Wednesday, March 14, 2007
For the past two days the Forest Service has been conducting prescribed burns one or two valleys away and they lost control as it broke the fire line that was constructed. We were on stand-by but fortunately we were not called out and I got to watch Niagara win the NCAA play in game on ESPN and Marc Faber on CNBC Asia.
There were several obvious risk factor that made burning yesterday a bad idea. The temperature was in the 70's, the humidity was low and there was a very slight wind. Everyone associated with wildland firefighting knows the basics of fire behavior and this was easy to see coming.
You can probably see where I am headed with this. There are a slew of things that normally pose threats to the stock market; things like higher interest rates, bad economic data, narrow credit spreads, unusually long time periods with no declines and a bunch more.
I have been writing about a potential correction (by the way I don't consider what has happened so far large enough to be a correction) and the reasons I have been citing are very routine relative to market history. The yen has been a source for problems in the past, some sort of problem with financial institutions has caused trouble before, so has an inverted yield curve or anything else you want to blame the current dip on. I have made a few references in the last few years to having seen this movie before.
I know some folks are feeling some anguish here so you can either take this to heart for the future (because this will happen over and over as a part of normal stock market volatility), benefit from this notion now or just think I am a buffoon and not care in the least.
I will say that my personal dissection of threats to the market over the last couple of years leaves me less prone to emotion than if I only focused on the greatest story never told. One perception I have about my job is that people who hire a money manager do not want that person to get emotional about the market. Assume for a moment that is true, I think you as your own money manager would want the same thing. Do I have that right?
And no that is not me in the picture, pretty cool though.