What's changed?

The world changed last fall and we are still feeling the effects today. The massive worldwide government intervention in the markets and the economy which began last fall has expanded during the past six months and has clouded the future as well as the underlying fundamentals of the economy.

Things that we know as facts:

1) The US economy is currently in a serious recession
2) The US Government via fiscal policy and monetary policy is attempting to change the underlying economic trend from contraction back to expansion

Things that are uncertain:

1) Will they be successful?
2) Will they create a new bubble on accident during the intervention period?
3) Are they creating wealth or printing money? (well everyone knows where I stand on this, but maybe Paul Krugman disagrees)

Where do I stand in the middle of all of this? My emphasis has changed from prediction, anticipation, and analysis to practice. I have full confidence in my analytical abilities based on my understanding and early forecasting of the debacle that occurred last fall and continues to unfold. This was an important stage in my development as trader / investor / speculator, however the next phase is even more important. That is the ability to manage risk in an uncertain time.

I am going focus on some risk management techniques that I am toying with and seeking to incorporate in my approach. Don't worry there is no serous math involved and the pattern used will not be remotely related to value at risk or anything else that lost people so much money in the past. The techniques will be practical and as a new one is successfully incorporated or discarded into the methodology some of its nuances will be discussed.

Why I am doing this? I am trying to change from a focus on end objectives to a focus on process. My underlying process is faulty because I have been unable to manage my risk in an uncertain period as measured by my past losses in the market despite overall sound forecasting and an understanding of the underlying economy.

This will not be an attempt to copy any existing system or to adopt a set of hard and fast rules. To the extent that the adoption of sound risk management principles can't change to adapt to growth or loss in the portfolio or the approach it is worthless anyways. There will be some discussion of the economy, technical anlysis, fundamental analysis, leverage and also a focus on some key failures - personal and third person over the past twelve months that might have some important lessons.

Cheers,

Ben