Hi DJ, Elmat and CB, I took CB’s topic as “assuming recovery is underway, what then are on the shopping list”, and Elmat’s much earlier topic as, “what can the next abracadabra be, assuming life goes on?” I do not doubt the eventual correctness of CB and Elmat’s premise, and so engaged in a bit of blue-sky speculation or dark storm meandering of the mind.
It is probably a good idea to exercise the mind and clear it of doom and gloom for a mid-bear market airing. I do not like to go down with the market, and I would like less to be left behind hugging on to some had-been stocks when the market, but more particular some well chosen stock and sector does recover, but more strongly then the rest of the stocks that make up the market.
We are just window-shopping and exercising now. It takes time to increase allocation to equity, and it takes time to sidestep false promises when the eventual recovery do take place, and so it is a good idea to walk the mind earlier, and then repeatedly before that happy day.
On the timing of above-mentioned happy day …
(a) I agree with you that the real estate market will likely go kaboom before the happy day is set up to be more fully appreciated;
(b) I suspect the USD, however more desirable than the Euro, Yen, and Gold, will be humbled first, if not against all three, then one of the three;
(c) I am looking to the consumer to adopt more conservation and less suicidal attitude towards money, savings, and investment animal spirit; and
(d) If the above three “to look for’s” do not happen, I feel the recovery would be weak and not worth betting on with longer term conviction and enormous allocation percentage, as such a recovery would be not from a deeply cleansed economic base where wise and balanced corporate capital investment can be undertaken to serve the pent-up and broadly enthusiastic consumer demand supported by strong public, private and individual balance sheets, but merely a series of successively smaller echo booms living off the residual energy of the 1990s tech boom.
I am also looking for an apology to capital holders and savers in the form of still sharply lower equity prices, Abby Jo of Goldman Sachs and Gene Epstein of Barrons to lose their respective jobs, Jeff Bezos to stop smiling, a few financial accidents, and unfortunately, as this is now a harshly integrated globe, we may also have to suffer through the settling of one or two real world events.
So, bottom line, the cleansing is well underway, even before September 11th, but we have a while and a few more matters to go yet.
The Recovery will not be based on ever-lower interest rate earnable as compared to anticipated capital gains of beaten-down shares of still highly valued companies operating in an environment of weak final demand originating from poor (relative to future living requirements) consumers. A (as opposed to The) recovery might, but will not be blindly purchasable with full faith, maximum conviction and bet-the-house allocation.
<<recovery sunshine … rain season of earning announcements … across the board … decreases in cash flows>>
I agree with you that The Recovery must be based on anticipated upturn of 3-5 year, highly visible to some, inflation-adjusted, easily sustainable, and genuinely accounted-for corporate profit and distributable cash flow.
The developments mentioned above were in the process of playing out to the logical end, but was interrupted and complicated by the terror attack on the US. The necessary developments in the financial and economic markets are now playing second fiddle to the logical and required resolution of the struggle against extremism disguised by faith, and of the settlement of genuine grievance hijacked by dark force.
So, as the saying goes, one thing at a time, a single step at a moment.
My slowness in response on the thread is due entirely to my process of personal unwinding and discharging, followed by rejuvenation and rebirth. Yesterday (Sunday) was a day of sleeping on the sand, snorkeling, catching tropical fish with a suction gun, cleaning and rejuvenating a salt-water fish tank, not reading Barrons, and then exercising my social charm. Another way of saying I did next to nothing.
Chugs, Jay |
