Rough Day

Well, that was ugly. The market finally paid attention to all of the problems out there. In my opinion, this is only the beginning. I'm not saying that this Libyan situation will spiral into a world conflict. I'm not even suggesting that Libya will certainly devolve into all out civil war. I am, however, suggesting that civil unrest and rioting will become a daily occurence. Governments throughout the world have overextended themselves and made promises that they simply cannot keep. Buckle up; it's going to be a bumpy ride.

Something happened today that I would I like to address: I fielded a phone call from a worried investor who saw that the market was down substantially and was worried that their account was taking a beating. I went on to explain that when the market is down, even significantly so, there are things that are actually up. Such was the case with this person's account. We had been preparing for quite some time for pending issues such as Municipal defaults, inflation, and civil unrest. So, we concentrated our accounts in things that tend to do well in volatile environments (i.e. oil, gold, silver, copper, and utilities). We actually made money on a day like today. In no way is this possible to get right all of the time, but I just wanted to illustrate that the market is not a one way escalator. You can make money when everyone is losing it and get absolutely hammered when everyone else is swimming in dough.

Now, for the rest of the week, I am keeping an eye on oil prices and gold. If oil tops $100 a barrel, it could shoot substantially higher which is going to negatively effect the larger market. More expensive oil = higher input costs for tractors (corn, wheat, sugar, etc.), plastics, trucking, construction, and nearly everything else. If oil goes much higher, it could signal a much bigger pull back in the market. Gold seems poised for another run as inflation seems to be creeping into the picture. Please pay attention to what is going on out there. It can be a bit scary but it is unbelievably fascinating as well. History is being made nearly every day. We are also living out a real life economics experiment. Can governments spend their way into prosperity? Can we really "stimulate" our way back to prosperity? Fundamental conflicts and debates are happening all around us, and you have a front row seat for the show. Stay informed.

Oh yeah! When watching the market, pay closer attention to the S&P 500. The S&P is a composite of the top 500 companies. The DOW, which we tend to watch more carefully, is actually only a measurement of the 30 biggest industrial companies. Also, pay more attention to percentage moves rather than the points themselves. This will give you a much clearer idea of what is actually going on.

We'll talk again soon,

Zach