Sunday, November 09, 2008

Long term value? Or frightened professionals?

I'm a fairly avid reader of various financial blogs and financial newspapers. Many of these blogs and the news reports relate to people who make their living in the stock market world.

I've noted a big theme among them - over the years, these professionals on the whole claim to be stock pickers who concentrate on "long-term value creation. Very few of them at or near the market highs said "Whoa, stock prices are pretty high - so I've got my fund positioned in 50% cash". There were a few notable exceptions of course, but mostly the long-term investment mantra remained chattered amongst the investment class professional masses.

Now that the market dropped, some of these same investment managers talk about "nibbling" on some "good" stocks, or "scaling" back into the market.

I'm confused! If the market was good enough for you when it was 60% higher than today, then doesn't your long-term value creation model hold intact? Or is that only palaver you dole out when the market is high, and you run scared just like the general public when the market is low?

Just asking.


The Confused Capitalist

Saturday, November 08, 2008

Obama's Approval Ratings Will Fall, unless ...

... unless he opens his presidency with (and continues) communicating directly with voters on the number and severity of problems facing the US. Too many people simply aren't aware of how serious the problems the US faces are, and their expectations will be (are?) far too high on what can be realistically achieved in a relatively short time frame.

As I consider it, there are many very serious issues that need attention over the next decade, and it's doubtful that even the most remarkable president would be able to fully turn "the good ship USA" around in that time on all of them. However, turning it does need, and if process can begin even on a handful of these items over two terms, then the future - which currently looks grim indeed will begin to brighten. By my count these items include:

  1. Global climate change initiatives - only the most idiotic "flat-world" person would argue that this doesn't exist, or need serious attention to ensure simple survival;
  2. National debt - now standing at around $80,000 per family and continuing to grow - this will continue to eat further and further into expenditures - a nasty "positive" feedback loop;
  3. Repair of the seriously decaying national infrastructure (don't do more of the "same old, same old", but consider in conjunction with point #1 above, to ensure that the right kinds of infrastructure gets built - i.e. mass transit, bullet trains, implementation of geo-thermal as standard heating for national building codes, etc.)
  4. Future style and cost of US intervensionism - perhaps using the military as a last resort is not that cost effective, and there are other ways to achieve the same goals, if a longer range view is taken (i.e. expect that policy decisions won't be immediately visible, but that total cost will be lower and long term results more satisfying);
  5. Social security and medicare reform (reform both so they are based on proper actuarial accounting, so that future users of the service are paying the correct cost today) - the current "pay as you go" isn't sustainable into the future and burdens tomorrows young people with an effective "tax" from yesterday's workers;
  6. Educational reform - approximately one-half of the nation’s entering postsecondary students do not meet placement standards and are not ready for college-level work and US students international performance is weak;
  7. Current economic crisis;
  8. Health care reform (any wealthy modern industrial country wherein 20% of its citizens lack medical coverage has to be viewed as a societal failure [please, think about the children before you add commentary about "choice"]);
  9. Growing income inequality (a major prerequisite for a long-term stable society is some level of income equality).

The current addiction to short-term fixes won't help in this instance - rehab is needed to face these challenges square on. Whether the US, collectively, is ready to look in the mirror and face them, is yet to be seen.

Well, that's my litany - for a 30 minute video from Juan Enriquez detailing some of these problems, visit this link.


The Confused Capitalist

Friday, November 07, 2008

Bigotry Alive Still

The tearful responses of many prominent black people after the election tells me that a great many of them have personally endured some amount of bigotry during their lifetimes. I suspect that had a women been elected president, the response would have been far more muted, as many of the most important gains made by women happened mostly decades ago.

Just as an Asian friend of mine was able to point out nuanced bigotry during a speech by a poorly chosen MC, acknowledging lifetime achievement by a great college teacher of mine, Dr. Fred Young, so too are many minorities sensitive (sensitive in the positive sense in that they are actually able to see something that exists) to bigotry.

I sincerely hope that racial reconciliation continues to occur and that people of all races, ages and faiths continue to open their hearts. May the promised land grow ever closer and closer.


The Confused Capitalist

Monday, November 03, 2008

Two years out: Deflation or Inflation?

Everybody is talking about deflation these days as the flavour of the month. Commodities guru Jim Rogers makes the point that - virtually always - inflation follows monetary stimulus ... buy hard assets he recommends, to deal with the inflation which will inevitably follow the very significant stimulus being added world-wide to deal with the banking issues/financial crisis.

He says they are printing "gigantic" amounts of money, and "massive" ("terrible") inflation is coming, 6, 12, 24 months down the road, and the only way to get out of the way of this is to get out of paper assets.

Video Date: October 24 2008.

Further points he makes are that he expects agriculture also to continue to outperform given the very low stores of food globally. This is something to think about and study for your own portfolio.


The Confused Capitalist