The S&P 500 Index closed at it historic high at 1565 exactly 1 year ago.Today it closed down (-41.9%) to 909.If measured from its all time intraday high of 1576 on October 11, 2007, the index is down -42.3%.I feel extremely fortunate to report that we have sidestepped the disaster. Catamount’s Managed Portfolios are +1-2% over the same time period.

In my September 17 comments, I stated that the precipitous sell-off in the market deserved a reprieve and that any bounce should be used to liquidate stocks.A violent two day rally offered little time to react, but, hopefully you took action.What ensued was a vicious capitulation for the history books.The S&P 500 shed a shocking 28% in the 14 trading days since September 19^{th .}

As you may know, I have expressed grave concerns about the condition of the capital markets for a couple of years as evidenced by the cautious, if not gloomy tone of my blogs dating back to November of 2006.If you really want to get depressed, you can read them in chronological order below. Anyway, what I saw brewing was a burgeoning credit bubble, widespread real estate speculation, soaring home prices, unbridled consumer spending, rich stock valuations and rampant inflation – a perfect prescription for a meltdown. Unfortunately, my greatest fears are now playing in a theatre near you. Despite my preparedness, I’m astonished at the fury of this latest selloff.

So, where do we go from here?In my February 2, 2008 comments, I encouraged readers to at least entertain the notion that the stock indices could fall to the lowest levels of the bear market of 2000-2003 which were approximately 770 for the S&P 500 and 7200 for the Dow.This would equal a 50% drop from peak to trough.The indices are not far from those depths. Given the facts, it may not be perverse to assign some probability to an even greater decline. However, bear markets rarely reach bottom in such a linear pattern as they are characterized by a series of dramatic selloffs and powerful rallies.It usually takes 18-24 months to complete the cycle which means we might have another 6-12 months remaining.

Indicators suggest that stocks could stage a rally soon.The next upswing could be one to remember, but, if I had to guess, the market will succumb to gravity and eventually rollover to test the lows of the last bear market. Of course our investment strategy will evolve as the facts and circumstances change.

We are in treacherous and seldom traveled territory and making sound investment decisions under these conditions is more art than science.Having avoided the first 42% of this decline should offer some comfort and cushion for Catamount clients. Thank you for your support and patience.