I am not sure what headline/story upset me more today. Could it be “IMF sees 1.3% drop in Global Output?” Or maybe “Freddie Mac Finance chief found dead in home.” Now I think it would have to be “Taliban Seize Pakistan Area Near Capital.” Not that I want to walk around with my head in the sand or anything but perhaps one new business idea would be to launch a new web-site that only reports on good things that are happening in the world. So funny, after just typing that I thought hmm…. I wonder if that domain is available – http://www.happynews.com/ – sure enough it is not, the site exists, and it is all about up to the minute news meant to lift your spirits. How cool is that? Their tagline is “Real News. Compelling Stories. Always Positive.” Add that address to your favorites and remember to visit it regularly.
So needless to say the news out there is just horrible. For a well articulated piece on why I think this rebound in the market is short lived read Martin Wolf’s piece in yesterday’s FT called “Why the ‘green shoots’ of recovery could yet wither.” I, like him, believe that we are still in the ‘early stages of a long and painful deleveraging and restructuring’ process. The IMF just recently upped their estimate of system wide loan losses up to $4.1 trillion and how much of that has been accounted for? I don’t know but it someone has the answer please do share. All these massive government programs are working hard to cushion the global economy’s free fall, but bottom line; we are still in a downward trajectory, albeit at a slower rate than earlier in the year.
So what does this mean from an investment perspective? For me it means remain defensively positioned, maintain liquidity, and look for lower entry points for both domestic and international equities. In the fixed income space I think opportunities do exist and I will pay attention to funds that are emerging out of the TALF and Public/Private Partnership Programs. I think you need to be careful about adding too much duration in your portfolios as although there is short term deflation, I worry longer term about the opposite. More importantly however is the massive amounts of debt issuance the government needs to do combined with how much debt that is already outstanding. YES the fed is buying treasuries, especially at around 3% on 10 year notes, but trying to effectively front run the fed and ignoring fundamentals is a dangerous game indeed. Might be ok for professional traders that are in the flow of information and flow, but for you and me??? Not good. I did spend a lot of time today talking to some exceptionally smart and experienced guys who are launching a venture capital fund in the digital media space, which was really fun. Their primary focus area is in gaming and is amazing to think about how so many other areas, like media, are being game ‘ified’.
Well my pillow is calling my name so of to sleep for a mighty early wake up call. I am heading to Colorado tomorrow for the weekend so the next post may not be until Monday. Wishing you all a wonderful weekend…..