With all the verbal diarrhea being spouted by the talking heads on CNBC and other channels, I thought it most appropriate to limit my comments on the current market debacle to a few bullet points.
- The history of government interventions is a profitable one. In the last six completed bailouts dating from the rescue of the Penn Central Railroad in 1970, the Treasury ultimately garnered a slight profit.
- The situation faced by Lehman Brothers and other firms were as much a function of circumstance as bad management. Certainly there were mistakes made, but even in a perfect sphere of decision-making the firms that are no longer with us would still not likely be around.
- The situation we face today is certainty more grim than the crisis in 2002 (Worldcom debacle), 1998 (LTCM/Russian default) or the recession of 1990. However, valuations-- especially in the credit markets--have never been more attractive. Those companies able to survive will reap enormous benefits from this market dislocation.
- As demonstrated by our politicians, individuals are programmed to act in their own best interest--and frequently do so even if it endangers the greater good.
- All things being equal, the advisors that manage the most diversified portfolios are often the ones that will live to fight another day.
The Monthly Index Report for October 2008
| Index |
Sept-08 |
QTD |
YTD | Description |
| S&P 500 Index* |
-9.2% | -9.0% | -20.7% | Large-cap stocks |
| DJIA* |
-6.0% |
-4.4% |
-18.2% | Large-cap stocks |
| Nasdaq Comp.* |
-12.1% |
-9.2% |
-21.5% | Large-cap tech stocks |
| Russell 1000 Growth |
-11.6% |
-12.3% |
-20.3% | Large-cap growth stocks |
| Russell 1000 Value | -7.4% | -6.1% |
-18.9% | Large-cap value stocks |
| Russell 2000 Growth |
-11.3% |
-7.0% |
-15.3% | Small-cap growth stocks |
| Russell 2000 Value |
-4.7% |
-5.0% |
-5.4% | Small-cap value stocks |
| EAFE |
-14.4% |
-20.5% |
-28.9% | Europe, Australasia & Far East Index |
| Lehman Aggregate | -1.3% |
-0.5% |
0.6% | U.S. Government Bonds |
| Lehman High Yield |
-0.8% | -8.9% |
-10.1% | High Yield Corporate Bonds |
| Calyon Financial Barclay Index** |
0.1% | -4.3% | 3.5% | Managed Futures |
| 3-mo. Treasury Bill*** | 0.4% | 1.1% |
2.2% | |
|
All returns are estimates as of September 30, 2008. *Return numbers do not include dividends. ** Returns are estimates as of September 29, 2008. |
Ben Warwick is CIO of Memphis-based Sovereign Wealth Management. He can be reached at ben@searchingforalpha.com.
