Despite a historically
robust economic cycle, the numbers behind the recovery can be interestingly
deceiving. Forget that Wall Street is
grinding out new high after new high; that earnings from the world's largest
multinational corporations are expanding; that "consensus" consumer
confidence numbers are widening. Think
instead about emerging markets' failure to gain political or economic traction;
how nearly 20 percent of the globe's population lives in poverty or upon arid
underdeveloped land; how centuries of religious and regional conflicts remain
unresolved; how despite your portfolio's good fortune over the past half-decade
you still feel uneasy or financially constrained....
Is this a memo of
"glass half empty" rhetoric?
Of course not. We ,too, have felt
the enormous benefits of an economic renaissance.
No, this is, instead, a
continuation of a conversation about investment
process, methodology, and decision-making that needs to be revisited daily in pursuit of
portfolio (and societal) alpha so that imbalances and exogenous noise have only
a minimal effect upon our investments (and lives) rather than a catastrophic
one . Asset management is a fluid
endeavor, not a static one. Nor is it a
"passive" exercise...buy it today and put it away. The best way to compete in today's
marketplace is to customize a solution for each client's individual risk/reward
tolerances, and constantly rebalance the nuances around the edges. Recall my oft-repeated investment mantra: asset allocation plays a greater role in the
probability of a portfolio's capital gains potential than does any individual
security within that portfolio.
Indeed, the question
now is whether there are recurring events that have become structural "new
realities" and/or impediments to the success of this economic resurgence
going forward? In the wake of monetary
incentives, fiscal reform, and a changing consumer dynamic, the outline of what
we thought to be true about economics is morphing into new science right before
us.
For example, whereas
low interest rates might have been thought to be the propulsion behind economic
revitalization, it appears that their omnipresence has become a necessary precursor of evidence of their own failure to magnify
any value to that recovery.
In other words, how
might central bankers be able to unwind the stimulus factor without giving rise
to a sense of panic about what's next, fear of its effect, or mistrust of any
political motives?
Additionally, such fundamentally
imprecise economic forces such as automation,
globalization, and demographic shifts are concepts that private enterprise and
government policymakers will have to address when creating fiscal and executive
policies for the next generation of financial capital. Redesigning the jobs market in the face of a
new technological millennium, for example, is something we might not even have
envisioned a decade ago.
How
far is up?
I also observe that in
spite of portfolio aggrandizement there are fewer of us who really feel allied
to their place in the world, or associated with the prospects for eradicating
poverty, hunger, war, terrorism, or disease, as well as providing for clean
air, drinking water, and renewable sources of energy. In fact, might not a "socially
responsible" portfolio directed towards finding solutions to these issues be
a real success in these times of uncertainty?
Before Wall Street entrepreneurs
begin back-slapping each other in congratulations for a job-well-done, perhaps
we should consider that the recovery is globally non-synchronized and that those
doing well are doing exceedingly well,
while others are struggling to keep up or are falling behind altogether.
Are profits and
portfolio gains sustainable? Yes, under
the right circumstances. But how
prepared are you (and your portfolio) for an eventuality of things going in the
wrong direction, or failing to meet your currently lofty expectations?
That's where this
missive intends to direct your focus......
No comments:
Post a Comment