WHY HELL WEEK WAS A GREAT WEEK
Excuse my tardiness. I was in Europe this past week and was pressed for time to put any fingers to the keyboard. As I fly over a remote part of Northern Canada that looks like a meat locker in the shape of a country, I am compelled to make up for the lost time now.
From a market perspective, last week was splendid. It was the kind of week that tells investors whether they are simply biding time until the next downdraft wipes out their profits or if they have a properly constructed portfolio of stocks that is nuclear proof.
As a responsible steward of capital, a week like last and especially a day like Thursday must be viewed as your hell week or hell day. The day where the market puts your portfolio through the ultimate test of endurance. If it buckled, then you go back to being a cadet. If it held up, then you are one of the elite.
One cannot simply take a 2,3, or 4 percent down day that comes as a result of being inappropriately exposed to a market with increasing risk, shrug the shoulders and go back to watching The History Channel.
When a portfolio suffers at the hands of the market then it is an indication that the portfolio is not fit to handle current market conditions. Investors must learn to view performance in absolute terms in order to even begin the process of managing risk correctly. The view that "the s&p fell 3% and I only fell 2.5," needs a bar of soap and an open mouth to put it in.
Last week was your test. If your portfolio experienced volatility that matched the market, then you are incorrectly positioned. If your portfolio experienced volatility that was more than the market, then you are idiotically positioned.
Thursday was a day that I will be discussing in "Portfolio Highlights" in the monthly report as it was not only a green day, but suffered from little of the volatility that plagued the market. It validates the method of risk control used in my portfolio management strategy even further...for now. I qualify that statement with "for now" because I realize how quickly that very validation can turn into Chinese water torture.
Adapt or die.
