Welcome

After years of trading and investing and consulting on the markets both formally and informally, I've decided to chronicle my views on the current macro and micro economic conditions in this forum.  I plan to keep the technical jargon light and focus on 'big picture' issues with a specific tilt towards the world of Alternative Investments.  I plan to not only rely on my MBA coursework in Finance from The Wharton School and CAIA (Chartered Alternative Investments Analyst) studies, but also yield to my experience trading and managing assets both independently and at some of the largest firms on the Street (or at least what used to be some of the largest).

This first post will be a little more anecdotal, as the markets of late have been experiencing the traditional bear market rallies that have begun to become routine for the market veteran and the retail investor alike, yet still somehow impacts the short , intermediate, and long-term investment decisions equally. With the Dow off some +7% and both the NASDAQ and S&P off closer to 9% today, there is no doubt in my mind that many investors saw the same thing I did this Black Friday.  A lack of buyers.  

It's a tradition of my family members to rise early on the Black Friday AM and head out to gather the best deals.  If  fact, I'm usually done with all of my shopping by 12 noon and am leisurely shopping the secondary and tertiary deals after a quick lunch refueling.  Not the case this year.  After a wonderful Thanksgiving where we discussed the normal current affairs and personal matters, we also discussed what would be 'different' during Christmas this year.  This year instead of many gifts, one of the ideas was one large gift per couple.  The idea of making gifts was even batted around, as well as forgoing gifts for the adults altogether.  So, when later that night I perused the Black Friday ads and saw little that was compelling I was sure that this would be a Grinch stolen Christmas.  

One of my daily tasks is the electronically window shop sites like woot.com, dealcatcher.com, dealnews.com, and dodtracker.com.  Therefore, I knew many of the deals weren't great and that the savvy shopper would play the waiting game.  Finding it hard to break with tradition, I did rise at 7AM to head over to see if Staples had any of the Lightscribe recordable CD deals left. I took my time and hoped for the best.  I pulled into the parking lot to question if the store was even open.  Not a car in the lot, save for the employee cars customarily parked on the side. I walked the store as one of two lone shoppers.  Walked right up to the register and purchase 2 of the items (even though they were one per customer).  The looks on the faces of the workers and managers was more than that of worry.  I knew this was going to be a Black Friday and Christmas season like no other.

What's the really happening here?  With the markets see-sawing and announcements of bankruptcies and layoffs nearly every day, cash is king.  How will this affect the wonderful world of alternative investments is yet to be determined.  A couple of possible scenarios come to mind. That private equity j-curve will likely turn into something more like the Big Dipper.  These firms are in the unfortunate position of having credit tightened and investors either unable or unwilling to make their capital calls.  Any exits for the existing portfolio of holdings are all but closed. Investments will likely be held past 5 or 7 years because of the previous high valuations and purchase prices.  We've all come to realize that the consumer rules this economy and with the consumers now. . .not consuming. . .even what were relatively healthy businesses are starting to deteriorate and be revalued.  The problem is even worse on the hedge fund side where everything moves faster. Add to their list of problems redemptions, margin calls, and valuation implosion.  A vicious cycle hard to counter once begun.

So what's the silver lining?  Valuations have in fact come down to levels not seen since the late 90's in some cases and companies are hopefully beginning to look at their businesses more critically.  This will help the system in the long run.  The fact that we're beginning to acknowledge the fact that we've been in a recession for at least a year now will also help, as will ushering in a new cabinet of leaders committed repositioning the country's priorities appropriately.  As far as the markets, I continue to sit in cash (what little is left) for real time opportunities and make no predictions on market bottoms.  I previously thought we'd be comfortable in the low 7000's, but we'll just have to wait and see. The biggest positive is that I look forward to spending the Holidays with loved ones who this year will undoubtedly look to sharing time as the most valued present of all.