We are two months removed from
the end of this year, 2010, and already investors are bracing themselves for
2012 (more than one year from now), as if next year
doesn’t, and won’t, count. With
unemployment widening and portfolio values simply treading water, many have
their sights set on a “rebound year” (2012) that they think has more promise
than next (2011). In fact, informal
opinion polling suggests that many see 2011 as nothing more than a postscript
to a miserable three year cycle begun when the global credit crisis erupted.
Further, any optimism about
next year is muted, and spoken about softly as if not to exacerbate an already
chaotic situation.
Indeed, there are as many
reasons to be pessimistic about 2011 as there are to be encouraged, which
doesn’t embolden even the most bullish amongst us. We have yet to complete the crises which put
us on a bear cycle, so it is illogical, and against the odds, to consider that
a turnaround might be quick, linear, or extreme. One doesn’t unravel a half-decade or more of
fiscal problems by fiat alone.
The solution to systemic inertia lies first in
reversing the crisis of confidence by the public. Along with consumer demand and discretionary
spending there must be a reversal of debt expansion too.
There will be a 2011.
Today, the “confidence crisis”
spills over into the home, the workplace, and the shopping mall. We are worried about spending for goods and
services, and those which we do buy are going up drastically in price. A pyramid of hierarchical needs is rising to
the top, as corporations recoup their losses, thus costing everyone much needed
liquidity. It’s not fair, but true
nonetheless.
And yet, throughout these
turbulent times, certain pockets of financial opportunity remain. Basic Materials and Technology stocks are in
a bull cycle. For the most part,
confusion about economics and statistics has been supplanted by a love/hate
relationship with 24 hour trading platforms.
In a market of stocks, not fundamentals, some can win quite handsomely by
engaging in “trading” daily. On the
other hand, this strategy is no place for the novice or the traditional “buy
and hold” investor.
The proportion of assets
allocated to equities is diminishing
in most traditional long-term portfolios, owing to the increase in volatility
and risk in the markets.
Investors, thus, are stepping
back from the exercise altogether, preferring to try to reduce personal
indebtedness, increase savings, and build peace of mind. Those
of us in the industry, and those outside, feel a palpable distrust about the
systemic failings that caused this last panic.
Our efforts might better be focused upon remediating the public,
perfecting our disciplines, and abstaining from artificial derivatives and 24
hour investment cycles.
In this climate of reticence
it matters little whether 2011 is a boom or bust year because its context will
only be judged by what happens afterwards.
Maybe 2012 isn’t really that
far off, after all?
No comments:
Post a Comment