27 Jul 2009 Century Management Newsletter ( Portfolio )
...mid September 2008 through the early part of March 2009 was the perfect storm.

We mentioned that investors do not need to wait for the economy to recover for the market to move up. History has shown that stocks recover long before the economy when coming out of a bear market, and we expect that this time will be no different. As was seen in the severe bear market bottoms of 1932, 1974, and 1982, investor capitulation signaled the beginning stages of significant recoveries. For example, in 1932, from its bottom, the Dow Jones Industrial Average DJIA moved up 74% in two months in 1974, from its bottom, the DJIA was up 45% in five months in 1982, from its bottom, the DJIA was up 30% in two months.

we mentioned that from a statistical probability, the market was cheap. When the S&P500 a proxy for the general market was at 741 on November 21, 2008, it was in the bottom 15% of all historical stock market valuations. This means 85% of the time the market had been higher than those valuations. We also said that when you get into the bottom quartile, and we were at the bottom 15% again in February 2009, more than likely the market will not stay there very long. That is not to say the market could not go lower, and we did believe that was a possibility.

As of this letter, most people that went to cash any time during 2009 are no longer better off for it. While they indeed missed a lot of the market drama and sweaty palms, the average portfolio in our CM Value I composite is in positive territory over this time frame, recovering back approximately four of the most extreme five months of this bear market.