market

Quite the decline since October -- from 1550 to around 1330 or so with many many stocks down much further. I remember talking in the summer about the real risk is permanent loss of capital. Yes it would be nice to have gone to cash over the last few months and I know many smart folks that have done that -- one year I will do it too -- once I allow myself to follow my instincts rather than my emotional ties to greed. that can be one expensive deadly sin.

Have I lost any permanent capital in DFR? perhaps but I'm not giving up yet. They still seem to be a viable business to me and one that is very cheap. They are smart fellows and they have a good plan. I have far more faith in the value of their assets than in any of the banks or brokers because their track record is very impressive.

Have I lost permanent capital in any of the other holdings? definitely don't think so -- AB is a high beta stock that goes up AND down faster than the market. As long as they have positive cash flows over time and are able to maintain margins and the global equity markets increase longer term, that stock will outperform significantly. That has been my thesis since I first bought a money management stock in 1990 and its still the case today.

If its not permanent loss, then it can come back. What is permanent loss -- the bond insurers, many of the banks and brokers are either not coming back or they won't for so long it doesn't matter. If 5 years from now Citibank is still between 25 and 35 can you really say its come back? that is a very likely possibility.

I have losses in Asian funds but they are holding up better than some of my stocks -- still lots of money there and since they haven't declined as much there is still a chance to save some before they drop so that I could buy back in -- something I debated doing with the energy fund I have -- so close to raising some cash but just didn't do it.

CME -- that stock has definitely surprised me in terms of the violence of its decline. I think its about solvency -- they are the clearinghouse for their exchange so they take on counterparty risk and in a doomsday scenario that could be significant. There is also the thought that too many financial players will be wiped out and that will lower trading volumes for a long time -- bear markets equal lower volumes. Remember the oppositve of love isn't hate its apathy. Apathetic investors/traders don't trade a lot. To demonstrate just how expensive CME got (and I did mention that on this blog when it hit $700) the stock has dropped over 150 per share and yet the PE is STILL over 27x and that assumes upside to current estimates.

TSRA is beginning to reflec t a positive outcome on their litigation -- I think the move is early but that stock is up over the last few months, while the market is getting crushed. I figure many large investors think they have nothing to lose at this point -- in the last week the stock got to $36 yet post win earnings could be $3 -- not really paying much for that win yet so many probably figure the downside isn't too bad especially relative to other tech, which seems to be dropping like a rock and the upside is huge if they win. stock could easily be in the $50's post win.

scary thoughts -- look at a 10 year chart of the S&P 500 -- sure looks like a double top to me -- think we are headed back to retest the lows? That's around 770 on the index or quite a drop from here. Not many in 2002 thought we could get back to the old highs anytime soon -- most assumed it would take 10-15 years. Instead it took about 4-5 years. But the other analogy is to the 70's -- commodities, war, inflation, bad monetary policy (Greenspan), rising taxes, dollar dropping to dangerous levels, etc. Could we see the same results -- a move back to the lows over the next 2-3 years only to see the old highs again a few years after that? Back in 2000-2002 many said we were heading for 15+ years of flat markets -- so 7 years so far, add 2-3 for a downturn and 4-5 for the next upturn and you get pretty close to 15 years where the S&P 500 fluctuates between 800 and 1600. its possible but who knows -- I'm not betting that way and even if it does pan out there will be plenty of opportunities to make money.