By proceeding, I acknowledge that I have read and understood the Disclaimer, Performance Reporting Disclosure and Copyright Statements .

PART I: INTRODUCTION

If the bear market has begun, expect gut-wrenching volatility from the market over the next few months. Two percent intraday corrections for the market will become commonplace.
- April Market Outlook -

When I suggested we would see “gut-wrenching volatility”, I didn’t even expect this. I expected 1-2% daily movements, not 2-3%. Market tops and bottoms are characterized by extreme volatility as the “C” words, contagion at the top and capitulation at the bottom, take hold of the market whipsawing it up and down. Market participants become very emotional changing their outlooks minute by minute.

Over the past quarter, most mutual fund investors were lucky to do better than break even while many hedge fund investors “took it on the chin”. Our portfolios did very well this quarter suggesting that if the market turmoil continues, I should be able to generate profits in your account. With that being said, I would not be surprised to see a short-term pullback in some of our positions as they have done very well and are probably overbought. But after recoiling, they could renew their advancement and I wouldn’t be surprised to see further strength, especially in our commodity positions.

Here is how my performance measured up to the averages for the first quarter of 2007:

PORTFOLIO	Q3 RETURN	YTD RETURN
Core Portfolio	8.0%	4.5%
Focus Portfolio	7.9%	(0.4%)
S&P 500 (VFINX)	1.6%	9.1%
NASDAQ 100 (QQQQ)	8.06%	19.4%
Benchmark	3.1%	7.7%

PART II: CURRENT MARKET CONDITIONS

What is truly intriguing is the internals of the market…The last three months have not been kind to equity investors as the typical stock declined over 3.9%. Normally a declining market favors value stocks which are trading at cheaper valuation levels. This has not been the case in this decline. In fact the best “value” stocks dipped almost 11.8%. Meanwhile, the best growth stocks completed the investment surprise by advancing 4.1%.
Barry James, James Investment Research – 9/30/07

The substantial increase in market volatility is a sign that the bull market is either over or close to it. Read the rest of this entry »

By proceeding, I acknowledge that I have read and understood the Disclaimer, Performance Reporting Disclosure and Copyright Statements .

The following news item regarding NovaStar Financial Inc., ticker symbol NFI, was released by the Associated Press today.

KANSAS CITY, Mo. (AP) — Mortgage lender NovaStar Financial Inc. said Monday it was terminating its status as a real estate investment trust, retroactive to the beginning of this year, after determining it could not pay investors a required dividend. The company’s shares plunged more than 21 percent after the announcement.

Back in February, right the peak of the REIT market, I wrote about the fragile nature of REIT yields. If you have REIT exposure in your portfolio, I’d recommend checking out the post.

By proceeding, I acknowledge that I have read and understood the Disclaimer, Performance Reporting Disclosure and Copyright Statements .

Part I: Introduction - The Credit/Liquidity/Sub-prime crunch takes no prisoners.
Nothing, with the exception of US treasuries, has escaped the recent market turbulence unfazed. Here’s how various assets and indexes have performed since 7/19/07:

Asset/Index	% Loss
GLD	(0.7%)
SLV	(8.9%)
S&P 500 (VFINX)	(4.9%)
NASDAQ 100 (QQQQ)	(2.9%)
Emerging Markets (EEM)	(5.0%)
Total Global Stock Index (EFA)	(5.8%)

When I suggested we would see gut-wrenching volatility, I didn’t even expect this. I expected 1-2% daily movements, not 2-3%. This market is selling off quicker than I had anticipated which has me worried for individuals who are holding on to traditional asset allocations. Read the rest of this entry »