of keeping in touch as well as providing articles that we think will help with your planning. While most will be geared towards managing your finances, we may get eclectic from time-to-time; maybe even pique your curiosity or just have some fun. We hope you both enjoy it and give us feedback along the way.

Speaking of feedback, you should have received a client survey from Wachovia Securities recently. This isn't just more junk mail. We really would appreciate you taking a moment, filling it out and returning the survey in the postage paid envelope. We rely on these to help us decide what services you want or would like, what enhancements we can add so that your experience with us is the best it can be.
So, let us know. We'll do our best to respond!

Relative Strength Report:

Here's how the sectors ranked at the end of 2006¹ with "1" being the strongest ranked sector: (Those we're in are in "BLUE" ² )

1: EMERGING MARKET -
1A: WORLD EQUITY (WE CALL THIS INTERNATIONAL)
2: LARGE CAP VALUE
3: SMALL CAP VALUE
4: MID CAP VALUE
5: SMALL CAP GROWTH
6: MID CAP GROWTH
7: WORLD INCOME (FIXED)
8: LARGE -CAP GROWTH

Recap: The Year that Was 2006

What a year it was! In 2006 we had four major signals, the most since 2002, just before the bear market turned around.

What could this mean? A market that's trending tends to keep us in the same areas; that is, not much shifting around. On the other hand, a market that is "trying to make up its mind" can be a volatile, shifting place. And that's how 2006 felt. Although some sectors came and went pretty quickly, International and Emerging Markets hung in. We found ourselves moving back from 2005's small and mid-growth holdings to value across the board. Nothing from bonds; noticeably absent since 2004.

Where will we go in 2007? We'll see. As you know, we don't make forecasts or have opinions. The markets themselves show us the way. On the other hand, there are those who wonder and those who answer, so, for those of you who would like, we thought you might find Wachovia's 2007 Outlook "interesting."

Relative Strength is a form of technical analysis and based on the study of historical price movements and past trend patterns. There is no assurance that these movements or trends can or will be duplicated in the future, and no guarantee that any investment strategy will be profitable. The top ten sectors have been prepared without regard to any particular investor's investment objectives, financial situation and needs. Accordingly, investors should not act on any recommendation (express or implied) or information in this report without obtaining specific advice from their financial advisors and should not rely on information herein as the primary basis for their investment decisions.

Any statements nonfactual in nature constitute only current opinions and interpretations of their indicators, which are subject to change without notice. There may be instances when fundamental, technical and quantitative opinions may not be in concert. This and/or the accompanying information was prepared by or obtained from sources that Wachovia Securities believes to be reliable but does not guarantee its accuracy. Any opinions expressed or implied herein are not necessarily the same as those of the Wachovia Securities research department. Any market prices/sector rankings are only indications of current market values and are subject to change. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Data and opinions are current as of February 27, 2007. Additional information is available on request.

The prices of small and mid-cap company stocks are generally more volatile than large company stocks. They often involve higher risks because smaller companies may lack the management expertise, financial resources, product diversification and competitive strengths to endure adverse economic conditions.

Investing in foreign securities presents certain risks not associated with domestic investments, such as currency fluctuation, political and economic instability, and different accounting standards. This may result in greater share price volatility. The risks for emerging market securities may be magnified.

The accuracy and completeness of this article are not guaranteed. The opinions expressed are those of the author(s) and are not necessarily those of Wachovia Securities or its affiliates. The material is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy.

Neal Dietz is a Senior Vice President - Investment Officer with Dietz & Lynch Financial Strategies Group of Wachovia Securities in Newburyport, Massachusetts. For more information, please call Mr. Dietz at 877-609-8476. Wachovia Securities, LLC, member NYSE/SIPC.

¹ Source: Investors’ Business Daily
² Since we are trying to keep the disclaimers to a minimum, we won't tell you the rate of return for each of the sectors but you can find that in various places. Look at your statements and you will see we were pretty much in line at the end of the year.