A Return to Regularly Scheduled Program

I believe that my brain cells have rejuvenated themselves. Bathed in fever and pain, they did not work very well. Cogency and coherency were the first victims. Until the last couple of nights where I actually got a good night's sleep, I didn't realize how sleep deprived I had been. Mark and I agree that "this" was one of the worst maladies we've had. Thankfully, neither of our children became ill--largely due to the fact that NOT spending time with us is something that they practice regularly. I was most concerned about my daughter who had college exams this week.

Santa Claus came early to my home. A friend sent me The Black Swan which I look forward to reading. I'm woefully behind on my reading given that my eye-brain connection was cut with impunity. Rather that feel the "need" to go back through my periodicals, I just tossed them. It was a freeing moment.

Roger Nusbaum has overtly stated that he thinks a bear market may be upon us. You can read about it here. The post is titled "Send in the Bears." The funny thing about bear markets, is that they are very much like recessions: They can only be seen clearly through a rear view mirror. I note that more and more commentators are now mentioning recession coupled with steeper odds.

While there is still much discussion about recessions and bear markets, it's worth noting again that it has to be worrisome that there is so much financial dislocation in the market. Remember that the financial markets are the lubricant for the financial engine. Well the oil drain plug has been removed and the engine is quickly running low on oil. Vince Ferrell, Jr. of Scotsman Capital Management stated that this was the greatest credit event in his lifetime. I believe that. As I wrote this, I decided to visit Scotsman's website. They are value investors, and you can find some information there that may be worth your time. I find Vince Ferrell to be one the most gracious and informed guests on CNBC. If he ran for office, I'd vote for him!

I feel like this dislocation has been under reported from its inception. For such a great event such as this, the opportunity for some really good EARLY financial investigative journalism was lost. This lack of credible coverage has cemented my view regarding mainstream financial media--which is that of providing us with watered down pablum. Here's my speculative account. It had touched just past $23K before I got cutsey with it with some ill made decisions (YHOO/RIMM puts in addition to what you see below)! My initial goal for this account was $20K by year end. At this rate, I'll be lucky to hold onto $20K.

Retirement accounts are mostly cash. So what you see here is the bulk of what I have "invested". One of the greatest reasons for my being mostly cash is due to the timing of when I received my qualified money. It was in January of 2006, and I felt then that we were getting close to a top in the cycle. I didn't feel compelled to keep it invested--particularly if I were buying at the top of a cycle.

I know, for I've read them, the admonishments of very bright minds and successful investors about staying fully invested. In a true bear market, few things escape, and even the most well diversified portfolio will fall to the its perils. I think that one of the most important things that an individual investor can learn how to do is hedge for those eventualities. And hedging requires as much consideration and diligence as crafting a portfolio. The inverse ETF's making such hedging more accessible to individual investors.

I don't feel compelled to stay fully invested particularly when I feel like the risks are high on a relative basis. I say relative basis for there is always risk in the market. But I sincerely believe that the economic cycle has topped, and the financial markets' distress is (to me) the clearest tell of that. For the life of me, I do not understand why it is glossed over by many.

That dim view does not mean that there are not still opportunities. There will always be opportunities. That sounds so simple, but it is deceptively powerful statement. If one thinks that there will NOT be further opportunities, one may be tempted to be hasty and reckless in action rather than patient and deliberate. I've been hasty and reckless with the poor results to show for it. You have too I'm sure at some point. I'm cultivating patience and deliberateness, and the mantra of "there will always be opportunities" is very foundational to that cultivation. I do not find holding cash a problem. It means that I have firepower for when opportunities present themselves. I'd rather wait for them to be more plentiful with a higher risk/reward ratio.