I am repeatedly asked why our firm believes in moving equity weights to cash if we get sells and no co-incident buys within our universe. Time and again people will point out that the vast majority of other managers or financial planners insist that holding cash is not a reasonable approach, and that holding equities “for the long-term” is all one need do. As I have explained before (and at some length in Juggling Dynamite) and as Barry Ritzholt wrote last week, where you stand on this issue is a function of where you sit:

"I have a different perspective. I manage money for a living. That creates very different obligations -- its to preserve capital and manage risk. Since inflation is always eroding our clients assets, we must find ways to offset that by generating returns in excess of inflation. Part of our calculus is when to go into risk-free treasuries.

And because of our long experience on Wall Street, we have become rather skeptical of what we read in the papers and hear on TV. We have not forgotten all of the television cheerleading in 2000, nor the analysts who lost investors trillions. We well remember the investment banking scams, the corporate accounting fraud, the lax regulatory oversight, the general theivery that took trillions out of the pockets of individual investors.

As Raymond Jame's insightful strategist Jeff Saut likes to say, where you stand is determined by where you sit. And where I sit requires a healthy dose of not letting the bullshit artists lose our client's money.

I suggest readers and investors do the same . . "   more »

My next BNN spot will be tomorrow morning at 9:20 a.m. EST in Toronto. We will be discussing economic news this week and the next market developments we are watching. Archive video clips are now only sometimes available on the BNN website after the fact, so the live interview may be the only viewing.   more »

Many thanks to Korelin Economics Report for hosting me on their popular radio show yesterday. Al and company are truly ...   more »

One of the most dangerous things about the financial industry and media commentators is how many people get to spout misleading and damaging “advice” at an unsuspecting audience. There are endless lines of people on TV and in print who say things which are irresponsible and for which they are not held accountable. Together they serve to baffle, confuse and mislead the audience with half-truths and misinformation. This can be very harmful to an audience who is largely gullible and unaware. I warn about the risk of talking heads in "Juggling Dynamite."

One of the poster boys for this phenomenon is Jim Cramer from CNBC's "Mad Money." In the late '90s, Jim came into our living rooms as the co-host of "Kudlow & Cramer." He and his partner Larry Kudlow were supreme bulls all through the tech wreck as people lost limbs. At that time I tried to read Cramer's autobiography "Confessions of a Street Addict" and could not get more than a third of the way through it. He was so full of hubris and arrogance that I was sickened and couldn't finish it.

After the bear market of 2000-2002 had ravaged people and their savings, I assumed Cramer would fall from popularity. Remarkably he did not. Cramer was reconstituted into his present CNBC show "Mad Money," which evidently has a wide following. A sad statement. I believe that at some point down the road after his fans and followers have once again lost large chunks of their life savings, Cramer will finally be dismissed as one of the icons of the ego and ignorance that was ripe in this period.

I am frequently reminded of the flabby devils described in Joseph Conrad’s "Heart of Darkness." If you know the book perhaps you will understand what I mean. Most of these reckless commentators that end up hurting people are too dumb to know better. The rest of them ought to know better but they chose to be willfully blind. In law being willfully blind means you have a duty to see but you chose not to. In law being willfully blind is no defense to damage caused, you are still held responsible.   more »

Hello to lots of nice people I met this weekend in Vancouver.

I promised that I would post on-going thoughts as this market downturn plays out over the coming weeks and months in order to give readers a sense of what we see next coming down the road.

After almost relentless down days in the first three weeks of 2008, more than half of the world's biggest stock markets have now fallen into a bear market, see Stock Tumble drives 43 Benchmarks into Bear Market (Bloomberg Jan 22, 2008). So much for “de-coupling”! Economists can argue all day about whether the world economy can de-couple from a US led recession in North America, but one thing we can tell for sure--world stock markets are not de-coupling. This stock market meltdown is truly global. All those financial advisors who tell everyone to just spread equity holdings around the world for diversity benefit? Well… you be the judge.   more »

I will be speaking at the Vancouver Resource Conference this weekend on Sunday and Monday. This conference is a huge event each year with some 10,000 attendees and a fantastic line up of speakers. Joe Martin and Cambridge House put together a great show.   more »

Wild ride for long investors the past few days. For those that have an interest, you can catch me for ...   more »

This morning Bloomberg reports that the U.K. Housing Market is Worst Since 1992 in December (Update3) :

"U.K. real-estate professionals said December was the worst month for the housing market since the aftermath of Britain's last recession in 1992.

The number of real-estate agents and surveyors saying prices fell exceeded those reporting gains by 49.1 percentage points, the Royal Institution of Chartered Surveyors said today in London. That compares with 40.6 points the previous month. In the capital, confidence in prices fell to the lowest since 2003.

An end to the U.K.'s decade-long housing boom may threaten economic growth as falling home values discourage consumers from spending."

   more »

I am always delighted when other financial experts speak truth plainly and without a sales based agenda. Barry Ritholtz of Ritholtz Research and Analytics, NY, NY does this often and today he speaks volumes on the present market climate.

"Rational or Irrational? Efficient or Inefficient?

Those are questions that academics wrestle with, and individual investors need to come to terms with.

A classic example is what market action gets credited or blamed on. Yesterday's sell off was blamed on weak retail sales and Citibank's big loss and write down. (I have a quote in today's NYT article, Citigroup Loss Raises Anxiety Over Economy)

However, these events were well known by those people who were looking in the right places (like readers of this blog). So how were these events such a surprise as to cause a major dislocation?

It comes back to crowds getting the big picture wrong, and individuals identifying those instances. I call this Variant Perception and contrarian investing. Ironically, seeing the variant is relatively easy -- the harder part is in the timing. That's what technicals and market internals are for.

Wait -- Are you claiming that you are smarter than the markets?

No. What I am very specifically saying is that there are opportunities to be uncovered if you can identify where the crowd is wrong. It happens all the time." Read more...   more »

It is still not too late to protect yourself from further losses.

I am going out on a limb here this morning. I am moved to do so out of a concern for all the nice people out there who are not clients of our management firm and are presently left swinging in the wind of the current bear market just getting started.

I know. Your advisors have assured you that long term equities go up and you should not worry about "short term volatility". But this is worse than a load of manure. Manure at least, helps things grow. Bear markets and long always investment advisors only help capital shrink, frequently by a lot. And this is after all, your hard-earned savings we are talking about. What kind of wilful blindness and self-serving lethargy moves advisors to leave clients fully invested through the contraction of each business cycle? It is actually scandalous. And to think that most advisors are paid handsomely for this dis- service.

For the past couple of years, I have been writing and speaking about the looming threats that were building in the credit markets. "Juggling Dynamite" released in April 2007 looks at these issues in detail. Most importantly I have been trying to explain to people why they ought to care about these threats and how the fall-out could harm them financially. Time after time, I have appeared in national media trying to warn people of the risks. Time after time, people have listened intently and then followed up with the hopeful comment, "but the buy and hold crowd should be okay right?"

So let me state this once again as clear as I can be: "NO THE BUY AND HOLD CROWD SHOULD NOT BE OKAY!"    more »

Michele Lawson did a great article in the HBT this month on the history and significance of blogging: Cyberspace: The ...   more »

Thanks to Al Korelin and company for this week posting a clip of my interview for The Korelin Economics Report...   more »

This big picture quote from JFK applies perfectly to the art of investing. So often the sales culture sells us the jump in and be brave bologna. Blindly buying without objective care as to timing is a strategy for financial disaster not reward. It is not just what to buy or how much of it one should hold, the pivotal questions are also when to buy and when to sell. The difference between financial success and failure has always been a question of timing and having a disciplined execution strategy. The lack of this purpose and direction is why, good intentions notwithstanding, most investment advisors and managers provide no valuable service for their fees. It’s why most investors fail to prosper over the course of a full business cycle.   more »

Back in the seat today after a whirlwind 10 days as part of the UK promotion of Juggling Dynamite just released there last month. Thank you to my Irish cousins for their warmth and hospitality as we made our way around the country with a lot of fun and a little Guinness all at the same time.

The old country is a world away from our young cities and towns in North America. It is nothing to have lunch in a pub that has been serving patrons for 500 or 600 years.
For me such visits always prompt a natural reflection on how the world has changed over the centuries and yet how, in many ways, humans are remarkably the same.

Of particular interest this visit was our first hand glimpse of the UK realty and credit markets and the country's economic prospects heading into slowdown 2008. The pound like our Canadian dollar has always been strongly core elated with the ebb and flow of global demand each business cycle, and like Canada, the UK economy has benefited heavily during this latest expansion 2002-2006. Now they too are starting to see that some of this cycle's gains will be fleeting.   more »