A New Year

If you are looking for more negative viewpoints or insights, you won't find them here. We all know by now that 2008 was the worst year for the market in 79 years--only 3 other times has the market been down more than 40% in a year. Of course, the only thing most of us care about is: when will it stop? Things looked pretty good until last week--we had very inconspicuously gone up by 20% from the November lows--now the market still stands at 5% above those same lows. That's how the market rebounds, slowly, quietly without fanfare. David Swensen, the manager of the Yale endowment fund who has written several books on investing and has had an average annual return of something like 15%, was interviewed in the Wall St Journal last week. In the interview, Swensen made an excellent point: you either have an aggressive portfolio that does well most of the time over the long term or you have a portfolio that is defensive whose goal is to not lose money. If you have a long term portfolio you have to expect there will be times you will lose money. We can't change what happened in the past-but we can affect the future by our behavior today. History has shown when the market is down and there is "blood in the streets" it is the wrong time to get more conservative, it's the time to get more aggressive actually. I know this concept is difficult because of the emotions--and I know I'm getting a little long in the tooth with my optimism--but I know this market will just one day, quietly, slowly without anyone really noticing start to go up in leaps and bounds. Research has shown if you are uninvested (sitting cash until the market stabilizes) and miss the best 10 days in a market rebound, your overall return will be diminished by 10%-30%. Hopefully we won't have to live through too many more 2008's in our lifetimes.