Break Out the Dramamine

Break out the Dramamine, because we're in a market see-saw. October absorbed the full force of the Panic of 2008. The Dow Jones Industrial Average over a 6 day period lost over 20% in market capitalization. However, having said that, the last week of October we experienced a powerful rally, taking the Dow Jones from 8175 to 9625 on Election Day (a 17% rally from the recent bottom). So as of October 31, 2008account valuations will look bad, but recall that just 3 weeks ago it was much worse in terms of market sentiment at the height of the Panic. Fortunately since that already infamous time, the credit "freeze" has thawed considerably, and it "appears" that the market has been creating a range of price support in the Dow 8200 range. This range could drift lower in the next few months (short term), and the market has a great deal of price support in the 7700 range, which we actually visited, albeit briefly, intra-day on October 10.

This will all eventually pass.

By focusing on the long term, and being patient, we will eventually get through this mess, and the markets will eventually recover. For most accounts, where appropriate, recently I raised some cash from assets that I estimate will take longer to recover than U.S.stocks. I will be focusing very selectively and patiently on making purchases in the low 8000 price level on the Dow, during times of pessimism, and raising cash in subsequent Bear market rallies. By doing this, I hope to bring some additive returns to your portfolios on the margins as we look forward over the next (at least) 2 quarters. The next 2 quarters of earnings will be bad, though the trick is realizing that the stock market will eventually look past the short term earnings announcements and begin to look for signs of recovery. This is what the stock market does; it acts as a time machine looking at the future. So eventually, when the gloom and doom looks pervasive, as it did just 3 weeks ago, something will improve.

-ACC