Wonderful discussion this morning, thanks all. We are in the genetically imprinted season of uncertainty (Autumn) and that is apparent in this thread and in the media as a whole. The elections (why in November of all months?)just make it worse.
Like everyone else, I am making my feeble attempts at understanding what in the hell is going on in the world and how to prepare for it. Intelligent cases are available for deflation, inflation, bull market, bear market, interest rates up or down, crack up boom, recession, depression, take your pick.
Two days ago, I asked my wife her perspective on all of this and her response was, quote, "don't you think we will just sort of muddle through?". The next day I came across Mauldin's "Muddle-through" economy piece. This (muddle-through) has now become my favored future scenario, partly because I have not been smart enough to figure on which of the more dramatic scenarios has the better chance of occurring. It seems probable to me that we are going to get a taste of it all, with many effects cancelled out by the mirror phenomenon i.e. (inflation/deflation).
Thinking about this possibility (no cataclysm, but not much good either) has not led yet to any clear ways to protect myself and/or to profit. It does seem clear that in such a scenario there very high risk of getting whipsawed no matter what position you take. Capital preservation would seem to be the best rule of the day. Unlike the 90's, momentum will only go so far as the countervailing phenomenon will soon exert itself. This suggests it is paramount to avoid chasing anything, whether it be precious metals, stocks, bonds, tech, whatever. True contrarian investing might work, but only for a short time in any given asset class.
How long will we "Muddle-Through"? First of all it probably won't feel much like muddling because those with any brains will see that we are constantly balanced on one precipice or another. But I suspect it will be long enough to render many of the imbalances pointed out here moot.
One other heretical thought, do any of you think that some of the powers that be have been hoping for and trying to bring about just such a scenario? Is Greenspan really trying to achieve just this "muddle-through" because all of the other alternatives are so appalling? Could going from bubble to bubble be an intentional way of avoiding economic cataclysm, Just buying time until the imbalances negate themselves?
With all the doomsday scenarios around, "Muddle-through" seems almost Panglossian. What say you, wise men and women?
Karl |
