So Now What?

As most of you know, my second profession is as a portfolio manager, and I have one question for anyone interested: Will someone sub in for me for at least the next month?!?!

The market right now is truly like watching a 50 car pileup in a toxic waste pool. You want to do something, but you don't know what or how. The statistics piling up seem make believe: 6 straight down days with a total drop in the neighborhood of 18%, down 35% or so on the year. Both of these numbers haven't been seen since the Great Depression. A stock that has only dropped 20% in the last year is in the top quartile.

Why is this happening despite everything Congress, the fed, and other countries have done in the past couple weeks? The answer is surprisingly simple....no one trusts anyone. There are other reasons, but this is by far the most important. Banks are afraid to loan companies money because no one knows what may be hidden in the finanacials of that company. Just when you think a company is fine, you find out they're not. While most companies are more than secure, everyone is getting clumped in one big pile of s&%t. Bonds have also been selling off dramatically. There literally has not been any safe place to go. Until we get clarity on public companies, the market will be hanging by a thread.

There are a few scenarios that can happen from here. One, these moves start to work, and we rally hard (30% or more) over the next couple years after finding a bottom sometime in the next month (odds 25%). Two, these moves don't do a damn thing because the financial statements are too murky and consumers have put their tails between their legs. The market plummets another 30-50% for a total of 55-70% overall (odds 10%). Three, the moves help reduce the pain and we stay in a very volatile up and down scary market for a while (odds 65%). This scenario is most likely, but still would have to be updated as new info comes into play and still could result in either of the two aforementioned scenarios. No matter what scenario takes place I would expect a huge (10-15%) rally to start within the next week because we have sold off so much so fast. This would probably be a good spot to sell some positions to get some extra cash on the side.

To be honest, I'm not sure what to do, and I don't think anyone is. Every "expert" I listen to seems to have a different opinion, but the problem is no one has ever been in a situation like this. Therefore, answers are based purely on opinion and not historical data. I do know, I would love to have alot of cash right now that I could put to work once I get a better grip of the situation. At the same time, I'm not selling right now because the market is so oversold, I would be shocked if we don't have the major relief rally I mentioned before.