Saturday, September 20, 2008

Private Client Commentary - redundant

Dear Clients,

I keep waiting for the return email that says "jeez Marty you are one redundant son of a gun". But until I get one, I'm going to keep on recycling the same message in many of these commentaries. Fact is, even if I get one, I'm going to keep recycling the same message in many of these commentaries.

As I write this, it's Friday morning, fifteen minutes before the market opens, the Dow Jones Industrial Average futures are pointing to a triple digit decline, oil futures are trading at $3+ over yesterday's price, and the talking heads on CNBC are telling me why all this is going on this morning. I think back a few years when we first got the internet in our office; our service provider was called Compuserve, or was it Prodigy? I remember how excited I got when we were able to print a, twenty minute delayed, market update anytime during the day. I thought wow, can you believe it? We can actually get the scoop on what's making the market move, even during the trading day. And oh how we were able to use that valuable information. Uh well, we didn't really have a use for the information, it was just cool that we could get it and talk about it.

My how things have changed, today I can pull up a stock quote and watch it tick up and down minute by minute. I can get dozens of commentaries any time of day that give me the authors' opinions on what exactly is moving the markets at that particular moment. I can watch a so called mad man scream about stocks for an hour every afternoon. And oh how I'm able to use all this valuable information. Uh well, I don't really have a use for the information, other than it gives me something to write about.

At the end of the day, it just doesn't matter, what the stock market does by the end of the day. The only thing that truly matters is what the stock market does over longer periods of time, and I'm not talking by the end of the month, the quarter or the year.. In the short-term the only thing the market can do to you, if you let it, is get you excited, in a good or bad way, depending on whether it's up or down. Case in point: it's now 6:38am, the Dow is off 115 points, no make that 107, no make that 110. Wow, it can really bounce around in the course of a few seconds. I would sure feel better if it bounced to the positive by the end of the day. I wish someone would just say something that gives traders the incentive to buy big time before today's close. I wish someone would read last month's report from Standard and Poors that said the worst is over - S&P made an intelligent argument, backed by some compelling statistical data that suggested that the market is in a bottoming phase and we'll see sunshine soon.

I was tempted to forward that S&P report to you (the Dow is now down 138), but I decided against it for the simple reason that I want you to get comfortable with being in a bear market, for bear markets are a reality that we (The Dow is now down 120) have had to, and will continue to, learn to live with. The market has its seasons, and if we're looking for a beautiful spring (a spring back in stock prices), then let's hope for a really cold winter (a bigger pull back), because the market works just like nature, the greatest springs (when the market springs back) always follow the harshest winters. And forget about the market forecasters, they're more clueless than your local weather forecaster, and you know how you feel about him.

I'll bet there are a few of you out there who are thinking I spend all this time writing these commentaries - why the heck aren't I trading something or reacting to what's going on? To you I would say, spending my time on these commentaries, if it keeps me from reacting to what's going on, is an extremely good thing for your portfolio. These commentaries are designed to keep you from reacting to what's going on, which history has proven time and again, along with lack of diversification, can be a huge investment mistake.

I'm going to close here, having typed for 45 minutes and given you nothing new to hang your hat on, except for the good news that the Dow is now down 157, make that 167 (good news because the bigger the pullback the bigger the eventual spring) and wish you a great weekend.

Take care,

PS. All kidding aside, don't hesitate to call if you're feeling nervous.

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