AND TOMORROW WILL BE ANOTHER DAY 9-15-2008

The US stock markets had one of the worst days in recent memory today, and while the DOW didn’t breach an important support level of 10,850, it did slip below the 11,000 point mark. The S&P 500 however, fell below its technical benchmark of 1,200 to close at 1,192 as the DOW fell over 500 points to close at 10,917.

There’s simply no way to color this as anything but ugly and painful, and no one with any credibility should even try. The media will have a hey day, politicians on both sides of the isle will have more fodder than ever with which to battle various incumbents, and pundits of all shapes and sizes will come out of the woodwork to tell us what this means. But in the end, there’s no one to blame, and all it means is that the markets had a lousy day as they reacted to some unexpected news. Tomorrow will be another day.

This is how markets tend to act as they are at, or near, their bottoms. There is virtually no predictability at these levels. Believe it or not, that’s a good sign. We believe that the DOW reached a low point in July at about 10,850 and that while we may continue to see some unwelcomed volatility, we’re not likely to test that level, or at least we’re not likely to pass through it.

Many investors recently shifted from a very conservative stance to one more consistent with their long-term objectives. Not because they expect that the equities (stock) markets are on a fast rebound, but because they know that one should take a more assertive stance towards the bottom of a market so they can benefit from the rebounds that may come.

For those investors that use some of the living benefits, or various guaranteed income or principal riders, offered by certain variable annuity companies, this is a time to be grateful for the peace of mind they might offer. Some of these programs shift investor monies into fixed rate accounts as markets decline to help offset possible further declines and retain value, and it’s not unusual to see as much as 80% of an investor’s portfolio in some of these fixed accounts at this time. That may not look too bad right now – other times it may seem to be too conservative, and investors may fear that it will curb possible upside growth as rebounds occur.

Bank of America’s surprise announcement to acquire Merrill Lynch, at what some are saying is a 70% premium to Merrill’s market value is huge. It stunned the market and it may be days before clear heads prevail and begin to realize that Bank of America made a thundering statement regarding how oversold and undervalued the financial sector may be at this time.

AIG, another of the financial sectors biggest players, and one of the nation’s largest insurers, survived Hank Greenberg’s controversial leadership through the late 1990’s and early 2000’s, but is once again center stage as the markets look for answers to questions regarding liquidity, capitalization and leadership. Hurricane Ike may well have helped batter AIG with as much force as it clobbered the Texas coastline this weekend, but only time will tell if the sum of the parts may become greater than the whole as the markets shift their focus to AIG and the Federal Reserve tomorrow.

Market reactions to unexpected events are rarely positive. Likewise, Lehman Brother’s inability to attract a suitable buyer received an icy reception and now, that venerable Wall Street name looks as though it may go the of EF Hutton in the late 1980’s. When Hutton wasn’t able to attract a suitable buyer other Wall Street firms began to pick off various talent from the firm, until there was little left to purchase. This was at a tough time for the financial markets and well established firms were maneuvering to maintain enough liquidity to meet capital reserve requirements. Hutton failed and the financial markets were hit between the eyes with as large a bat as we’d ever seen.

Investors wanted little to do with equities. Many investors reacted and money fled into CD’s, bonds and alternative investments at unprecedented rates. The national media outlets and financial press proclaimed that Wall Street was in for one of the darkest periods in the market’s history, and that average investors ought not to be exposed to the equities markets for some time to come.

That was barely 20 years ago, and the DOW was trading at less than 3,000 – today, even with the recent economic weakness, the DOW closed at almost 11,000, and less than a year ago saw levels in excess of 14,000 points. Is this a difficult time for the markets and the economy? To be sure. And, tomorrow will be another day.