Ok I am back and have a ton of things to catch up on. I had almost no internet access for the past 2 weeks or so and there is an amazingly large amount of news and market action for me to digest. So bear with me and I hope to get back up to speed by the end of this week.
Taking the time to remove yourself from the markets often allows for some great introspection on your general feelings towards news items and market events. We all carry some bias one way or another and it is generally reflected in our writings. As anyone who reads this blog knows, I am very bearish on the prospects of our economy and country and think that we have a long road ahead and desperately need massive changes towards more laissex-faire economic structure and our inability to do so will prolong this rough period further (think 10 years of growth lost in Japan due to their leveraging of their future). I see things moving in a similar way.
What has changed with my trip abroad is that I have come to realize that this current period is still in the stages of denial and the old adage "you can't fight the tape" is holding true. No matter how bad everything is getting. The market seems keen to key on Bernanke saying "The worst is over" and many other massaged data points showing that things are less worse than previously. This is a time period where I can say with conviction that I don't get it. This is starting to happen with more regular frequency due to the massive involvement of our government in the financial markets as well as the general business environment.
Just yesterday I saw a television commercial with the head of Chrysler attempting to coax people into his cars with a 90 day return policy. I could only shake my head in disgust. This company is hemorrhaging taxpayers money like crazy and what minuscule profit margins they already have are probably going to get eroded away by this absurd return policy. This is the perfect example of what government intervention does it gives poorly run companies the security to take on non-profitable actions to generate revenue at the expense of its competitors. AIG is doing it by offering rates that are according to actuaries not profitable and therefore artificially suppressing prices and driving their competitors slowly our of business. GM is doing the same thing. Government intervention ruins the free market economy.
The even sadder aspect of all of this is that we are no longer long term forward looking people. The average holding period of a stock on the NYSE is now under 9 months. In the 1980's and even the 90's it was measured in years (5+ in the 80s and 2+ in the 90's). We are a market of speculators and not investors. Don't try and invest in a speculators market. People think that a couple of less worse data points indicates that we have solved the massive glut of excess leverage and easy lending that has occurred for the past 15 years. People real solutions will not come until years from now. This will not last.
Whether or not the market will reflect this is a completely different story. This is no longer a market of Buy and hold. I cannot advise anyone to be fully invested without some hedge on the risk inherent in a system not run by the market but by our government. Until that changes I will never advocate holding stocks for the long run.
There is no easy solution to an investment strategy these days. I can only think to tell people that they are better off accepting that their money isn't going to grow at all over the next 3-5 years and sit and wait with the powder dry for the time to come when rationality returns to the market. That time period will be fancifully ugly and only then will I chose to truly Invest.
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