This past week provided a shock to the way we see and experience the world. Events and news is shaking investor confidence and re-aligning the construct of our carefully curated lives.

Until recent days, most could not have imagined the changes we would see in the way we interact, the limitations in the ways we work and congregate and most importantly the security that we feel in the way we live our lives. Everything seems uncertain. In many ways, the news that Tom and Rita Hanks tested for COVID 19 actually made it all real.

The 12 day sell off in capital markets around the world from an all-time high has been unequaled in any period in the last 120 years. it is precisely the reason we feel so strongly about consistently using stop losses and being prepared to step aside when conditions deteriorate. Our Disciplined Leadership Approach helped us to have significantly less volatility than global markets and was effective in protecting client portfolios.

It is never clear how difficult things can become until after the fact, so a step by step decision process shows its value when you need it most.

As we wrote in our last note, this has been a week to play defence and maintain flexibility. As stops were hit, cash was built and aside from parking capital in short term government bonds, we have been careful not to try to catch a falling knife.

There does however come a time to focus on balance....and we are there. At some point risk of continued decline becomes balanced against the risk of sharp rally. The good news is that in this type of circumstance, it is likely to be some time before there is risk of sustainable advance.

We can never know exactly what will happen next in any circumstance but human nature is constant. People behave the same way over and over. So, as we like to say, while history never repeats, it does have a tendency to rhyme a lot.

I want to offer some thoughts on what we think may happen going forward and what folks can expect from the Barometer Team...the game plan.

There is no other way to describe this past 12 days but as an event driven "waterfall decline" or crash.

Waterfall declines have some common characteristics. They happen when an event occurs to disrupt the consensus view, inserts uncertainty and forces a sharp re-pricing as investors re-allocate. Panic is a common characteristic and enormous volatility ensues until concerns become overly discounted in price and finally new information (good or bad) starts to provide some clarity.

As of Thursday we met many of the first requiriements...prices were sharply discounted,, volatility spiked, sentiment fell and exposures were slashed and offsetting policies were proposed...all measured as extreme vs. any other selloff including the financial crisis.

The closest comparable is the great crash of 1987. At that time the Dow was in the midst of a secular bull market. Returns leading up to it had been strong, sentiment had been ebulient and investor positioning was aggressive. The economy was strong.

When the market broke, it fell for 16 days including a couple of sharp bounces and culminated on October 19th down 32%.