01.09.09

01.09.09

          2008 was a year few investors had ever witnessed before. Not since 1931 has the Dow Jones Industrial Average suffered such a decline. Never in the history of the Nasdaq Composite Index has such a drop occurred. It was a historic year that brought to an end investment banking as we know it, saw commodity prices collapse with stunning rapidity, and witnessed America's once-proud automobile industry on the brink of bankruptcy. Here is a picture of the 2008 investing season featuring the massive 25% stock market crash in September. When Treasury Bonds are the best performing asset class, you know that things are out of whack.

          The market crash leaves the S&P 500 having given up all of its gains from the 2003-2007 bull run and having lost an amazing 28% over the past ten years - delivering a "lost" decade in stocks.

          With stocks back to the vicinity of their prior lows (from 2002) and the government pulling out all the stops to support the economy and financial system, investors wonder whether the carnage has stopped. The economy is in a seeming freefall, unemployment is quickly headed to double digit levels, and the government is being asked to provide emergency funding to innumerable industries. Can it get much worse? Yes, it can. And it likely will in 2009. But it is very possible that the stock market will rebound even while the economy continues deteriorating. Looking at the 2002-2003 trough during the prior bear market, you can see the tremendous swings in the market as it struggled to find a bottom. The market can easily move 15-20% back and forth during these volatile periods making for further investing challenges.

          Crude oil futures had massive swings.  Prices surged 8.9% to $46.34 per barrel as the the unrest in the Middle East continued.  The gains did not last long, however, as crude ended the week with a 12.6% loss at $40.49 per barrel after the weekly energy inventory report showed more evidence that the global economic slowdown is causing demand to nose dive.

          We are again staying on the sidelines with 100% CASH.

Till next time

The MTA Staff