As the father of 4 boys, I am well versed in Attention Deficit-Hyperactivity Disorder (ADHD).  It seems that every teacher the past 20 years has received a medical degree and is able to diagnose ADHD.  They hadn't invented ADHD when I was in school.  Back then we called it being a boy.

After watching the market the past few years I may change that diagnosis and suggest that my sons do not have ADHD, they are just budding stock traders.

Europe is a problem, no wait they solved the problem, oh wait there are MORE countries besides Greece that are broke.......

The banks are in trouble, but look at their profits, oh wait that's because they lowered their reserve allowance, but the Fed will save them, oh crap- what did Geithner just say, but look somebody else just beat estimates, oh yeah it's all trading profits, B of A just settled their mortgage problems, oh yeah there are hundreds more lawyers lining up to sue them.....

The economy is growing, but QE2 is going away, well that means QE3 will be on its way if it gets much worse, but QE2 caused inflation and really didn't help the economy, but it doesn't matter it helped the stock market, wait what did Bernanke just say.......

The list could go on and on.  Today the ADHD traders are focusing on the micro picture (earnings) rather than the big picture once again.  We better hope that corporate earnings are strong otherwise we're in for an even bigger mess.  The Fed's policies have allowed the large corporations (and the US Government) to roll over their debt into longer maturities with lower interest rates.  In other words, they were just buying time. 

In the big picture, which the ADHD traders could focus on as early as tomorrow the entire world is going through a balance sheet recession (depression).  For 30 years the world used debt at constantly increasing levels to finance their growth.  There have been revolutions in the Middle East.  The fringe countries in Europe are already basically bankrupt even though the larger countries have tried to bail them out.  Now in the U.S. the Republicans in control of the House have gotten religion on debt even though they failed to produce a balanced budget from 2001-2006 when they had control of both the White House and Congress.  Rather than focusing on changing things for the better, our Congress is once again choosing to argue over the Bar Tab on the Titanic.

Wall Street and Washington barely saw a recession and have benefited nicely from all of the stimulus and money printing.  Main street is suffering.  The ADHD traders is the reason we focus on the intermediate term trends and try to ignore the short-term swings.  For now, large institutions are accumulating stocks and the S&P 500 remains in an uptrend (barely) as it held support once again in the 1295-1300 region.

Investing was easy in the 1990's as the Fed kept interest rates artificially low and the economy enjoyed the benefits of the technology boom.  It was easy once again from 2003-2006 as the Fed induced housing bubble masked the underlying structural problems.  It will be easy once again -- AFTER the economy finally restructures itself away from debt fueled growth.

Our goal is to make money while we can and manage the risk in such a way that our clients still have capital left when the inevitable restructuring occurs.

Another way to look at it -- we are attempting to not allow the inevitable ADHD to damage our clients' portfolios.

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