Normalcy
We found last week's market order to
be less disconcerting because of a reversion to “normalcy”, devoid of the kind
of panic and crisis that had characterized much of the platform for the past
few months. As a result, it becomes
easier to see real pent-up demand and which sectors might be the beneficiaries. Spending leads to more spending; corporate
valuation increases (hopefully) leads to new hiring, innovation, and activism;
employment gains improve wages and consumer hope. While the numbers perk up let's not forget
that an improving economy is not the same thing as an improving situation
around your kitchen table at home...bills to pay, children to feed, goals to be
met. The Petri dish that is our global
economy discovers, discards, develops, and enhances global trends, both new and
old. Retail prices, demand, and
expectations all took a valiant step forward last week simply because the
markets didn't overreact to hidden suspicions.
However, to suggest that the global
economy is “heating up” would be an exaggeration. Interest rates are historically low, meaning
that the money spent on debt service is also quite low. Central bankers announced last week that they
intend to keep the status quo on borrowing costs. Consumers are dipping one toe in the water,
not jumping in full-bodied...at least not quite yet. If and when interest rates do move
higher...as suggested they have already...then it will be an indication of better business, not higher
inflation. The market is galvanizing, the crisis is
receding (not gone), and we are moving in the right direction.
Fanduel
architecture
Even as the pandemic recedes,
however, a curious behavior is hard to shake.
Many investors with whom I speak are still consumed by their short term
expectations of market trading in lieu of more “traditional” long term
strategies. This is a vestige of last
year's buy the dip and recovery philosophy which occurred in the context of
once-in-a-generation health related catastrophes.
“How
come my portfolio isn't up 35 percent when XYZ Corporation is exploding upwards
in price?”, they ask, forgetting of course that
these gains are occurring after precipitous price drops...some as much as 50
percent declines...and significant portfolio rupture for those who couldn't get
out of the way of the decline in time.
The incredible risk of a sports-betting mindset builds into a frenzy which
imbues importance to insignificant speculative chatter. Investing is not just whether the Yankees
defeat the Dodgers; Manchester beats Milan; or Springboks beat the Bulls. At its essence, investing is goal setting,
patience, and avoiding big losses. We
reap the kind of markets we sow. Buying low...then buying again even lower is
not always a winning investment strategy.
Understanding the bigger picture, the
enormity of problems that capital investment can solve, such as global hunger,
energy development, infrastructure, and the eradication of disease, increases the probability of successful portfolio
outcomes and makes debatable the notion of bottom-fishing sudden declines at
the expense of “going long” abundant opportunity. No doubt, there are myriad numbers of ways to
invest. The devil is in the details and
the promises of which strategy compels belief in the best outcome for you.
The market system isn't broken. Rather, it is the shortsighted ambition of
those who seek vast alchemic wealth, spun from next to nothing, that causes
them their greatest frustration.
No comments:
Post a Comment