RCM Editorial

It's a Fun House...Get Used To It



The behavior of the markets during 2008 reminds me of walking into a fun house at the town fair. Do you remember the experience when you walked up to the mirror in the fun house? You were a child, maybe 4'10" and when you looked into the mirror all of a sudden you were Manute Bol with a waist like a ballerina on Phenhermine. But even as a child you knew that the picture you were looking at was a joke. Your concept of reality was not shaken by the view in the mirror.

The daily trading patterns of the market paint a picture that is no different from that of the fun house mirror. New announcements come out on a constant basis, government sponsored storied for example, that create a misleading view of reality all for the purpose of delaying or slowing the inevitable decline. This misdirection is by no means limited to the government. Companies that are experiencing an implosion in their business issue a stream of erroneous stories to try and delay the inevitable collapse. Example: Bear Stearns and Lehman Bros.. Both companies issued stories about their respective liquidity strength and problem ending deals. Of course, none of the stories were true and the stock prices raced to the bottom.

Our concept of reality in the investing world can not and will not be skewed by the fun house mirror of news stories and 60 minute chart volatility. We know that the equity bear market we are currently experiencing will take time to resolve and no amount of daily manipulation that stretches the truth can change that fact. Only a steady hand and a deep breath will get us through this period.