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October 1, 2015

Dear Client: Year-to-date returns for the major stock indices through the third quarter of 2015 are as follows: Index YTD 2015 Dow Jones Industrial Average -8.63% S&P 500 -6.75% NASDAQ Composite -2.45% As we have stated in earlier letters, market pullbacks are a normal and healthy part of market growth.  Broad markets historically average three 5% pullbacks each year.  One out of every three 5% pullbacks develops into a 10% correction with one in ten becoming a full blown correction of 20% or more. Market pullbacks are never easy to accept, but the good news is we do not see the current situation developing into a major bear-market selloff.  Those are typically the result of a recession.  Realistically, there is little expectation of a recession at this time because the supporting fundamentals are solid and stable.  These economic fundamentals include: Private sector jobs have increased for 66 consecutive months. We continue to have a recovery in the housing and construction industries. Consumers have been steadily paying down debt and adding to their savings. Their debt ratios are back at reduced levels not seen since the 1980s which leaves room for an upswing in future big-ticket spending. Auto sales are near record levels and rising. Corporate profits, other than the energy sector, continue to grow and corporate balance sheets are loaded with cash which gives them flexibility. Here are the major issues that are currently weighing on the equity markets: Uncertainty over when the Federal Reserve will begin to raise interest rates. While the media has made a huge issue out of this, the timing of this event is only...