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With the S&P gaining over 3%, last week was good for stocks, but not the best for TCI. While our portfolios certainly posted a net gain, they did trail the market.

The reason should not surprise you. In your last update, we warned you that gold and oil could pull back a little in the short-term, and so they did. Gold lost nearly 8% to close at around $920, while oil fell some 6% -- closing nonetheless above $100 a barrel.

We admit the pullback was a little more dramatic than we hoped. But corrections in commodity bull markets can often be sharper than a serpent’s tooth. Indeed, the current correction might not have ended yet. Gold could potentially fall into the mid-$800 range. But we must reiterate that you should view any meaningful drop in gold as a tremendous buying opportunity. The factors that have pushed gold higher since the turn of the century did not evaporate last week. Nor have the factors driving oil prices, or the prices of commodities in general.Read more...

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I was out of town for much of last week, though I kept tabs on the horrendous events taking place in the market through telephone and financial TV. In particular, Thursday morning stands out. When I turned on the TV, I saw stocks start well, but then Mr. Bernanke began speaking to Congress. Almost on cue, the market turned south. By the time it closed, we had witnessed one of the bloodiest days in a long time. Friday saw stocks fall again, and then this morning’s sell off was even worse (though prices did bounce higher later in the day). From top to bottom, the S&P swung over 100 points in three days. Clearly, the market does not have much confidence in the current Fed chairman.

As we said in the previous update, this state of affairs cannot be taken lightly. The job of the Chairman is to provide confidence in times of trouble, just as a good physician will give his patients reason for optimism – even when he has no idea what the nature of their illness is. Very often, a simple visit to a good doctor can relieve one’s symptoms – even if no actual treatment is given other than calm reassurance.Read more...

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The biggest trends on the economic front today are rising industrial commodity prices and weak financial stocks. In the past, this combination has been very good for the stock market. The reasons are straightforward. Rising commodities indicate strong economic growth, while weak financials signal to the Fed that it’s time to pump liquidity into the system. Both these are good for corporate profits and stock prices.

We are very pleased to note that the Fed has been lowering interest rates rather aggressively lately, and using extraordinary measures to add liquidity to the financial system. Clearly, Mr. Bernanke is anxious not to become Chairman who oversaw the start of “Great Depression: the Sequel.”

For all the apparent derision we have heaped on Mr. Bernanke in the past, we believe he has the ability to keep the economy going. Yet, we also acknowledge that the path ahead of him has several challenges…

NEW PRESSURES ON THE EVER-RESILIENT CONSUMERRead more...