2009 1st Quarter Letter {Part I}
Investors had the sky fall in 2008! Even Warren Buffett lost gobs of money last year. A smart guy once told me that every crisis is either one of Wall Street or Main Street. This recession started as a financial crisis but has morphed into a Main Street event. 2008 goes on record as the 3rd worst investment year ever! Only 1931 & 1907 were worse. Both year’s declines or crashes} were also the results of financial crises. Each preceded a deep recession and each later saw significant rebounds in stock prices.
2008 By The Numbers:
Here is a snapshot of 2008. Only Government Bonds was spared.
The Russell 3000 {98% of all equities} lost about 40% or 6.7 trillion dollars.
The S&P 500 had its worst performance since 1937 losing 38.5%
The Dow Jones Industrial Average lost 33.8% its 3rd worst year ever and its worst year since 1931.
The five worst performing tech stocks lost more than 90% of their value.
Investors Intelligence reported that the average stock lost 54% of its value in 2008.
Enter 2009
There has been no reprieve as stocks suffered their worst January ever. Most major averages lost in excess of 8% for the month. Not a great beginning, but note that stocks have held the trading range established last fall. The S&P 500 is currently about 12% above its mid-November lows. It trades within 10 points of lows established in early September. Strategist Jeff Saut holds that stocks made a capitulation low on September 10th and a price low on November 20th. Economic activity has declined sharply. Down over 50% from their highs, stocks likely reflect this. Equities thus look cheap at these levels.
Stocks are currently in a defined trading range with well established support & resistance levels. The attached chart illustrates these specific points. I have discussed on the web why I think we will remain in this range for some time and why I believe this is healthy for stocks. Probability suggests we are in the later stages of this decline and have entered a period of consolidation marked by investor disinterest and apathy to stocks. I believe this period could last until at least midsummer or early fall.
The Russell 3000 {98% of all equities} lost about 40% or 6.7 trillion dollars.
The S&P 500 had its worst performance since 1937 losing 38.5%
The Dow Jones Industrial Average lost 33.8% its 3rd worst year ever and its worst year since 1931.
The five worst performing tech stocks lost more than 90% of their value.
Investors Intelligence reported that the average stock lost 54% of its value in 2008.
Enter 2009
There has been no reprieve as stocks suffered their worst January ever. Most major averages lost in excess of 8% for the month. Not a great beginning, but note that stocks have held the trading range established last fall. The S&P 500 is currently about 12% above its mid-November lows. It trades within 10 points of lows established in early September. Strategist Jeff Saut holds that stocks made a capitulation low on September 10th and a price low on November 20th. Economic activity has declined sharply. Down over 50% from their highs, stocks likely reflect this. Equities thus look cheap at these levels.
Stocks are currently in a defined trading range with well established support & resistance levels. The attached chart illustrates these specific points. I have discussed on the web why I think we will remain in this range for some time and why I believe this is healthy for stocks. Probability suggests we are in the later stages of this decline and have entered a period of consolidation marked by investor disinterest and apathy to stocks. I believe this period could last until at least midsummer or early fall.
posted by CR English at 8:38 AM
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