On December 19th, 2008, Robert Brokam of the Motley Fool, asked John Bogle (born 1929), founder of The Vanguard Group, if we are heading for a depression (Bogle grew up during the Depression).

“Today, we hear a lot of people invoking the possibility of another Depression. So what is your take on today’s crisis? Are we looking at another Depression?”

Bogle answered,

“…This is my tenth bear market, defined as one that goes down at least 20%. And this is in a lot of ways the most difficult one that we have had because the gross excesses — the unacceptable excesses in our financial sector — are carrying over to the economy at large…I think the excesses of Wall Street and Wall Street’s greed have carried over and done substantial harm to Main Street and the people that make America go….”

In the Berkshire Hathaway 2008 Annual Report, Warren Buffet refers to the performance table (see page 4) tracking the 44-year performance of Berkshire’s book value and the S&P 500 index.

“…2008 was the worst year for each. The period was devastating as well for corporate and municipal bonds, real estate and commodities. By year-end, investors of all stripes were bloodied and confused, much as if they were small birds that had strayed into a badminton game.”

There was no place to hide, and asset allocation didn’t matter.

An “Investment News” survey concluded that “70% of 329 advisers said that the economic downturn and its effect on clients have negatively affected their physical and/or emotional health.”

Jed Horowitz, author of the article, writes,

“Mental-health professionals say that stress can trigger depression, which can lead some advisers to feel unjustified guilt over unpredictable client losses.”

“As many as 80 percent of Americans are stressed about their personal finances and the economy, according to the annual survey conducted by the American Psychological Association,”

according to CNNHealth.com.

Dr. Katherine Nordal, the association’s executive director for professional practice said,

“This year…the No. 1 concern is both money and the economy. In my 30 years of experience…this was not the thing that would be high in complaint lists…what we’re seeing today is that the economy and finances are viewed as significantly more stressful, by more than 8 out of 10 Americans”

(7,000 Americans replied to the survey from April to September 2008).

During his March 24th press conference, President Obama reminded Americans that

“We will recover from this recession, but it will take time, it will take patience, and it will take an understanding that when we all work together; when each of us looks beyond our own short-term interests to the wider set of obligations we have to each other — that’s when we succeed.”

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Recent news suggests, but may not be conclusive, that this recession has found its bottom and finds it attractive.

October 29th, 2008

Nothing about the stock market is too predictable…what you expect usually does not happen.

Some will disagree. For them, the direction of the market is clear. At least clear when claiming prescience. They’ll never admit when wrong; they will boldy exclaim and humiliate when right.

Stock trading intra-day has relevance, but what seems to matter most is what the market indexes say at 4PM (or after the final trades settle around 4:10 or later).

Here are three observations:
• Volatility prevails
• The better hedge funds seem to be standing on the sideline
• Nobody is really certain about what happens next; Those who are certain see “gloom and doom”
• Many wait for the next economic “shoe-to-drop”

Finally, whatever happened to dollar-cost-averaging?