    Last week it wasn’t much fun to be long in the market… watching percentage values of stocks and funds evaporate in a matter of days. But today was quite the turnaround with a gain of 286 points on the DOW and over 2.4% on the S&P! How do you measure your own risk tolerance with such market volatility? Does your blood pressure rise and fall with the market? For the average “retail investor” let’s hope not… if that’s the case then you probably need to modify your risk tolerance (or your portfolio’s asset allocation based on your risk tolerance), step back and look at the bigger picture financially speaking. Not something we can say to a trader perhaps, or someone whose entire portfolio or 401(k) was invested in the fortunes of the mortgage business with companies declaring bankruptcy. Or to the CEO of United Capital Markets who is selling a 143 foot yacht for $23.5 million and a home in Aspen for $16.5 million while trying to raise cash… he has made a ton of bets, and money, on collateralized mortgages derived from consumers that he says have “to be an idiot to take on those loans.” But he’ll probably continue making money on them.Â
    Many of the hedge fund managers are probably still doing very well, and as Ben Stein spells out, they thrive on market volatility with the market swings being related to the credit crunch and speculators. I’m not sure many people will see it as simply as he does however. Especially with adjustable rate mortgage resets forecast to increase rapidly from now through early 2008. In other words, with tighter credit and lending standards, foreclosures may increase quite a bit over the next year in many markets, compounding the challenges to the housing recovery. We may not see a housing bottom until late 2008 or even 2009. I personally agree with Ben Stein’s view that the volatility is an over-reaction. But that’s the way it goes in a shakeout, and I suspect it will continue for a while. I’ll stick with diversified funds and companies that pay good dividends over time… but count me out of REIT’s and mortgage investments. Being long in the market certainly has its ups and downs.  Needing your money in 1-3 years can make it tough to watch and requires careful asset allocation. But you don’t notice the “downs” so much when you look back 10-20 years.Â
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