well, ECRI has just been reading the tea leaves. That's the thing about leading indicators. They tell you about probabilities, not certainties. So to the layman, if the probabilities don't pan out, then they tell you the messenger is an idiot and their science is bollocks. To the scientist or the statistician, it's all just part of the game. You always bet based on what the probabilities tell you. To do anything different would literally be illogical.
For example, the probability that the Eurozone was going to officially print a negative growth figure in Q1, after already printing a negative growth in Q4, was overwhelming based on all the leading indicators. It was almost a sure thing to make a prediction that the Eurozone would officially be in a recession after the Q1 GDP growth figures came out. I even said as much. But then the figures were released and the Q1 growth was 0.0%. So was I wrong? Was I right? Something in between? Who knows and who cares? Only folks on this thread would argue over semantics like that. The greater point was that the real world business and investment impacts from the direction and trend of Eurozone growth gave you plenty information on how you should invest your money and what kind of wild risks you'd be taking if you were betting on a Eurozone market going upwards in such a climate. To say, I made the wrong call on that one is to miss the forest for the trees.
So same thing goes for ECRI. Whether we print negative GDP in the US or not in Q2 is an academic question. I've said and ECRI said we'd have the start of a recession in the first half of 2012. The probability has been extraordinarily high that this would happen. Looking at the trees is whether ECRI and I are right on that call or not. Looking at the forest is trying to understand why the probabilities of a recession are so high, and why that means economic risks are very high, which consequently means investing in the stock market and betting for an upward movement is a very risk y bet. It doesn't guarantee the market goes down, but I personally bet with the probabilities. So right now, I'm holding a lot of cash and am mostly in DBLTX and PTTRX, which are quite stable and pay nice dividend checks monthly. No stress investment for me in this climate.
When the Keynesians are put back in the bottle, Congress starts acting responsible, and Bernanke is put out to pasture, then I think it might be safe to risk a larger portion of my assets on longer term bets on stocks again. In the mean time, wealth preservation and safe yield is key. Lastly, stay the hell away from Treasuries of any kind. Good luck out there! |
