History dictates, and I concur through both my personal and professional opinion, that the market will both rise and fall from the current level over time. There will be clear opportunities identifiable only after the occurrence have passed naturally where we can look back and say with certainty if this was a great time to buy or to sell. Further, when you evaluate the results of the decision, it will clearly be based on the day you decide to measure the result - the ending point if you will.

For instance, March of 2003 was a truly amazing time to buy equities, though very few did because the landscape was fraught with uncertainty and confusion. Exxon opened at $36 a share and the boats were on the way to Iraq. We would soon hear the words, "shock and awe." Things appeared to be cheap but they also looked cheap in October 2002 and we watched the market destroy our confidence as it went up to merely fall again. We as investors were despondent to a large degree. The S&P 500 went up 24 percent in three short months. Was this a good time to buy?

If your measuring stick was applied one year later, three years later, or even five years later, the clear and obvious answer is absolutely! On the other hand, if you look at the market today where it resides firmly lower than it did in 2003, was it a great time to buy? The obvious answer is no.

This is not intended to be written as a confusing parable but a simple point and fact that things, including our interpretations of results, change as time changes. Sometimes that change is for the better and other times it is for the worse. We observed people who fired their money managers for missing the rise in 2003 and simultaneously fire managers for missing the downfall of 2008, and yet hold on to the belief that there should be little movement (transactions and allocation changes) within a portfolio. Rather ironic, but true nonetheless.

Clearly, the only way to prosper from 2003 through October 2007 was to be in the market and be willing to alter your allocations. Clearly, the only way to survive the swift changes in 2008 was not only being willing to make adjustments to the changing climate but also changes to the percentages held in various asset classes including cash and commodities.

Academics will argue the ability for anyone to get 2003 correct, the time period between the rocket up, the eventual crash of 2008 and the actual crash was remote, if possible at all. Indeed, the icons of my industry proved this out as their reputations and results went from the penthouse to the poor‐house in one short year. The academic argument then is for absolute, uncertain, rigid diversification without any willingness to adopt or adapt to new economic changes and conditions. Is this the right argument?

One endowment style portfolio we follow that mandates such an unwavering set of diversification principles, the Seven‐Twelve Portfolio by Professor Craig Israelsen, had results making its worst year going back to 1970 as being a loss of 5.5 percent. This plan of diversification helped through the recessions in the early 70s, the crash of ‘87 and the tech wreck of 2000. Impressive to say the least, and also had notable upside years as well. We have worked diligently to create a similar model in our practice to prepare for the eventual market contraction based on demographic changes.

Then 2008 hit. The seemingly flawless portfolio mustered up a loss of 28 percent. Obviously managers are in shock, the investors concerned, and academics almost speechless. My question to them is not one of what happened but rather what will happen. 2008 was horrific if held independently in time. If the only measure you, me and they care about is what happens as of December 31, 2008, then this is clearly a failure and most of my industry is treating it as such. Money managers across the globe are holding meetings in private and public to figure out what went wrong. Large mutual funds are scuttling options and firing managers. They are also making changes to prevent it from happening again in the future. One question I have, is to prevent what? A market meltdown, getting caught in a market meltdown, or are they simply changing because it appears what we have today is broken?

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