Tuesday, October 28, 2008

Private Client Commentary - what if the mkt never closed

Dear Clients,

At 12:45pm yesterday the Dow was ever so slightly in positive territory. Fifteen minutes later, at the close, it was down 203 points. What amazing volatility we

Wednesday, October 22, 2008

Private Client Commentary - panic scenario

Dear Clients,

Last week a client asked what would it take, relative to the stock market, to make me panic? After I gave him the

Tuesday, October 14, 2008

Private Client Commentary - biggest one point day

Dear Clients,

All I can say again is Wow! Yesterday saw the biggest single day point increase in the history of the Dow. And of course the question today is; is it sustainable? Has the bear market finally done its part in bringing the excesses to light and helping purge them from the system - and are we now ushering in the next bull market? Or, is it a sucker's rally - where the market surges, taking investors with it, only to sell off back to the bottom - breaking hopeful hearts along the way?

Of course you know, I don't know. Timing the stock market is something no one has ever done with any, investment worthy, degree of accuracy. And anyone willing to go on national television and tell us, with great conviction even, that they know where the market is headed, has let his ego run wild with his common sense. I woke up this morning to Bloomberg Television just in time to hear that three "major market strategists" (as opposed to minor market strategists) are indeed labeling this a bear market rally. Two simply stated that, due to the coming deep global recession, investors must sell into this rally; for we are no where near the end of the pain. The other was so bold as to even predict precisely when the market will bottom, which, if you're interested, is mid 2009. As I've illustrated many times in the past, not that these guys are wrong, but even the most popular gurus seldom guess correctly when it comes to forecasting the market.

Now, having clearly stated my position on market timing and my opinion regarding those fortune tellers who would have us bet our portfolios on their predictions, I will say emphatically, that I would not keep these primetime palm readers from making their prognostications for all the tea in China. In fact, if it is indeed time for this market to turn the corner, these guys are essential to making that happen.

Think about it, if everyone turned bullish at exactly the same time, every drop of cash on the sidelines would rush in at once, and I'd guess the Dow would settle somewhere north of 16,000, with nothing to keep it there. And trust me, that's not what we need! We need pessimists, and we need them to remain pessimistic, and we need people (not us) to continue to listen to them. That will help ensure that the liquidity the next bull market needs to move higher at a healthy (sustainable) pace stays in place. There's the old adage, "bull markets climb a wall of worry", implying that they are born, and advance, in the midst of very bad news - and again, we need the doom-sayers to keep things relatively negative, at least for a while.

So here we are, and like our kids suffering through the long drive to Grandma's house, all we want to know is - are we there yet? And all I'm saying is; if we are, we want to keep the air conditioner running and leave the ones sleeping in the back seat (dreaming that they're still on the road) there for as long as possible - while we go inside and enjoy Grandma's apple pie.

And lastly, please do not take this as my prediction that the bear market is finally over. I honestly do not know!! And as I've said many times before, it's not important that it end today, it's only important that this bear market end after, and only after, it's finished its work.

Have a great week,

Wednesday, October 8, 2008

Private Client Commenary - confused market

Dear Clients,

It seems that days requiring more than one commentary have been happening all too often lately. I promise to keep this one brief.

During the last two days, we

Private Client Commentary - crisis conversation

Dear Clients,

Yes, I know, I

Tuesday, October 7, 2008

Private Client Commentary - Cramer comments

Dear Clients,
I'll keep this one brief. The big news this morning is that the Fed is stepping into the commercial paper (short-term unsecured corporate debt) market for the very first time. It appears that the Fed will be buying this short-term paper in a move to get credit investors back into the short-term lending business. For the past week or two even the highly liquid, generally high quality, money market had begun to freeze up. Now get ready for the media to bill this as "more tax payer money at risk". And yes that's true, but it is at risk in the 'money market' and my suspicion is that the tax payer will make out just fine on this one, in the near term. For today, we won't get into the longer-term concerns over the government stepping so directly into the private sector.
Those of you who have watched CNBC or the Today Show the past couple of days may have caught 'Mad Money' host Jim Cramer, advising investors to get their money out of the market, at least money with a five year time horizon. Which, at first blush simply sounds like general financial planning advice - which in the aftermath of his comments (apparently a lot of folks were listening) is what he seems to be claiming this morning. But make no mistake, based on how he couched his recommendation initially, Mr. Cramer was indeed making a market timing call.
Having been in the investment business for a quarter century, and believing in my heart of hearts that the near-term ups and downs of the market are virtually impossible to time, I Googled Mr. Cramer's comments over the past several years and made an interesting discovery. According to the Coax Advisory Group, who provides a service where they grade the gurus, Cramer made the following comment to his readers on March 24, 2003:
"Stocks, all stocks, are now equally dangerous. The bear market, which began in technology, has now extended to every single sector. In short, the risk of owning stocks are as high as I've ever seen them, and the rewards, the least certain. The wounds, self inflicted or otherwise, are too deep to fix, even with a successfully prosecuted war. If you want safety, go buy a bond."*
In case you weren't aware, the last bear market literally bottomed in March of 2003, the Dow hitting a low of somewhere around 7,500. If you had followed Cramer's sentiment on that day, you'd have missed a very nice extended bull market.
So then I thought I'd take a look at what he was saying last October, when the last bull market hit its peak. Here is one of his comments from October 1, 2007.
"I'm now confident that, what would have been a given in 2008, a brutal recession, will now be avoided and prosperity assured.

Monday, October 6, 2008

Private Client Commentary - emotions and the market

Dear Clients,

Looks like another one of those days that calls for two commentaries. As I mentioned in this morning

Private Client Commentary - emotions and the market

Dear Clients,

Looks like another one of those days that calls for two commentaries. As I mentioned in this morning

Wednesday, October 1, 2008

Private Cliient Commentary - reflective vs. reflexive

Dear Clients,

Looks like another one of those days that calls for two commentaries. As I mentioned in this morning's message, I'm currently not in the office. But in light of today's slide in the stock market, I thought I'd take a break and offer some perspective on what's going on.

As of this instant, the Dow has dropped below 10,000 for the first time since 2004. Today's primary excuse seems to stem from Europe's sudden realization that their banking system is in every bit as much disarray as ours. Like it or not, the economies of the world are without question closely connected, and while it's not as apparent during times when most economies are growing (as some countries expand at faster paces, and a few perhaps not at all), it's very apparent, if not exaggerated, during times when one or more of the major economies of the world begin to contract. So we might think of Europe's issues today as the 'other shoe to drop'. The market looks to be reacting to the probability of a global economic slowdown. In essence, selling on the anticipation (kind of like selling the rumor) of what's to come.

As we've explored, ad nauseam, the market is ultimately the great discounter of a potential future event, or series of events. Its goal is to always be early to the party. But if the market in the short-term is anything

Private Client Commentary - buy the rumor

Dear Clients,

There are a couple of old sayings on Wall Street that are particularly worth mentioning today: One is

Private Client Commentary - Buffet article

While, as you may recall, I haven