I absolutely believe Lakeside has the most intelligent, thoughtful and forward thinking clients in the investment business.

We owe you a great deal of thanks for your openness to unconventional wisdom, responsiveness to decisions needing quick action and for the tremendous ideas that each of you have offered to make this an even better wealth management and investment advisory firm.

Today, we want to share our appreciation for making Lakeside Capital Management successful.

In 1999, we articulated our vision of a wealth management firm – a place free from Wall Street and located outside the downtown financial district along the shores of Lake Washington. You loyally followed as we left our previous employers for a smaller, more personal experience.

Who could have imagined that a decade later Merrill Lynch, EF Hutton, Lehman Brothers, and Bear Stearns would all be gone?

In 2001, we shared less concern about the technology stocks that had fallen and placed our focus and concern about those that had yet to fall - including Cisco at $56, Sun Microsystems & EMC at $85 and Microsoft at $84. We sold millions of dollars of those stocks and helped protect your portfolios from further losses. For heeding our advice and patiently listening, we thank you.

In 2002, we asked some of you to take a leap of faith and invest in a new housing project in Seattle’s Central District. Welch Plaza was born along with Lakeside’s allocation to real estate. The new transit system assures the success of this property for many years and we thank you for your patience as a dilapidated hardware store was transformed into a model for the neighborhood.

In 2005, we began to focus on cash flow more than capital gains. Who knew that monthly income would become such a priority in these difficult times? Parting with your bank stocks and the annual dividends was difficult for some, yet the right thing to do in the long term.

In 2007, we reduced our stock market allocations substantially. Later, after a 30 percent decline we re-acquired some of those holdings. We thank you for understanding we are human and did not buy at the bottom.

Now, here we are in 2009 and a decade has gone by since Lakeside opened its doors. During this decade we’ve seen a lot - the tech bubble peaked and burst; the memory of 9/11 has faded but will never disappear in our minds; and Wall Street and Main Street bankers wanted salaries comparable to professional athletes and ended up handing their homes back to the banks. Now, you and I own those banks.

While this road will take a long time to recover from, we encourage you to be proactive now. Spend less, teach your children about money and character, invest for cash flow, meet with your advisors often, work hard and savor the rewards that come.

Thank you again for your loyalty and confidence in Lakeside. You inspire us to do our best work.

We’ve all heard people trot out the old Chinese proverb “may you live in interesting times.” It points to the duality that an interesting time is not necessarily a happy time, and happiness can abound in boring, routine periods.

When it comes to the credit market, and issues of liquidity, these are, indeed, interesting times.

Not to get all crazy with aphorisms, but remember “cash is king?” Well, that is the case today.

Under normal economic conditions, those who need cash turn to those who have it. If they can make a case on why they need to borrow it and how they are going to repay it, they usually walk away with money in hand.

Today, the problem is that those who traditionally had the money to lend are broke. They, in turn, are going to an even smaller group who have a bit of cash lying around.

That, in effect, is creating a maelstrom of painful activity we would not normally see. Investors large and small are cashing out of the stock market, covering their eyes at their losses, with the knowledge they need cash now, and at whatever cost. With an abundance of these sellers, and with very few buyers on the other side, stocks fall at a faster rate, compounding the sellers’ misery.

At Lakeside, we are joining with a growing number of economists and financial advisors who say that we are not likely to see these things corrected as soon as we would like - that our current financial situation could hobble our economy for as long as a decade. Recovery, we are afraid, is a long way off.

Sure, some are pointing to a few recent developments as totems of the recovery. The Goldman Sachs report of a $2.7 billion profit is oft cited as a harbinger of good news. But let’s not forget “all that glitters is not gold.” While the firm did make money, the financial index of which it’s a part is still 10 percent lower than where they were at the beginning of the year.

We also see storm clouds gathering again on credit markets. The demand for credit remains high.  We’ve seen some episodic loosening of the supply of credit, but we are concerned this is only temporary. While we think it is not likely that credit markets will tighten to the degree of last fall, it is certainly a possibility.

One bright spot - for those with deployable capital - is the real-estate market. In fact, this may be one of the few areas that investors can make money absent a much broader - and highly unlikely - recovery. It is a sad statement, but we will see a big increase in the demand for low priced homes. The purchasers? A few savvy groups with cash to invest in distressed housing - as we are doing at Lakeside.

So what does this net out to for investors?

First, for non-real-estate investments, reset your expectations when it comes to returns; stop looking down your nose at investments that return three or four percent. Remember that the stock market has returned less than five percent annually over a number of short- and long-term horizons, three years, seven years, 15 years and 18 years. Be willing to suffer through low money market rates while waiting for the best opportunities and always consider the asset allocation balance when making decisions.