Saturday, February 6, 2010

Clawing Back

The Ithaca Experiment portfolio gained ground last week in a very volatile 5 days of trading. Nothing to get excited about, but still moving in the right direction. The S&P 500 broke a resistance level of 1065 and spiraled downward towards the next resistance level of 1035, but managed to rally back into positive territory in late trading Friday afternoon. That 1035 level on the S&P would put us at a 10% correction, which many have been predicting because these 10% corrections are healthy for the market, but still I believe we are in for a nasty downturn. Besides the Ithaca Experiment portfolio, the rest of my money is in cold, hard cash in the form of money market accounts and CDs. We are in a crisis of confidence right now with the sovereign debt problems over in Europe and the high unemployment rate here stateside, if not worldwide. I do not believe these problems are just going to blow over.

This week I read David Faber's And Then The Roof Caved In about the root causes of the housing crisis. Faber is a high profile reporter with CNBC and I wanted to read what he has to say about the real estate implosion because I have always enjoyed his broadcast journalism. The book is very well written and is informative, but not as good as advertised. When I read a finance or economics book, I am looking for ways to increase my assets or for solutions to economic problems and this one came up short. Part of the problem with the book is that it is just straight forward unadulterated reporting with very little editorializing. I don't regret reading it because it solidified my belief that we are not in your run of the mill recession. But it just wasn't enough to recommend it.

One thing I've always liked about Faber's interviews on CNBC (and one of the reasons I bought the book), is that he tends to call the interviewees on the carpet and not let them gloss over missed predictions in previous encounters. This is a glaring omission with many of the anchors at CNBC, that they don't make guests fess up to previous mistakes. It is too bad with all of the technology that we have that CNBC, or even Bloomberg for that matter, don't have databases on their Web sites that would allow visitors to drill down for previous projections. As is, we are just taking the guests' market pronunciations at face value, whether they have been right or wrong in the past. Don't get me wrong, I like the financial cable channels, but sometimes feel they are just broadcasting for the moment and not the long-term. It is reporters like Faber that make for better viewing. I just wish he had written a better book.