As I write this column, the stock market is down roughly 35% for the year. Of course, the market has been so volatile that this number may be materially wrong before I finish writing this sentence, and positively obsolete before you finish reading it.

How does this market compare to history?

It's pretty common knowledge that the market can be volatile in the short run, and to illustrate this I'll show clients a chart that in­cludes the worst annual market during a 200-year history. According to Jeremy Siegel, in his book "Stocks for the Long Run," the worst single year in the stock market was a real return of minus 38.6%.

Although 2008 is not yet finished, this could be the year that the record is in danger of falling.

I've always been a bit skeptical about annual reports from publicly held companies. It's way too easy to get creative with accounting state­ments, as did Enron and WorldCom. But I must admit, until lately, I saw these as occasional misstatements.

Today, however, we are dealing with a whole industry—financial services.

Take Lehman Brothers as an example.

During 2007, it was named the most admired securities firm by Fortune magazine. In its 2007 annual report released during 2008, Lehman showed a record profit of $4.2 billion and noted its "vigilance on risk."

During just the first half of 2008, Lehman Brothers increased its long-term capital to $154.5 billion from $145.6 billion six months earlier. Yet just a few months after the release of this report, Lehman turned its impressive position and vigilance on risk into a bank­ruptcy filing that rendered its common stock worthless.

And by worthless I mean just that—zero, worth not even a penny.

This is bad enough for a single company, but it seems that the entire financial indus­try was doing the same thing. Look at AIG, Wachovia, Washington Mutual, Merrill Lynch and Bear Stearns. And don't forget those that have so far survived—thanks to us taxpayers—like Citigroup and Bank of America that are now worth a small fraction of their value a year ago.

So while the Enrons and WorldComs were fairly common earlier this decade, this year it's the financial services companies with an­nual reports that just plain ignored the ton of subprime debt during a time of declining real estate prices.

Investors Are Dazed

I've always known we could be in for a black swan, but 200 years of history gave me a degree of confidence on the down side of the market. Got to admit though, I'm one of those investors walking around with a bit of shell shock.

Following the market has gone from being stressful to out-and-out painful and, when I come home, let's just say my wife and son say I'm rather joyless.

And apparently wordless, as a recent TV interview demonstrated.

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