"Shouldn't we talk about the weather...?...shouldn't we talk about the government...?..." Michael Stipe - lead singer of Athens, Ga., band, R.E.M.
The recent, brutal, winter weather that we've had along the eastern seaboard (and certainly elsewhere), has been historic. Really. It kept people home from work; in places like Atlanta, it kept them from going to Chick Fil-A to buy a sandwich (that one's for you, Mark). It's been a real setback (economically speaking). And sometimes, a lot of times, the financial markets have a tough time digesting weather-related data points that seem to alter the trend. As we enter into April, if the severe weather subsides, I think we'll start to see a resumption of positive trending data points. Many of these trend data points have been (up until very recently), reasonably constructive. Housing, manufacturing, energy, consumption, payroll, credit expansion - the list is long actually.
You have to have a plan
"I don't think people should overreact, but I think that this is a long-pull." Dr. David Mulford - March 10'th 2014 - Former U.S. Ambassador and undersecretary to the Treasury and current Vice Chairman of Credit Suisse
You've got to have a plan. How are you going to maintain your discipline in your approach to asset allocation when people on CNBC and Bloomberg are saying, "Sell your stocks, the crash is coming", and "Sell your bonds, they're risky", and "Buy Gold". In the South, folks say..."Dew whaht?"
There are so many distractions right now pecking at folks. There are so many opinions on which direction Yellen is going to lead monetary policy, which direction the stock market is headed, which direction interest rates are headed, and what the "right" thing to do is. Does it seem that way to you?
Enjoy the March 2014 Credit Suisse Investment Monthly
How much money do you need to live with the dignity that you're looking for?
"We need to make sure that the blessing of longer life is achieved with dignity, now that we can afford longer life." Larry Fink - Chairman & CEO Blackrock February 12, 2014
There sure is a lot of bearish sentiment out there about stocks. And many people think we're headed back into the Cold War with Russia.
Against such a backdrop (considering where we seem to be mid-cycle in the business cycle), historically, this has been a great time to invest in stocks. For years now, I've been explaining asset allocation as a surgical exercise rather than a cookie-cutter approach. I know, there are many practicioners out there in my profession that prefer the simplicity of the business model that uses the cookie-cutter; and there are some really pretty graphs that suggest that's the way to go. I've been around the block a time or two at this point in my career and am almost considered the 'old guy' now, and though I love modeling, and graphs and charts as much as the next guy, I'll pass on the cookie-cutter approach.
Resilient United States of America
It will take a lot more than Ukraine defaulting on their debt to cause the U.S., at this point (mid-cycle), to enter into recession. It doesn't mean it can't happen, it's just not likely. To be dismissive of the Ukraine situation would be truly insensitive - it's 45 million people who are just trying, like you and me, to provide for their families and do the best they can....what if, all of a sudden, they saw Russian tanks treading down the road through their town? A tad frightful, I'd say. And a perspective that virtually none of us in the U.S., can appreciate - because we're so fortunate to have never had to deal with that sort of thing (thank you U.S. Armed Forces).
Opportunities in emerging markets
There are many opportunities globally in emerging markets despite places like Ukraine, Turkey, Argentina (to name a few). Singapore, Korea, New Zealand, and Mexico are several examples where investors with ten year time horizons or longer will be rewarded by investing with a measured amount of risk taking.
"As investors we need to be patient..." Larry Fink CEO Blackrock - February 12'th, 2014
What concerns me
- Margin debt charts;
- The number of people attending day-trading seminars versus working in more traditional job roles;
- Dysfunction in Washington (inability to compromise and work together);
- Historically high profit margins, though earnings look good overall;
- This quote:
"We are not pursuing growth policies like we did during the Kennedy recovery and the Reagan recovery....We were growing [the U.S.], at zero percent in 1982 and by 1984 we were growing at seven percent....We are now choosing not to grow." Dr. David Mulford - March 10'th 2014 - Former U.S. Ambassador and undersecretary to the Treasury and current Vice Chairman of Credit Suisse
What doesn't concern me
- The fact that the market is at an all time high;
- The fact that the stock market had a huge year last year;
- The fact that most people are nervously awaiting a crash (just around the corner);
Three big, positive things to consider (and they're biggies):
2) Amount of cash corporations have;
3) Banks are healthy;
In closing, I wish I could remember who said this at an investment conference I was at in New York fifteen years ago, but it is worth repeating:
"Let's remember, if we get the client's time horizon and risk tolerance right, we're able to construct a vehicle (portfolio), with a much smoother ride. And they'll be happy with it and their experience will be the envy of their friends." (I wish I'd said it first)
Thank you so much for the opportunity to serve you and your family. I have a great job and people like you make it possible. I look forward to the next time we get to talk/visit.
Have a great day!
P.S. - Enjoy this Wizard of Id cartoon about "how to fix the budget"