No Pain, No Gain

Are we there yet?

After the volatility of the past two months, everyone wants to know if we’ve seen the worst that the market can dish out. The answer is, it all depends.

Now that the Federal Government has shown itself a willing partner in the banking system, it seems like the worst of the financial panic is behind us. Even if a further decline in the housing market burns thought the capital infusion that the banks have received, the Feds have shown that they’re not prepared to let the banks sink.

The pain that we’re seeing now—that of a “normal” recession–should set us up for better returns in the future. That’s because bear markets cause investors to adapt their strategies, companies to shore up their balance sheets, and consumers to adjust their buying patterns. And unless our elected reps do something really dumb, these adjustments will strengthen the economy in the long run.

A friend in the Marines tells me that “pain is weakness leaving the body.” In the case of the market today, the sharper the short-term pain, the greater the long term gain.

Douglas R. Tengdin, CFA
Chief Investment Officer
Hit reply if you have any questions—I read them all!

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