Portfolio Performance for October 2008

Drawdown city. Stay in this game long enough and you'll encounter months like September/October. In fact, they happen so infrequently...it's almost like recalling a memorable storm from years back. I still remember the panic my mom went into whenever there was a hurricane in the Gulf. She'd stock up on food, plot the hurricane on those maps the National Hurricane Center would give out, and fret, fret, fret. 99% of those hurricanes would peter out, stall, or miss us entirely. But, she still remembered living through the devastation of Hurricane Carla...and felt the fear every summer 30+ years later.

The human mind is a funny, funny thing...behaving binary with pain. If you've never experienced the pain of a hurricane, snowstorm, loss of a loved one, or the falling knife of the market...you're set to 0. You operate without fear. But, once you experience the pain...you're set to 1. And everything you do from that point forward is now based off that pain. Based off that switch.

And that switch is a bugger to reset. Most people can't do it. The instant the pain hits they begin tweaking their life as if the odds of experiencing that pain again has increased to a 100% certainty. Funny part is...

• the odds of experiencing the pain hasn't increased
• all those tweaks won't do a thing to prevent future pain.

Smart people get stuck in this trap...a lot!

What's my point? Invest in the market knowing the worst will happen. The foundation of your investment strategy should be able to withstand the storm. If you're busy tweaking your strategy right now in an attempt to avoid the next storm, trying to pick and choose your investment spots, thinking all the work you're doing will sidestep the next storm because you figured out how to handle this storm...then your bit is set to 1. And this cowboy quote likely fits:

Timing has a lot to do with the outcome of a rain dance.

And with that the performance charts for the month of October 2008.






We're experiencing a fairly hefty drawdown as is the market. I've received several exit signals over the past 2 months. At one of the highest level of cash since investing in the market. And doing nothing but patiently waiting out the storm.

That, and preparing for a cold Missouri winter.

Later Trades,

MT