Market Commentary for the week of December 17, 2012

Power down.
It’s not surprising that the markets responded with a resounding “so what” to Fiscal Cliff negotiations in Congress, and a  Federal Reserve pronouncement that it intends to tie low interest rates to low unemployment for the foreseeable future, in order to maintain whatever stimulus effect low-cost borrowing might be having upon economic development.

Unfortunately, my data has seen nary a blip in significance as regards real change in secular demographics which persevere despite current events, exogenous influences, or the Fed Chairman’s machinations.

My statistics, instead, show that Technology, Healthcare, Agriculture, Energy, and Industrial (infrastructure) development are the stepping stones not only to domestic economic renaissance but for global integration, as well.

You might notice that, in terms of hierarchical priority, consumers and lending institutions while vital, play less a role in the next generation of global prosperity than in the past.  This is due in part to an aging infrastructure, an aging population, and efficiencies in production brought about by technology, itself.

Indeed, the American Dream, the Human Dream, of advancing economically beyond the previous generation is a fallow hope, replaced instead by moderate recapitalization in infrastructure and a hardnosed approach to unnecessary capital expenditures of any kind. 

The energy complex, for example, offers future capital gains to investors in shares that focus upon research, development, extraction, and delivery of product in a cost effective way.  Post fiscal crisis America will be a different place than the 1950’s.  And from an investor’s perspective these new “demographically-driven” industries offer a new opportunity to change horses in mid-stream without getting wet in the process.

One might also ascribe an economic “slower-pulse” to political and regulatory changes taking place worldwide.  For nations in debt, a new set of financial covenants must be drawn, while the very wealthy must also absorb their share of any burden to effect globalization and fair trade.

Markets responding.

These changes offer a remarkable opportunity for building portfolio wealth in the next few decades.  In the real world, earnings remain supreme in guiding our expectations for future equity share price performance.  As technological advancements gain traction to the corporate psyche, one might expect enduring and noteworthy changes in decision-making.  As important as profits are to the corporation, stability and mission statements are to the public.

Slower growth rates, while unspectacular, are good for the rebuilding process.  Tremendous amounts of free cash will create sustainable outcomes and hopefully net an extraordinary basket of opportunity.  Therefore, diversity in one’s portfolio will be more important than concentrated portfolios by aggregating as many chances to succeed as possible.

Not everyone is convinced that we are on the cusp of portfolio greatness.  To be sure, investor confidence in the economy, in the financial marketplace, is the last critical component to fall in line.

Sometimes, though, when everyone expects the worst possible outcome, the very best of possibilities might occur.

Being “three-over” after nine, doesn’t, shouldn’t, mean that the game is out of reach.