Portfolio Update amid Stock Market Mayhem - 8/8/2011

Dear Clients,

I don't typically like to do mid-month updates but given the extreme market conditions, I think its advisable to bring you up-to-speed.  First off, all of my portfolios have appreciated this month thus far.  I don't have specific figures but I can say that my Core Portfolio should be up a little over 2.5% this month as of the close on 8/8.  The equity positions I'm short fell well in excess of the S&P 500 which means a little bit of short medicine provided some significant gains.  With that said, I've been liquidating much of my short portfolio over the past few days.  The harder they fall, the harder they'll bounce so if the market rallies post-Fed meeting on Tuesday (tomorrow) then my shorts could move against me quickly.

The S&P 500 did confirm the bearish Head and Shoulders that I addressed in last month's update.  Furthermore, Muni-bonds are breaking down while the USD is seemingly holding up for at least a little while.  However, the USD is primarily appreciating versus the Euro and other weak currencies and not stronger ones like the Yen and Franc.  And of course, it is falling precipitously against the oldest form of money in the world, Gold.

I think the most critical development that may or may not take place is the performance of the USD index and the Muni-bond space.  If these break along side the stock market, any impact the Fed could have would be severely limited.

As always, if you have any questions or concerns about your portfolios, please feel free to contact me.

All the best,

Matt