A New Week Approaches

Last week we were expecting weak earnings reports from many companies along with dismal outlooks. That is exactly what we got and the markets ended the week on a positive note. Perhaps investors were expecting much worse but the picture certainly appears gloomy for the balance of the year. We continue to have core positions in stocks but remain highly cautious. As the markets move higher we add to our S&P put position because we are not convinced that the raging bull since March 9th is not just another bear rally. The financial system does not look like it will implode but significant risk is everywhere in the credit markets.

The restructuring of the auto industry is still a question mark as is the weakening consumer credit markets and the impending collapse of the commercial real estate industry. We hate to be a broken record but risk management is the most important aspect of investing and unless one remain focused on the major issues staring at us, it is easy to get lulled into complacency. Simply being a long term investor is much more difficult with the current volatile markets. Each day brings a new challenge and portfolio adjustments are needed to address the news and events as they unfold.

More earnings reports are on the way as are the details of the banks' stress test. Perhaps this week the negative news will bring a swoon to the markets.