I think it's just really tough to know where things are headed. All that I can do really is have larger themes (commodities and emerging markets), as well as smaller themes and have a belief in those themes over the long term (although position sizes and the manner of expressing those themes in terms of choosing different investments may happen over time.) The remainder of the investments are more broad-based and flexible. I currently have little in the way of fixed income, but I will likely look into fixed income again some point down the road and believe it's a very important element for those at/nearing
retirement (although I continue to believe that the best course is a broadly diversified fixed income portfolio.)
A lot of the global issues that I've discussed in the past still concern me. There was an interview with Caterpillar's CEO the other day where he discussed the demand in developing markets and the infrastructure build-out that continues to go on. Meanwhile, in this country we've thrown tons of money at the financial system and not really given much thought to developing the remainder of the country to be competitive in an evolving global market. There's an incredibly critical article (
http://www.koreatimes.co.kr/www/news/opinon/2011/05/137_87020.html) about the state of high speed rail in California in the Korean Times (!) this morning, and another article in Reuters regarding rail in Florida.
Despite setbacks, there was this quote: "Transportation Secretary Ray LaHood says he's thrilled to be moving forward the long-term goal of connecting 80 percent of Americans to high-speed rail within 25 years." Um, 25 years? Are we serious? By that time, other countries might look like the Jetsons. Obviously an exaggeration, but we're getting a late start and you're telling me the goal is to have it done in 25 years? It'll take at least five for various aspects of it to be debated at the state/local/federal level (You've already seen a lot of that, with Wisconsin getting mad at their governor for not accepting rail funds.) Beyond that, the country needs upgrades to the power grid, other utilities, airports and roads, among other things (which I'm guessing wil be accomplished in 25-40 years from now.) I'd love to invest in alternative energy, but between volatile energy prices and debates over funding, I continue to question whether it will ever really take off until we reach a point where we have to urgently start looking at alternatives to traditional energy sources.
Other countries absolutely have their flaws, as well, but ambitious plans for development on infrastructure will offer them an advantage, if successful. It's a matter of giving people the option to use tools (whether improved transportation or improved utilities, etc) to improve their daily lives, not to mention business benefits of improved infrastructure. I guess what my question is is what is the vision for moving the country forward. I'm not getting a sense of it, and while the squabbles over budget (and how we can quickly move up the debt ceiling) are currently taking center stage, what about all the current political bickering over other issues would make me think that these people could unite with a vision for moving the country forward? (shrugs)
In terms of emerging markets, you're seeing corporations trying to venture deeper into markets and buying up local companies, with Yum Brands buying an Asian chain (Little Sheep) the other day, and Wal-Mart buying a stake in an Asian e-commerce company the other day. Some US companies have not succeeded - you saw Best Buy close their China stores earlier this year, but the local chain they bought (Five Star) continues to do well.
Riskier bonds may have time periods where they do not correlate to the stock market, but in a 2008 situation, emerging market bonds are definitely not going to hold up. Templeton Global Bond did, although that was because manager Michael Hasenstab did an excellent job with currency hedging.
There's a very good discussion with Jim Rickards on King World News regarding Bill Gross being short treasuries and the thinking/theory behind it; Rickards believes that Gross is not short treasuries because he believes that there's going to be bond market trouble if QE ends this year, but he does believe that there will be trouble over the medium term and there's no way for a Bill Gross to position the fund in that manner right away if a turning point really does happen, it has to occur over time, ahead of time. The short treasuries trade has been so greatly discussed over the last year or so, but - despite a fundamental theory that seems sound - it has not worked. It will, but it won't play out in a way that everyone expects.
I think one has to prepare (even if it's not what they would prefer to see) for what they see in the future to some degree, and what I see may not be what someone else sees, and that's fine. I'm flexible in my longer-term themes, but will continue to stick with them until I'm convinced otherwise; I'm not going to try and trade in-and-out of them. The rest of the portfolio can be deployed in a more broad/opportunistic fashion.
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