You Never Know What to Believe!

The stock market was hit with rather unpleasant news. Perhaps Rita negatively affected the Oil infrastructure greater then we were led to believe by the media over the last few days. This has caused the stock market to pullback noticeably. Breadth still remains positive and dip buyers are still around however, the stare down that we spoke of earlier has ended and the Bulls flinched. We are not surprised by the large give-up in the stock market, as we have been expecting to see volatility to increase versus the past few weeks. The Bulls still have plenty of ammunition to work with as the Bears have not done irreversible damage yet. The internals are still okay and a comeback from the Bulls at this point would make the upside potential even greater than it would have been without this pullback.

The most annoying thing for market participants is the continuous revisions to information. It is difficult enough to make fundamental assessments and forecasts but traders then have to analyze how the markets may react to any given fundamental news. When endless revisions to large macro information bombard the market, entire strategies and thesis's need to be revisited. One would think that the technological revolution has made the dissemination of information real-time and accurate. However, it often feels as if the dissemination of misinformation and conjecture is the only thing that we've been blessed with. Fund managers with teams of analyst find it difficult to get accurate fundamental information that sticks. Imagine the frustration for individual investors.

We continue to be approximately 70% invested but make no mistake; our nails are growing shorter with every bite. The internals of the stock market seem to be holding and perhaps the next "revision" will calm our nerves. Despite this we will not hesitate to once again cut exposure and move to a more neutral stance should it prove true that Rita did indeed dramatically damage the nations Oil infrastructure.

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