Looking Past the Graveyard
du Pasquier Asset Management
Scotty George
November 1, 2010
We are two months removed from the end of this year, 2010, and already investors are bracing themselves for 2012 (more than one year from now), as if next year doesn’t, and won’t, count. With unemployment widening and portfolio values simply treading water, many have their sights set on a “rebound year” (2012) that they think has more promise than next (2011). In fact, informal opinion polling suggests that many see 2011 as nothing more than a postscript to a miserable three year cycle begun when the global credit crisis erupted.
Further, any optimism about next year is muted, and spoken about softly as if not to exacerbate an already chaotic situation.
Indeed, there are as many reasons to be pessimistic about 2011 as there are to be encouraged, which doesn’t embolden even the most bullish amongst us. We have yet to complete the crises which put us on a bear cycle, so it is illogical, and against the odds, to consider that a turnaround might be quick, linear, or extreme. One doesn’t unravel a half-decade or more of fiscal problems by fiat alone.
The solution to systemic inertia lies first in reversing the crisis of confidence by the public. Along with consumer demand and discretionary spending there must be a reversal of debt expansion too.
There will be a 2011.
Today, the “confidence crisis” spills over into the home, the workplace, and the shopping mall. We are worried about spending for goods and services, and those which we do buy are going up drastically in price. A pyramid of hierarchical needs is rising to the top, as corporations recoup their losses, thus costing everyone much needed liquidity. It’s not fair, but true nonetheless.
And yet, throughout these turbulent times, certain pockets of financial opportunity remain. Basic Materials and Technology stocks are in a bull cycle. For the most part, confusion about economics and statistics has been supplanted by a love/hate relationship with 24 hour trading platforms. In a market of stocks, not fundamentals, some can win quite handsomely by engaging in “trading” daily. On the other hand, this strategy is no place for the novice or the traditional “buy and hold” investor.
The proportion of assets allocated to equities is diminishing in most traditional long-term portfolios, owing to the increase in volatility and risk in the markets.
Investors, thus, are stepping back from the exercise altogether, preferring to try to reduce personal indebtedness, increase savings, and build peace of mind. Those of us in the industry, and those outside, feel a palpable distrust about the systemic failings that caused this last panic. Our efforts might better be focused upon remediating the public, perfecting our disciplines, and abstaining from artificial derivatives and 24 hour investment cycles.
In this climate of reticence it matters little whether 2011 is a boom or bust year because its context will only be judged by what happens afterwards.
Maybe 2012 isn’t really that far off, after all?
Scotty C. George
(212) 624-1147
The information contained herein has been obtained from sources believed to be reliable but is not necessarily complete and it accuracy cannot be guaranteed. It is intended for private informational purposes only. Any opinions expressed are subject to change without notice. Du Pasquier Asset Management and its affiliated companies and/or individuals may from time to time own or have positions in the securities or contrary to the recommendation discussed herein.
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