An
elusive pipedream
Some weeks are
noteworthy more for what doesn't happen than what does. Because the end of last quarter was
particularly unsettling for equity prices...and our psyches..., last week's meager
up and down trajectory should be viewed as a return to normalcy and a more
positive development for the financial markets.
No doubt, however, the ongoing drumbeat of tariff negotiations and Mid East
war weigh heavily upon the backdrop for further momentum.
At first glance, the
fact that nothing new happened last week other than the usual spate of earnings
reports, Congressional investigations, and Brexit negotiations offers us a
chance to have another look at portfolio allocation for the current
quarter. It is noteworthy that few are
running for the exits just yet. The fact
that we had a week without serious rupture is important if you are trying to
determine whether to cash in ahead of any anticipated catastrophes or to stay
the course.
To be fair, there are
so many (negative) exogenous influences we could cite to do exactly the former
(cash in). Science, and valuation, tells
us that there will be a contraction in financial markets...we just don't know
when and to what magnitude. All the
while, leadership sectors continue to lead (non-cyclical) while the laggards
lag (industrial), and the coincidental sectors provide cover for those
in-between.
From "30 thousand
feet up" the markets are simply reflecting the overall economic trends of
our day, including low inflation, diminishing acceleration patterns in
corporate earnings, low interest rates, and a disjointed and confused universe
of private investors trying to make sense of it all.
The question one must
answer from the variables I described above is how to sort through the multiplicity of dissimilar vectors moving in numerous
directions to arrive at an allocation that does no harm while still offering a
high probability of capital advancement.
Easy, right?
I still believe there
is sustainability to the global economic recovery. Our recommended list of equities and bonds
this quarter is a menu of "conservative aggression". Even though September took a lot of steam out
of portfolio momentum, we are now, nevertheless, in an opportunity to add some
elements to the portfolio at a less advanced price than earlier this summer.
Averting
crisis
I always seem to be
urging caution, or so my readers tell me.
Jumping in with both feet...when the market goes up or down....is the
siren call for the uninitiated. However,
I have no doubts about the coming wave of prosperity and capital gains in
generational, longer-term demographics in healthcare, alternative (renewable)
energy, technology, infrastructure, agriculture, aerospace, and education. These themes would complement any portfolio,
at any time.
Case in point, I see
too many desperate investors chasing depreciating securities...fishing at the
bottom....looking for validation that "if
it's cheaper it must be better to own". But nothing succeeds like success,
particularly companies with a history of increasing earnings and share price
over the long haul. Look, the era of
"dot.com hype" is long gone.... over 20 years ago (!!)... and not the
kind of aggression that is needed for successful portfolio modeling now.
Instead, we should be
looking to cultivate arable farmland to feed the hungry, transmitting water assets
to arid territories, and developing 5G technology for this decade's next
technological revolution. There are
enough public and private companies engaging in these endeavors right now to
keep you busy for quite some time. And
more to come.
The factors which
inhibit your portfolio progress are your
own restlessness and an obsession with taking chances unnecessarily. Looking around at what your neighbor has, or
is doing, is a recipe for failure. Nor
are there passable solutions to be found from "slick" television
commercials hosted by bearded spokespersons and sexy models, "zero
commission or fees" offers, or beach house photographs and fancy parties. No, nothing beats good old fashioned due
diligence, process, methodology, common sense....and a bit of luck and good
timing.
This is not a time to
succumb to hyperbole. Be secure in
yourself.
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