Beacon Trust Company - Monthly Commentary

SEPTEMBER 8, 2008

SEPTEMBER 2008 COMMENTS -

The heady GDP growth reported in the second quarter was up an unexpected 3.3%. Obviously Americans went on a short-lived spending spree. The third and fourth quarters, absent another freebie from the government, are not likely to be robust quarters. Unemployment just zoomed over 6% making those struggling with house payments even more vulnerable to this economic slowdown. Notwithstanding the impact of the rebates, there is a strong possibility of a quarter or two of negative growth on the immediate horizon. Equity prices seem to be reflecting that of late.
While the news overall seems to be quite negative, (excepting the news of government intervention with Freddie and Fannie), the following economic focus will shed some light on areas where the news seems to be improving.

THIS MONTH'S ECONOMIC FOCUS - BETTER NEWS: GOVERNMENT TAKEOVER OF FANNIE AND FREDDIE, EXPORTS, EMPLOYMENT, HOME INVENTORIES AND HOME PRICES

The comments noted below are intended as "food for thought" when you consider current financial conditions, and may be tiles in a mosaic of "better things to come".

Government takeover of Fannie Mae and Freddie Mac

On Sunday, September 7, Treasury Secretary Paulson placed these two agencies in a government-operated conservatorship, ousted their chief executives, and eliminated the dividends on both their common and preferred stocks. Since the President signed legislation giving the Treasury Secretary such power on July 30 th , there was uncertainty as the market waited for the "other shoe to drop," and this action, while perhaps "stop-gap" in nature, is initially being viewed quite positively by the market. (Please refer to last month's Commentary for a more detailed piece on FNMA and FHLMC.)

Exports

Despite the somewhat pervasive gloom about the economy, the export sector continues to be a bright spot that is helping to offset the drag caused by the weak housing market. Exports of goods and services in June 2008 increased 21.1% on a year-over-year basis and totaled $164 billion, almost twice the $84 billion level of just 5 years ago. This strength in exports has also helped to reduce the balance of trade deficit to monthly levels in the $55-60 billion range from a peak deficit of $67 billion in October 2005.

Employment

Many are concerned, and rightly so, about the difficult current employment situation. This concern is perhaps increased by our proximity to the financial services sector in the New York City metropolitan area. The data, however, suggest that this employment downturn is somewhat less severe--at least to date--than in the 2001-2003 period. In this cycle, employment peaked in December 2007 and the latest figures (for August) show a loss of 605,000 jobs over the 8 month period. By contrast, 8 months into the last employment downturn (October 2001), more than twice as many jobs, 1,337,000, had been lost. Many suggest that the strength in exports noted above is cushioning the employment picture, and that changes in the government's unemployment insurance program may be partly responsible for the jump in the August unemployment rate to 6.1% from 5.7% in the prior month.

Home Inventories

New and existing homes for sale in July totaled 5,085,000, near the all-time high of 5,100,000 in July 2007. The slightly encouraging news is that the number of new homes for sale included in this figure is 416,000, a cycle low from the peak of 572,000 in July 2006. Some suggest that builders (with new homes) operate in a more business-like and less emotional fashion than owners of existing homes who may have unrealistic (at least in the current market) price targets for selling their homes. Long-term data indicate that the inventory of homes needs to decline from 5,100,000 to the area of 3-3.5 million units.

Home Prices
The most recent Case-Shiller Composite-20 Home Price Index indicated that prices in June 2008 were 15.92% below year-ago levels. It is interesting to note, however, that the month-over-month decline was the smallest since a year ago in June 2007.

We always welcome your thoughts and opinions on this Monthly Commentary, as well as any questions or comments you may have. Please do not hesitate to contact your Portfolio Manager or e-mail info@beacontrust.com.

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	*06/30/2008*	*12/31/07*	Change	Dividend Yield
S&P 500 Index	1282	1479	-13.3%	2.4%
Dow Jones Average	11543	13366	-13.6%	2.8%
Treasury Note (10 yr.)	103.98	101.81	2.1%	3.7%