Getting messy.
As we near the end of the first quarter, performance results are a mixed confluence of factors. On the one hand my volume and volatility quotients indicate investors are either furiously trying to grab at the last push of the market’s current short-cycle upleg, or they are staying away altogether, unwilling to be seduced by the hype. In either case, justification is suspicious.
As I begin the database download in preparation for the next quarter (an anniversary date which has no relevance to market cycle duration) I am struck by the duality I describe above. Either I can embrace the long-term potential of demographic thematic investing, or I could simply say “it’s too dangerous in the short-term to be playing all my cards right now.” Thoughts like this make me suspect that Q2 2010 might be one of the worst ever.
Transitions, you see, are not points in time, nor does a bell ring telling us its time to get in/get out. Therefore when market indicators represent this much ambivalence, it’s usually a bad time for compulsive behavior. Nor can we expect to be perfect in our assessments. My forecasts are top-down not bottom up, and usually identify common themes without nuance. At these moments of confluence it is best to rely upon asset allocation, rather than stock-picking, and hope for something better than mediocre.
Still, investors like to be positive about something, and given the current climate on Main Street most are sure that they cannot afford the risk inherent in Wall Street.
Betting is not the same as forecasting.
Just bear with it.
I am further dissuaded by the effect low interest rates have had, and are having, on the financial markets. Cheap money fueled an egregious climate of real estate growth, mergers and acquisitions, and market bubbles. The benefactors of those trends are now long gone, if they were lucky, and profiting from the wreckage they left behind. All the others, whose lives were negatively impacted by that climate of greed, are not laughing at all.
Based upon analysis of the trend, it is probable that interest rates might redirect upwards during the next few months.
Today’s inertia makes it more difficult to find good ideas. I am torn between selfless altruism and profit-at-all-costs. My client’s mandate is to perform, irrespective of social conscience or morality. The real definition of capital gain, does not lie in moral textbooks but in the bottom line. Fewer companies are able to deliver either, or both.
With a few weeks before the calendar quarter starts anew, it appears too late to close the barn door …. the horses are already out. Our mission is to avert a negative stampede and to round the assets into an orderly posse.
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