Its Beginning To Look A lot Like . . . 2008

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Last week was the worst Thanksgiving week the market has had since 1932.  What am I thankful for?  We didn't participate in it.  In fact, as Don points out in the briefing, the last 9 market days have brought an 8.5% drudging to the markets.  We participated in none of it.

I've written about the events going on in Europe weekly for the last few months.  It seems something big is happening in the news every week over there.  This last week was no different.  There is such a stigma regarding Europe in the investment community that Germany, one of the only responsible adults in the entire European community couldn't even borrow the amount of money they wanted this last week (read bond offering).  Belgium, one of the only other responsible adults just got their debt downgraded by S&P.

Europe is a hot potato that no one wants to touch.  This next week, the rest of the sinister family is going to see if THEY can borrow enough money to pay their bills.  The more reluctant investors are to lend them money, the higher the interest rate will be.  The higher the interest rates, the lower our stock markets will go.  Have I spoken about dominos before?  A very interesting week is lining up on the heels of a very interesting weak.

I can't help but use this opportunity to plug technical analysis.  As many of you know, wall street says the only way you can invest is to buy and hold.  Asset allocate and diversify.  Bend over, grab your butt and hope for the best.  If that were truly the case, our portfolios would have experienced much larger losses from their highs than the 2 to 5% we've experienced while the S&P 500 gave up 20%.  Our models are currently about 15% above the market since February.

Rodrigo Campos of Reuters said in an article this week that euro zone crisis is causing stocks to be sold regardless of the underlying company's strength.  This is one of our underlying tenets of technical analysis vs. asset allocation or individual stock selection.  When the market goes down, it takes everything with it.

As we have mentioned so many times, technical analysis isn't about always being right.  Its about being wrong just a little when you are wrong and letting your winnings run when you are right.  We know there isn't a perfect investment approach out there, but actively managing the one you have does wonders.

Normally you will see a bounce up after record breaking downs.  We will see how that plays out this next week with so many European countries trying to borrow money.  Don't expect market volatility to decrease yet.

Please visit the Briefing Room to get that warm feeling that goes with the Holidays and the knowledge your money is being looked after on a daily basis.