Monday, July 28, 2008

Private Client Commentary - fishing

Dear Clients,

While I found no correlation between the Alaskan Salmon Run and the direction of the U.S. stock market, of course I discovered a nice little metaphor in my experience.

We arrived in Alaska late afternoon last Monday with great anticipation of fishing the legendary Kenai River, where in 1985, an unsuspecting angler pulled a world record ninety seven pound king salmon from the water - where in most years, forty to seventy pounders are the norm. We woke Tuesday morning to drizzling rain and a reported temperature of 50 degrees - felt like 40. At the end of six hours of hard fishing and marveling at the breathtaking beauty of the Alaskan wilderness, we left the water with one twenty two pounder "in the box" (caught by my son Nick). Not what we expected, but hey, that's fishing, you have to take the good with the bad. Our guide, a 20+ year veteran with thousands of fish under his clients' belts, did all he could to find fish that either weren't there or weren't in the mood.

Day two; raining hard, 50 degrees - feels like 30 something. Fishing a new spot with a new guide, who the day earlier managed to help his clients land four beauties ranging from thirty to forty-five pounds. Okay I thought, today's the day, after all this is Alaska! Six hours later we left the water with just two "in the box", a very respectable thirty six pounder caught by my good friend Dan, and a spunky eight pound sockeye salmon caught by Nick. But hey, that's fishing, you have to take the good with the bad.

Day three (our last day); same spot as day two; raining hard, windy, 50 degrees - feels like 30, make that 20. In spite of our limited success the first two days, we had reason to be hopeful. The previous day, the fisherman who took the afternoon float with the same guide on the same water we fished that morning; caught their limits within three hours - ranging from thirty five to a whopping fifty four pounds. Looks like a new surge of salmon were making their move up river. Six hours later, on this last day of our trip, we left the river with one "in the box", a very nice twenty six pounder landed by my son Nick. But hey, that's fishing, you have to take the good with the bad. BUT HEY, THIS IS ALASKA! EVERYONE SAYS IT'S THE BEST PLACE IN THE WORLD FOR CATCHING SALMON! THERE'S SUPPOSED TO BE A LOT MORE GOOD THAN BAD! Of course later that day, while we bid our farewells to the guides and the other fisherman, we learned that they had already fared-well that afternoon - a fresh run of kings came through just after we left the water and everyone caught their limits.

If we simply stayed in the water, or stayed another day or two, we would have certainly gotten our money's worth. Which is of course the message - it makes sense to fish waters that have delivered for decades, while accepting that some seasons may not meet our expectations. Everyone says the stock market is the best place in the world to invest your long-term money. But, just like fishing, there will always be periods when it feels awfully cold outside and nothing wants to bite.

Successful long-term investors take their cue from successful fisherman - they remain in the water, and simply weather the inevitable ups and downs.

See you soon,
Marty

p.s. Please don't feel sorry for me for not landing a fish. Having spent five days with my son and a good friend in the most beautiful place I've ever seen was an amazing and wonderful experience. I realized that first afternoon, as the three of us were in complete awe of Alaska's unparalleled beauty during the three hour drive from the airport to the river, that whether or not Mother Nature yields us a salmon was of no importance whatsoever. I thought I was going to Alaska to catch a fish, but as it turned out, I went to Alaska for an unforgettable experience with people I care about

Friday, July 18, 2008

Private Client Commentary - the weather oil prices

Dear Clients,

Every now and then I feel like I should comment on something other than the current bear market (telling you why it

Private Client Commentary

Dear Clients,

Just giving you a heads up that I'll be out of the office next week, 7/21 - 7/25, and this time I really mean it. I'll be on assignment in Alaska, researching the relationship between the Kenai River Salmon Run and movements in the U.S. Stock Market.

Apparently there's some correlation between the average number and size of the Chinook Salmon that move up river during the summer months and the performance of the stock market - but only during election years. Upon my return I expect to be able to accurately predict what the market will do between now and the end of the year. I'll be in touch soon with my recommendations. I can't wait!

Don't worry, of course I'm kidding (although I will be in Alaska next week), I haven't completely lost my mind just yet. But I have to tell you, as ridiculous as my little joke sounds, it's no more insane than what I've been listening to, much of the time, on the popular cable financial news network. Take the hosts of the show that airs at 6 o'clock every morning. There's an upper-middle aged gentleman who's been on the network as long as I can remember, I think his name is Doom. His co-host is Gloom an attractive young lady.

Doom and Gloom are very bright, articulate and mostly friendly individuals. But at times they, Doom especially, can be a little rough on their 'expert' guests. This past Monday morning for example, after one of their guests gave his prediction on where the market is headed from here (how he knows I'm not sure, could be a salmon researcher), Gloom asked him what sectors he currently favored. He courageously answered with "I like the financial sector right about now". And before he could state the obvious - that he liked financials because the whole sector's been taken out to the woodshed and that there are some good companies that look extremely cheap - Doom jumped in with something like; "you can't be serious, you people have been telling us this for the past three months and financials have been getting killed the whole time." The guest attempted to make his case only to be interrupted repeatedly with more of this "ya right" sentiment. It sounded as if Doom and Gloom knew something the expert guest didn't - that what's going on right now is what is going to go on for a long, long time - if not forever.

Now I have found this linear view of the market to be consistent among the average consumer, however I am often surprised when folks like Doom, who's been around the block a few times, take this posture. You'd think he'd know by now that the market moves cyclically, not linearly. Apparently it's easy, even for pros, to get caught up in the emotion of the current trend. But how ironic that during the following two trading days, financial stocks, almost across the board, posted phenomenal gains.

This morning Doom and Gloom seemed a little different, they were almost optimistic. If this continues for long, they'll likely get caught up in the new trend and we'll for sure have to change their nicknames.
I'm not predicting that the 480 point rally in the Dow we saw Wednesday and Thursday marks the beginning of the next bull market (it's way too soon to tell) - this upward spike in stock prices could very well be what they term a bear market rally, as many are suggesting. But I will say that it is ultimately a harbinger of things to come - could be now, could be later.

Just think of it like the ancient Native American rain dances: Did you know that during times of drought, the Native American rain dances actually worked 100% of the time? That's right, and the reason they never failed is because they never stopped dancing until it started raining. Or, like the line from Brian Tracy that I've quoted before; "if you want to be known as a great economist in America, always predict growth. If you always predict growth, you'll be right 70% of the time, and if you're wrong temporarily, you'll be right pretty soon."

Take care,
Marty

Friday, July 11, 2008

Private Client Commentary - the weather gas prices home prices

Dear Clients,

Every now and then I feel like I should comment on something other than the current bear market (telling you why it's necessary, or why you're always okay if you think long term, yada yada yada). Which means today I must be at a loss in terms of how to tell you the same story with a different twist. We're still in a bear market, although a number of "experts" think we're seeing signs of 'capitulation', which is the big sell off on high trading volume that often characterizes the end of a bear market. As I write this, the market is trading lower on negative news from Fannie Mae and Freddie Mack, while oil is up on military rumblings coming out of Iraq - sending the Dow down triple digits despite surprisingly good earnings news from GE. Of course we won't know if this is the great capitulation until after the fact. Keep in mind that all the "experts", even the most pessimistic, are offering up their predictions on when and where this bear market will end and the next bull market begins. Implying that the bear market will indeed end, and the next bull market will indeed begin. Not that you ever had a doubt.

But let's talk about something else. How about the weather? Man can you believe it was 113 yesterday? Absolutely miserable! Can't go golfing, can't ride your bike, can't go anywhere. The only thing worth doing this weekend is hang out by the pool with the kids, or stay inside with the spouse. Or, if no kids and no spouse, stay in and relax, watch a movie or read a book. Huh, when you stop and think about it, those things sound pretty good. You've been meaning to spend more time with the kids (or the spouse) anyway. Maybe it's a good thing it's so hot outside.

How about the high gas prices? Jeez, it costs a hundred bucks just to fill up your tank once a week. So maybe you try not to drive quite as much, which maybe means you're at home with the family a bit more - not all bad. Or, maybe because gas is so expensive, the auto companies will invent more fuel efficient cars. Maybe, because there's so much financial incentive these days, we'll begin seriously utilizing some of those alternative sources of energy. Huh, that might help clean up the air and lessen our dependency on oil coming from certain volatile places in the world. Maybe we'll look back in a few years and say those crazy oil prices turned out to be a good thing for us and the planet.

How about home prices? Can you believe it - a couple of years ago your house was worth $150k more than it is today. But, compared to those poor folks you hear about in the news, you're happy you didn't over-buy and use an adjustable rate mortgage. And what about the mortgage companies and investment banks that got so incredibly aggressive with those loans - they're stocks have tanked, sending ripples through the rest of the market - no doubt a big contributor to the current bear market. But when you stop and think about it, the real estate boom had to end sometime - and the bigger the bubble, the bigger the pop. The headlines today talk about the worst real estate market in decades, while it seems like just the other day when the headlines were all about the best real estate market in history. And ultimately, more affordable housing can't be all bad, while it lasts.

Please forgive me; but I just can't resist tying all this back to the stock market. As I've been preaching for nine months, much like the weather, energy and home prices - the market is cyclical. And the bear phase cleans up the messes the market gets itself into every few years. I guess affordable stock prices can't be all that bad, while they last. And every once in a while, a certain phase in the cycle inspires a revolutionary trend (perhaps it's in energy this time around) that ultimately makes our world a better place to live.

Take care,
Marty

Private Client Commentary - the weather gas prices home prices

Dear Clients,

Every now and then I feel like I should comment on something other than the current bear market (telling you why it's necessary, or why you're always okay if you think long term, yada yada yada). Which means today I must be at a loss in terms of how to tell you the same story with a different twist. We're still in a bear market, although a number of "experts" think we're seeing signs of 'capitulation', which is the big sell off on high trading volume that often characterizes the end of a bear market. As I write this, the market is trading lower on negative news from Fannie Mae and Freddie Mack, while oil is up on military rumblings coming out of Iraq - sending the Dow down triple digits despite surprisingly good earnings news from GE. Of course we won't know if this is the great capitulation until after the fact. Keep in mind that all the "experts", even the most pessimistic, are offering up their predictions on when and where this bear market will end and the next bull market begins. Implying that the bear market will indeed end, and the next bull market will indeed begin. Not that you ever had a doubt.

But let's talk about something else. How about the weather? Man can you believe it was 113 yesterday? Absolutely miserable! Can't go golfing, can't ride your bike, can't go anywhere. The only thing worth doing this weekend is hang out by the pool with the kids, or stay inside with the spouse. Or, if no kids and no spouse, stay in and relax, watch a movie or read a book. Huh, when you stop and think about it, those things sound pretty good. You've been meaning to spend more time with the kids (or the spouse) anyway. Maybe it's a good thing it's so hot outside.

How about the high gas prices? Jeez, it costs a hundred bucks just to fill up your tank once a week. So maybe you try not to drive quite as much, which maybe means you're at home with the family a bit more - not all bad. Or, maybe because gas is so expensive, the auto companies will invent more fuel efficient cars. Maybe, because there's so much financial incentive these days, we'll begin seriously utilizing some of those alternative sources of energy. Huh, that might help clean up the air and lessen our dependency on oil coming from certain volatile places in the world. Maybe we'll look back in a few years and say those crazy oil prices turned out to be a good thing for us and the planet.

How about home prices? Can you believe it - a couple of years ago your house was worth $150k more than it is today. But, compared to those poor folks you hear about in the news, you're happy you didn't over-buy and use an adjustable rate mortgage. And what about the mortgage companies and investment banks that got so incredibly aggressive with those loans - they're stocks have tanked, sending ripples through the rest of the market - no doubt a big contributor to the current bear market. But when you stop and think about it, the real estate boom had to end sometime - and the bigger the bubble, the bigger the pop. The headlines today talk about the worst real estate market in decades, while it seems like just the other day when the headlines were all about the best real estate market in history. And ultimately, more affordable housing can't be all bad, while it lasts.

Please forgive me; but I just can't resist tying all this back to the stock market. As I've been preaching for nine months, much like the weather, energy and home prices - the market is cyclical. And the bear phase cleans up the messes the market gets itself into every few years. I guess affordable stock prices can't be all that bad, while they last. And every once in a while, a certain phase in the cycle inspires a revolutionary trend (perhaps it's in energy this time around) that ultimately makes our world a better place to live.

Take care,
Marty