Mission:
Earth
As an asset allocator I
rarely see things as a binary choice, but rather as a grouping of
probabilities....overvalue/undervalue, lagging/leading, interest rates (bonds)/equities,
etc....which heightens the challenge but, ultimately, enhances the portfolio
security and reward.
This type of thinking
helps me to evaluate when or how to refocus our client's risk objectives, for
example, to liquidate expansive, and expensive
(!), technology shares before the dot.com crash or increase bond holdings in
the 1990's ahead of secular interest rate declines.
Thus, our conviction
levels are always “positive" even when the data might be indicating
negative potential ahead. In that
instance, we will factor in those unconstructive influences to arrive at a more
affirmative action plan.
This work is performed
daily, but not to the exclusion of our macro long-term objectives. It is simply impossible to "time"
the markets exactly.
Right now, it is
significant that in the face of extraordinary headwinds the sum of the parts
remains more or less bullish, with an eye on how well and how much more the
global economy has to run. Of course,
one needs to be careful not to conflate economic activity with the gyrations
and “parallel" direction of the market.
They are not directly correlated, nor should one assume that specific,
strategic sector allocation is the same thing as abundant confidence. Nevertheless, my view is that several sectors
are in an outstanding position to gain traction and to push towards new levels
of upside valuation, today and decades in the future. It certainly does not appear at this juncture
that the global bourses are ready in
synchronicity to recede into bearish
territory.
The markets deserve the
benefit of the doubt, reservations acknowledged and notwithstanding. While there is always evidence of selling
pressure “at the top" there is also sufficient cash on the sidelines and
levels of interest in making money to quell the worries and to fill in the
valuation gaps. As noted, we are always
more aware of our macro mission when it comes to asset allocation and portfolio
expectations. While it would not
surprise me if the markets went into a period of price contraction, I am not
yet willing to concede to a bear market bias.
Worried?
That having been said,
it is remarkable that the current bull phase is over a decade old. There is always a full schedule of things to
worry about, not the least of which is the volatility and unpredictability of
our politics and the mistakes that can be made out of pride and ego.
Capitalism is not
broken; the way we execute it sometimes is.
The globe has plenty of water, food, minerals, and wealth. The issue is how we choose to allocate these
precious resources. Every system can be
improved upon. We, the people, and our
leaders, must decide when, where, and how we choose to treat everyone else on
the planet. A hierarchical structure is
not anathema to social development, but surely works best when even those at
the bottom of the rung are well treated and respected.
No one wants their
wealth and assets legislatively “stripped from them" or shared, or given
away. But one cannot deny that lack of
access might lead to market disruptions and economic inequality that could
affect the trajectory of social and moral evolution. We are already witnessing social turbulence
around the world as a result of inequitable decision-making.
The season is ripe to
focus politically and economically upon eradicating hunger, building
infrastructure, eliminating disease and poverty, enabling entrepreneurship and
education, and sustaining stock market and wealth-building
activities. Win-win for everybody.
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