This year investors faced a low return/high volatility market with defensive equities and long dated U.S. treasuries leading the way. Investors continue to liquidate their equity funds in droves; more so than 2008! Where are they going? They are looking in the rear-view mirror for the best performers like bonds and the perceived safety of high yielding utility stocks.
But when was the last time investors were rewarded for buying high and selling low?
It’s something to consider when making your 2012 New Year’s Resolution.
We are starting to receive the Wizards of Wall Streets expectations for 2012. This is a lengthy exercise of sifting through the wash plant for nuggets of gold. As usual, we will formulate our own economic and market views which we will be sharing with you in our upcoming quarterly newsletters. Until then, we wish all of you a peaceful, restful holiday season.
“Strategic planning is worthless — unless there is first a strategic vision.”
Buffet-mania? No, not the spread for lunch at the Marriott, but watching the every move of Warren and Co. We were fascinated to learn more about his Son Howard the Farmer who will become the non-executive chairman of Berkshire Hathaway some day. With all the work Howard has done in dealing with hunger in Africa, he will offer much to the community.
Meanwhile back in the economy we continue to keep score on the good news and the bad news. Certainly the market volatility, Europe and Washington’s intransigent crowd don’t help. But at the micro level there were a number of juicy items- Pfizer will raise their dividend 10% and buy back $10 billion in stock. GE raised their dividend 17% and Ford has reinstated their dividend after a five year absence. While the consensus forecast for the fourth quarter GDP had been running around two percent, the recent estimates now are 3.5%. No one is willing to proclaim victory, but it surely feels better.
So what to do? We come back to Buffet and his style of investing- come up with a value you want to pay for an investment and wait for it to reach that price. Be an investor, not a market timer and remember the three rules of investing-patience, patience and more patience.
“With time and patience the mulberry leaf becomes a silk gown.”
- Chinese Proverb
What a difference a week makes! Good economic news from the US along with a rate cut in China and a surprise coordinated effort from six central banks resulted in the S&P 500 and DJIA surging roughly 7% for the week. Bonds sold-off slightly for the week.
China dropped its reserve requirement ratio by 0.50%, and Brazil lowered interests as both countries signaled easier monetary policy.
In the United States, better-than-expected economic news provided incentives for investors to add to equities. Among the good news: Chicago PMI, pending home sales, strong retail sales, better auto sales and higher consumer confidence.
The old adage “don’t fight the Fed” rang true last week as six central banks came together to provide liquidity to the European Central Bank.
The last few months reinforce the fact the volatility is a two-edged sword. The markets reacted violently on the downside, and they reacted the same way on the upside. Investors should stick close to long-term asset allocation rather than trying to time the market.
Expect more volatility … there’s a lot of market moving events in the weeks ahead.
“We can’t solve problems by using the same kind of thinking we used when we created them.”
- Albert Einstein