There will be up-days and (mostly) down days in the Markets, going forward. But the trend will be downward, or "even-stephen" at best. What we are in the midst of is an era-long funk. An ERA-LONG FUNK. It will be so until some brave people actually move to bring some ORDER to the world's economies. The EU is behaving like my dysfunctional denomination: it's so damn democratic, nothing can get done. At least not anything quicker than within a GEOLOGIC time-frame. Recall the infant-beginnings of the EU, soon after WW II? And how long ago was that? It will take just as long to emerge from what we are right now experiencing. The American banks still own the Congress. Even Dimon serves on the Board of the NYC Fed? I just read that, minutes ago. What kind of screwed-up world IS this? The fox is boldly and publicly put in charge of the hen-house, and after eating the hens, the only voice I hear calling for him to be removed is Elizabeth Warren's??? (I'm in Massachusetts.) Canada's banks are heavily regulated, limiting their potential for outsized profits. But will they not make decent, average profits going forward? Those "hoser-banks" are not contaminated, carrying toxic materials around with them, like Morgan/Citi and the rest. When will Glass-Steagall be reinstated??? (Or something like it, but geared for the 21st century?)
Asia is joined at the hip by now to the rest of us. There is no global diversification any longer. Just different names of different companies, and fewer and fewer of them. They all own each other. Even the King of Beers belongs to Belgium, now....The divorce between Wall St. and Main St. is complete. It will take a sea-change event to reverse that, again, so that the Average Joe does well when the Big Money Big Whigs do well.
From a Macro point of view, EVERYTHING is pointed downward---albeit gradually, achingly, slowly, inevitably: like watching a train-wreck happen in slow-motion. Every single day will not be a pile of mud, but the overall picture will be. This will continue until a 3rd World War happens or some other terrible cataclysm. When it does happen, there will be no hiding from it, anywhere. Or else, leaders need to be found who will stop either playing economic "chicken" or engaging in stuff that is no more than meaningless window-dressing.... Already, "Quantitative Easing" has accomplished the dilution of our currency. The government wants its cake and to eat it, too. Whatever it must pay back will be done so in the future with much cheaper dollars. In the meantime, the dollars people earn at work can't purchase as much as they used to. It's a "heads, I win, tails, you lose" proposition. It bites.
Comments
As for Elizabeth Warren, I agree with her, she means well, but I have about zero confidence in her ability to change things. It's sort of like a librarian against the world (no offense to librarians.)
Banks are everywhere within the government, lobbying, in positions (how many former Goldmanites, JPMers, etc?) and elsewhere. They were all bailed out and nothing's changed - if anything, their influence in government is only stronger - and you're going to have senators asking for hearings and all other manner of BS, but nothing is going to be done to JPM. And if JPM ever pulled a LTCM, they're just going to get bailed out.
We are definitely on the same page, Scott. Sad, but true.
One of LTCM's former head traders is now the head of the CIO for JPM.
http://www.zerohedge.com/news/jpm-retires-ina-drew-appoints-chairman-treasury-borrowing-advisory-committee-cio-head
Bank of Nova Scotia: 14.20%
Royal Bank of Canada: 13.96%
Canadian Imperial Bank of Commerce: 11.15%
Toronto-Dominion Bank: 14.05%
Bank of Montreal: 12.13%
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A recent headline in USA Today caught our attention - "Invest in Stocks? Forget About It." The article included the following claim: "Wall Street's long-running story about how stocks are the best way to build wealth seems tired, dated and less believable to many individual investors."
The piece reminded those of us in our office old enough to remember of another provocative headline-the famous BusinessWeek cover story from August, 1979, which confidently trumpeted "The Death of Equities." Needless to say, our contrarian instincts are always piqued when we see popular trends so at odds with what we are seeing in our day to day work.
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Our nearly forty years of experience has taught us that, over time, companies tend to have more influence on their own success or failure than do the broader economic trends around them.
That's not to say that economic events don't matter-they certainly do-but they tend to matter more in the context of how they make investors behave in the short run than whether or not a company is a good investment over the long run.
The current environment is particularly interesting in that global headlines are the only thing that seem to matter to investors. This is not surprising considering the array of remarkable, seismic events that have occurred across the globe over the past several years.
But it is clear that a disproportionate amount of investor attention is now claimed by information far removed from the specifics of a company's particular business. The macro is now overwhelming the micro, and in that divide we see opportunity.
That, as the market is down nearly another 150. I'm pretty surprised, as I thought markets would be pumped up in advance of "The Social Offering".
I'm not saying that the current dislike for stocks is a time right now to be ripe for overweighting stocks but that the more and more dislike we see around equities, the closer and closer we get into buying opportunities --- although we could be early a year or two or three. It happened to Steve Romick in the late 90's when he lost over 80% of assets because investors fled.
However, I did quite well cranking up my investments during the 2000-2003 big downturn while everyone around me was running away.
One potential strategy because we're still in the middle of a very difficult global situation (e.g. Spain down over 24% YTD, etc, etc.) is to be a bit more defensive with my existing portfolio but continue with my regular stock/bond allocation on new money that's added periodically per month or per paycheck in say my 401k. That's kind of the 2-prong approach I'm working with.
Or their reality is different and they can't gamble what they could or - and this is one that's certainly been talked about on the board - they're of retirement age and they just went through one crisis and they're not going to lose more if there's another. The older generation isn't going to take risk again right after a financial crisis if they are looking forwards preservation for retirement or otherwise. I think that's really going to become clear. Seniors are not going to be pushed into Brazilian bonds or other risk en masse - they're just going to preserve and cut back in many cases.
I mean, look what catch just posted what he did after today's market. One can talk about how that's right or wrong, but he's doing what he thinks is right for him with his age and risk tolerance and I guarantee there's a whole lot like him.
You have people who literally do not trust the financial markets - plain and simple, which is why (among other reasons I've mentioned) CNBC will continue to not STFU about how the retail investor has not come back for quite a while to come. That is fixed by time and regulators (which they won't do) actually looking at some structural elements that are continually moving the markets towards being more and more in favor of the large investor.
It's not just the average investor though, and you're seeing a lot of discussion of high net worth investors leaving or pulling back significantly or heading into other investments (diamonds, art, real estate, whatever). Whether they are right or not, high net worth individuals drive the market and if they are going into other things or pulling back, that will have an effect.
Are stocks unloved and if people are going to buy they should start looking now rather than looking when everyone loves them? Sure. I certainly think that could be right, but I think there are other elements - including structural elements - that have turned people off to investing that are going to have to be addressed before sentiment starts to really improve and CNBC finally stops babbling about how "RETAIL IS NOT BACK, WHY IS RETAIL NOT BACK!?!!?!".
People don't like stocks and while contrary indicators are great, one should realize that they are absolutely no guarantee and "cheap" can easily get cheaper. Anyone looking at current sentiment as a contrary indicator should have either a long-term view or a secondary plan if that doesn't turn out to work. I'm not selling, but I think that's both a long-term view and the view that if things tank again, you're going to get governments who will just print print print.
I am a little skeptical of yield - I just heard MLPs mentioned as a "defensive" play on CNBC and had to laugh. People really are running to yield and I think aren't - in many cases - realizing risk or looking at fundamentals. They just want yield and they don't care what it is.
Even hedge funds are seeing money flee - that's why you're seeing an increasing amount of them looking for "permanent capital".
Why? Two reasons I can think of: I can't afford NOT to take advantage of such downturns, and besides I'm not needing to take and use anything from out of my portfolio, yet. Second, while I add to my US holdings, I'm helping to proportionally reduce my huge overweight Asian and EM positions. It might be untimely, but it seems the prudent thing to do, whether or not the crowd is running in the other direction.
(Quoting: "However, I did quite well cranking up my investments during the 2000-2003 big downturn while everyone around me was running away.") I only BEGAN investing in 2002-2003 and did so in a 403b invested in Bud Zaino's Royce Opportunity fund. Gained over 70% that first year. Damned if I didn't wish I had $100,000.00 in the damn thing (RYPNX), in that first year. I've since left it, of course. Rather risky, runs hot and cold.
In all seriousness though, it doesn't surprise me. Just another one of the occasional official who is presented as a "crusader for the common man" who is proved to be bought off just like all the others.