This blog is written weekly by Dock David Treece, a registered investment advisor with Treece Investment Advisory Corp. It is meant to share insight of investment professionals, including Dock David and his father, Dock, and brother, Ben, with the public at large. The hope is that the knowledge shared will help individuals to better navigate the investment world.

Sunday, April 12, 2009

Somebody wins, somebody loses

Recent market activity has shown that it obviously ran too high too fast in proceeding weeks. This latest stall in the market’s rally could – and probably does — have several causes. While we hate to imply any cause and effect relationship, lately there has been some bad news in housing as new delinquencies have taken off.

However, in light of recent policy changes in Washington, we believe that there are more than enough programs in place to help along any delinquent mortgages. This is facilitated by a greater willingness on the part of banks (most of which are now controlled by the Obama Administration) to help borrowers.

In addition to these programs to help borrowers finding themselves in trouble, readers who are self-employed may have noticed from 2009 tax documents just released that rates have fallen for tax withholding. This is a program we have argued in favor of for months now, and one that we feel will put more money directly in the hands of American consumers and should do more to stimulate the economy than all the spending bills passed thus far.

It is worth noting that in the past week or so, the only things doing well were the same investments doing poorly during the rally — namely the dollar and treasuries. This would imply that there may have been some profit-taking by some investors as the market comes off the bottom. This would indicate that those investors either needed or wanted greater liquidity in their portfolios.

Then again, perhaps the recent downturn has more to do with the return to winter weather we’ve seen in the past few days. The previous optimism in the market could be attributed to spring fever, in which case it should — hopefully — return shortly.

Changing gears, there is an April 8 article in The Wall Street Journal by Timothy Aeppel that is rather interesting. In it, he looks at a furniture manufacturer based in North Carolina that has been seeing explosive growth lately as many of its competitors have disappeared. This article reiterates a point I made in one of my first blogs, that being the importance of recognizing opportunity in crisis.

Many investors, even after all this, fail to recognize that the markets are a zero-sum game. To quote Michael Douglas in the 1987 movie “Wall Street,” “It’s a zero sum game; somebody wins, somebody loses. Money itself isn’t lost or made, it’s simply transferred from one perception to another.”

In this market, as in any market, it is important to remember that for every loser, there is a winner. Prowess (or luck in some cases) is the only thing separating the two. Keep your nose to the grindstone, stay adaptive and work hard and you improve your odds of emerging this or any crisis in better shape than you went in.

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