Dear Sir/Madam:

The mood in the country is a mix of panic and fear combined with a fascination with the bizarre. No one is quite sure if the current economic weather system will bea twister that blows the roof off or merely a scary looking storm cell that darkens the sky without doing more harm than scaring the chickens and cows. Daily we read about European debt fears, stock markets crash­ing, America’s credit rating faltering, stalled U.S. GDP growth, the unemployment rate, Chinese inflation, Indian corruption, gridlocked government, etc. If one throws in locusts, hail, and boils, it would seem almost biblical.

But this is not 2008. And that is important to remember. As bad as things feel right now, and they do feel bad, our financial system is not on the brink of collapse. The number of U.S. banks that should be shut down has actually declined a bit, and cor­porate profits remain high. We did not default on our debt and, politics aside, the United States is not over.

What Happened to the Year of the Recovery?

With some important exceptions (gold for one), commodities have backed down from their recent peaks and gasoline prices are no longer threatening to cripple the lower end of the work­force. But for most investors, 2011 has become a year of dyspep­tic nervousness, already falling short of its original promise.

We had hoped that 2011 would be the recovery year, where the economy proved to be on the mend, where unemployment and housing made aclear bottom, where the U.S. government backed off its aggressive stimulus programs, and when investors came out of hiding. At first it looked like we had all these things. Now it looks like we may have few to none of them: GDP growth estimates for 2011 have now been lowered to an anemic 1.9% and unemployment has lurched back to 9.2% nationally, with pundits writing off any near-term recovery in jobs. Investors, like ground hogs, stuck their head out of their holes and said, short-term rally be damned, its dark and cold out there!

So Far During Q3 2011...

This letter is coming out after we have seen the extraordinary volatility of August, 2011: The Dow down 600 points in a single, the Russell 2000 off 9% in one trading session. And, ironically, U.S. bonds have been the place to hide, actually increasing in value despite every pundits prediction from only a month or two ago. Once again, the death of the United States has been exag­gerated (apologies to Mr. Twain).

All in all, our clients should be pretty happy. Our institu­tional-style investment model has kept our clients well-diversi­fied beyond the traditionalconfines of ordinary wealth manage­ment strategies. And, as a result, our clients have been able to hold on to a lot more of their money in these volatile markets.

For more information, Email us at: info@wangerinvestments.com or visit us on the web at: www.wangerinvestments.com or www.wangeromniwealth.com.

Best,
Eric Wanger, JD, CFA