The S&P 500 rallied 8 days in a row through March 18th to a 18 month high of 1159.9, still below the level last seen following the bankruptcy of Lehman Brothers on September 15th, 2008. The daily volatility of the stock market has declined to the levels not seen since the peaceful summer of 2006. By our calculations, the overall stock market is slightly overvalued. Whether current levels are sustainable depends on corporate earnings and Federal Reserve policy over the next year, and whether the US can avoid the 'double-dip recession." We remain cautiously optimistic and fully invested. Given a breather for first time in two years, we'd like to devote this commentary to:
Many people have the illusion that our job is easy - anyone can do it! And we reply, 'Sure! And anyone can fly a plane, perform root canal, build a house etc." So much of modern media presents investing as "easy;" Jim Cramer jumping up and down on "Mad Money," the suavely cool investors in the TD Waterhouse commercials (featuring Sam Waterston of "Law & Order," for gravitas) and the E-Trade talking baby. We think investing is about 1000 times harder than playing poker. Nonetheless, plenty of amateurs who would never dream of going to Las Vegas to play against professional players think they can beat the market (and do their job and take care of their families all at the same time.) Good luck!
In fact, outside of medicine, we don't know any endeavor more complicated that investing. Even if you're a particle physicist, the laws of physics have remained the same for the last several billion years. Becoming a grandmaster chess champion is hard, but at least the rules of chess stay the same from game to game. Investing has the ability to make smart people look stupid all the time. We use these frameworks to try to be less stupid than most.