20080728 Timer Commentary

Is this an average correction? Not yet. An average market correction since 1900 shed more than 30% of the market’s value while our current market would have to drop an additional 5-10% to reach that. The average correction lasted more than 400 days; the current correction about 200 days.

Maybe this is a better way to frame the investigation: do we have an average set of problems riding this correction? Are the contributing factors worse than, say, the dot-com correction in 2000?

Which is worse:

1. losing investment money in tech companies that had no profit…or
2. the combination of the subprime crisis and higher energy costs (includes commodity prices, falling dollar, housing slump, banks failing, Fannie/Freddie, inflation, deflation, stagflation, etc.)

We think downside testing around 1200 on the S&P the most likely near-term path and look for some modest upside starting Friday or later.

Current model positions: two models short, two models cash.