It seems that once critical concerns regarding liquidity and credit have been addressed to the extent that some semblance of confidence can return to the market, we are reminded that we are in a slow economy.  That is even without credit and liquidity concerns, we must still confront the economic slowdown that is part of a normal market cycle.  The numbers that started today’s sell-off were at least partly influenced by by normal, predictable economic cycles, but greatly exacerbated by abnormal economic reality.  Part of their variance reflects erosion of sentiment regarding spending power.  Still oversold, though.  The tools needed to help re-invigorate vital liquidity are in place and are being implemented.  Sentiment should be turning, however slowly, towards recognizing value.  Investors are ready to buy back in.  Sharp, intermittent upward spikes with reveal this…

I’m having more conversations with investors looking for entry points and seeking to accumulate value.  Some inventors are remaining frozen, while others that may have been panicking are now realizing that patience and perseverance should rule the day.  I’m inviting investors to take this opportunity to review their portfolios and re-assess their risk tolerances and time horizons while considering potential tax losses.  I also remind them to resist the natural tendency to wait for recovery in the same exact portfolio that declined in value.  Usually, such portfolios contain viable securities along with some hopeless causes.  There is no rule that says you must recover in the same securities that brought the portfolio down.  Review, re-balance and re-allocate.  Buy & Hold works over time, Buy & Forget does not…

Investors were already showing me a change in sentiment.  Several investors called in last week looking for entry points into depressed stocks.  They are looking for buying opportunities.  Many were looking at GE, BAC, GM and F.  Some believe that BAC will emerge as the premier provider of U.S. financial services.  GM and F rely on their financing arms to remain profitable.  Financing contributes more to their width of their margins and bottom lines that the unit by unit sales.  They desperately need the credit markets to resume somewhat normal liquidity.

It is refreshing to see how readily investors are embracing the possibility of a value oriented buy-side shift in sentiment.  The key to capitalizing is to remain cautious and begin accumulating viable shares.  Resist the temptation to jump in with both feet.  We are by no means out of the woods, but we are taking steps in the right direction…

Investors are starting to come to grips wit the gravity and speed of this downturn, and are starting to ask about strategies to lead us out.  There is still a lot of panic out there ans sentiment is the major reason behind today’s sell-off.  But cooler voices are starting to be heard.  Find value.  Begin to accumulate it.  Think long-term if you have the staying power…

I’m hearing things that could support this little ray of optimism.  I talked about how significant catalysts are now in place to help investors recover some confidence.  I used an analogy describing how my wife rescued a feral kitten last year.  She brought him home and provided him a warm safe environment with readily available food and water.  The kitten was a little skittish and although he noticed the food, it would be a few hours before he summoned the courage to approach it , sniff at it and finally take his first cautious bites.  He needed to trust his surroundings before he could let his guard down long enough to eat.  He didn’t know it, but his guard didn’t have to be up.  The influx of liquidity and coordinated rate cuts should help to begin the process of restoring confidence.  Soon, investors will be taking those cautious buy side bites. It seems to me that many investors are now looking for an excuse to begin buying again…

What i’m seeing out there:  Two investors with long term time horizons (10-15 years each) are questioning their respective tolerances for risk and volatility.  One feels that his investment management team should have been making wholesale portfolio changes into and out of commodities and cash, in effect abandoning their long-term perspective in favor of short-term strategies.  The other is concerned with the prospects of recovering her unrealized losses in a relatively moderate portfolio.  The Managing Partner of one our institutional clients is asking for additional conservative or fixed-return investment options in the 401k plan we manage for them.   My advice to their newer [younger] employees is to look at the current market levels as an opportunity to begin accumulating pockets of value slowly and strategically.  The more senior employees can shift to more conservative allocations with their current positions while continuing to contribute new money into aggressive allocations to leverage current market conditions into stronger long term upside potential.  The old Axiom still rings true: Buy low then sell high.  Sound logical enough, doesn’t it? Low is here.  Low is now…

One of history’s greatest witnesses is our free market system.  It objectively and consistently measures our collective sentiment and confidence regarding economic trends, politics, tax policy, foreign relations and innovation.  It has reflected American consciousness through times of devestating depression and war as well as periods of bucolic Rockwellian prosperity with profound accuracy.  It creates wealth and facilitates progress.  It nurtures creativity and incubates new industries.  It accelerates the assimilation of new immigrants and above all it facilitates the realization of the American Dream…

The free market system however, is not always kind.  Current events prove yet again, that although greed and hubris can form a lucrative partnership, their success is almost always short-lived and always followed by periods of uncertainty and sometimes severe correction.  To some, times like these severely compromise faith in corporate leadership, political/fiscal policy and fundamental truths of long term market dynamics.  To others, the current environment presents an opportunity to begin gathering pockets of value and establish portfolio positions that will capture the full extent of the inevitable market recovery as the next cycle of economic expansion begins…

I work with a major national brokerage firm and enjoy the privilege of daily contact with a full cross-section of diverse investors.  We manage substantial assets for high net-worth individuals, families and institutions.  We also provide information and research for investors that prefer to remain self-directed.  One the most rewarding aspects of my position is educating investors in principles of portfolio theory and dynamics.  In turn, I’ve learned listen to their stories and understand who they are.  Their legacies and their dreams. Their reactions to what motivates them.  Our shared experiences in life and in the market.  And ultimately, our appreciation of how those two realities are so profoundly intertwined. 

I started this blog to share the sentiments of an endlessly diverse group of investors through daily individual contact.  I hope that sharing these diverse and very real perspectives will help others gain insight and useful new understanding.  Sharing experiences can be cathartic and will help all of us to recover from this crisis of confidence…