“WILD DAY CAPS WORST WEEK EVER FOR STOCKS” –
front page of the Wall Street
Journal October 11 – 12, 2008.
“The Dow Jones Industrial Average capped the worst week in its 112-year
history….after a
22% drop over eight trading days….The damage has been devastating both
to households and to
major investment institutions. Investors’ paper losses on U.S. stocks
now total $8.4 trillion since the
market peak one year ago….The blue-chip average is down 40% from last
October’s record, its
biggest decline since 1974.”
“MARKET CRASH SHAKES WORLD” – front page of the
Financial Times, October
11 –
12, 2008.
“How the world’s markets fell this week…Tokyo down 24.3%, Frankfurt down
21.6%,
London down 21.1% and New York down 18%. US stocks suffer worst weekly
loss in history. The
Dow Jones Industrial Average fell as low as 7,882.51 and rose as high as
8,901.28 before closing
down 1.5 per cent at 8,451.19. For the week, its 18.2 per cent fall was
the worst ever. Policymakers
from the Group of Seven nations said they would take ‘urgent and
exceptional action’ to stem the
financial crisis, though stopped short of adopting a specific and
uniform set of policies that would
individually bind all its member countries.”
The Financial Times continued on page 16 with “Panic selling follows
attempts to calm
investors. European shares’ worst week ever….Fears of worldwide deep
recession….Decline in
stocks mirrors beginning of Depression.”
General Motors stock sold below 5, its lowest level since before the
Crash of 1929, and the
company later was forced to say that “bankruptcy protection is not an
option.” Ford fell to a 26-
year low.
This is the type of selling we have been witnessing: Aubrey K.
McClendon, the
billionaire chief executive of Chesapeake Energy Corp., has sold
"substantially all" of his stock in
the company over the past three days in order to meet margin loan calls,
the company said Friday
(October 10th). Between Wednesday and Friday, he sold 31.5 million of
those shares -- 94% of his
holdings -- for $569 million.
We cannot begin to say how much we regret writing the above and that we
anticipate some
type of stabilization. For years now we have implied the possibility of
these and other problems in
our and the rest of the world’s stock and bond markets although, of
course, attempting to forecast
the degree and timing of such problems is impossible.
Please have a look at the Commentaries section of our Web site: www.HamiltonAdvisors.com. There are numerous commentaries there going
back a number of
years. We believe you will find them to be relevant, and we will welcome
your questions.
Paying close attention to the Objective of Capital Protection by
concentrating on the asset
mix of portfolios has been essential, although each portfolio has a
different nature requiring a
special asset allocation. Investing in high quality bonds and the stocks
of good companies as well as
keeping a significant percentage of assets in the highest quality (U. S.
Government securities)
money market funds has made an enormous difference in risk management.
We are in a Bear market within a Bear market.
However, with so many
stocks so
irrationally oversold, it is reasonable to expect rallies --- sometimes
some very sharp rallies. The
U.S. and other G-7 governments are finally working together to assist
the financial markets, and we
will see good news forthcoming as the financial markets are pumped full
of liquidity by the world’s
leading central banks. Today’s markets can present significant
investment opportunities.
The solution obviously is to reignite CONFIDENCE. That is not easy and
quick. It is,
however, possible with great effort and patience. The markets will come
back as a rapidly growing
world requires more goods and services every day.
In closing we will repeat the last paragraph in our September 10, 2008
letter. The same is
true now, one month later and will continue to be as long as present
circumstances exist.
“At this time when the stock markets are impacted by enormous and
irrational selling
caused by forced liquidation of hedge fund positions and of other very
highly leveraged investors,
the thing to do is to have patience, hold on to shares of excellent
companies and wait for the dust to
settle. We will not be buying aggressively even with stocks at these
levels until we can see some
stabilization and clarification of the extraordinary issues with which
we and the rest of the world
are dealing.”
John W. Hamilton
******************************************************************
John W. Hamilton
jwh@hamiltonadvisors.com
Deborah J. Hamilton
djh@hamiltonadvisors.com
J. Brock Hamilton
jbh@hamiltonadvisors.com
