Day 2, 2009

In the next few days we will provide performance updates on the portfolios for 2008 and some ideas for 2009.  John Mauldin’s weekend letter made some good points, see links section on this website.  For us the main thing to keep in mind is that this recession was preceded by bubbles everywhere, tech in 2000, houses in 2005, stocks in 2000 and 2007, and commodities in 2008.  The fact that markets were overpriced is one thing, the fact that they were overpriced through borrowed money is an even bigger issue.  Now many assets are worth less than what is borrowed against them.  This has to mean that this problem is not going to go away fast for investors.

The big factor to watch this month is the stimulus plan that will make its way through congress.  If the old fat cat Democrats, the blue dog Democrats, and the Republicans team up to derail the Obama’s Administration plan we will see the markets tank.  If, as we anticipate, the green stimulus plan goes through, workers will see jobs come back and income stabilize.

So, for us, the markets over the next six months are going to do something like the move off the 1987 low, a slow upward tilt with many selloffs through the course of it all.  The offsetting factors of renewed vitality in the workplace coupled with bad debts everywhere will keep anything close to euphoria well under control. As such a trading philosophy will prevail, sell the peaks and buy the dips.

At the moment the S&P market is working with a wide 890 to 950 range.  Fridays job report will be an overhanging issue.

There has been no change in positions since December 15th.

8:28 AM CST