[Leeb06]

I think it all comes down to your investment / trading horizon. If you have a short-term focus and you are feeling uncertain then going to cash is not a bad idea. I personally am not a market timer and have no idea when we have hit a market bottom or top.

If you have a longer term view and feel that market volatility will be more common going forward then these market retracements are actually very beneficial to your portfolio. They will provide you with continuing opportunities to add quality companies at more attractive prices.

As an ongoing exercise I think it is important to do monthly housekeeping on your portfolio, and make sure that your best ideas are represented by the companies in your portfolio. We all can get a bit complacenet about the makeup of our portfolio especially when the entire market is rallying. The question you need ask yourself is if you found extra cash lying around to invest, would you reinvest in the current names in your portfolio at these or lower levels. If there are names that you would not reinvest in, then you need to take a serious look as to why they are in your portfolio.

As for whether or not we are in a recession, I would be careful not to paint the entire economy with the same economic brush. One of the reasons why we look at 10 years of company data is to get an idea of how the companies did during upturns and down turns in the market.