On the long flight back last night from a conference of financial advisors in San Diego, I listed a few general observations:
1. There was almost uniform agreement from the economists that the underlying economy is improving.
2. There was some question about the length of the current economic recovery. Is the recovery already longer than normal? Is the normal length of a recovery screwed-up by the politicians?
3. If politicians continue to be obstructionists, there is general agreement that a recession could occur but disagreement about how severe it would be. Sequestration is expected to happen.
4. There was almost uniform agreement from the investment strategists that the stock market wants to rise but is being restrained by the politicians. The continuing budget deficits are the greatest threat to our economy and our markets.
5. Of the economists I heard, I would classify them as either Austrian or Keynesian. I heard almost no discussion of Supply-Side economics. In other words, there was no discussion of cuts in the highest marginal income tax rate as being necessary for growth, which was surprising to me.
6. Despite the general contempt for politicians, I found that contempt was equal for both Republicans and Democrats. Nonetheless, Former Secretary of State Condi Rice was one speaker, and she was treated respectfully by everybody. Former Republican Senator Alan Simpson and Clinton White House Chief of Staff Erskine Bowles were also treated respectfully. Indeed, it was refreshing to listen to Simpson/Bowles discuss the deficit problem without all the partisan spin -- proving it can be done.
7. With respect to Europe, there is a general sigh of relief that "Super-Mario," head of the European Central Bank has "saved" Europe the way Bernanke "saved" the United States. I think that means they prevented a financial collapse, which should buy enough time for the politicians to fix the fiscal problems.
Generally speaking, there was far less acrimony than I've seen in the past. Financial advisors are quite bullish, which worries me somewhat.
Still, my own analysis is that the underlying economy is indeed stronger than most investors expect, that Europe is healing slowly, and that China is strengthening again. With all that, the stock market should continue rising. Don't forget that only about 10% of the money that flowed out of stock mutual funds has returned, which means there is still more than $350 billion of investor money waiting to get back into the stock market.
However, until Europe addresses its fiscal problems, there is a strong risk of financial collapse on the scale of another "Lehman Brothers." That doesn't mean we should stay out of the market, but it does mean we should act quickly to sell, if and when that becomes necessary. For the long-term investor, a recession is not to be feared, but a financial collapse is!
Of course, the best part of any trip or conference is . . . getting home!
1. There was almost uniform agreement from the economists that the underlying economy is improving.
2. There was some question about the length of the current economic recovery. Is the recovery already longer than normal? Is the normal length of a recovery screwed-up by the politicians?
3. If politicians continue to be obstructionists, there is general agreement that a recession could occur but disagreement about how severe it would be. Sequestration is expected to happen.
4. There was almost uniform agreement from the investment strategists that the stock market wants to rise but is being restrained by the politicians. The continuing budget deficits are the greatest threat to our economy and our markets.
5. Of the economists I heard, I would classify them as either Austrian or Keynesian. I heard almost no discussion of Supply-Side economics. In other words, there was no discussion of cuts in the highest marginal income tax rate as being necessary for growth, which was surprising to me.
6. Despite the general contempt for politicians, I found that contempt was equal for both Republicans and Democrats. Nonetheless, Former Secretary of State Condi Rice was one speaker, and she was treated respectfully by everybody. Former Republican Senator Alan Simpson and Clinton White House Chief of Staff Erskine Bowles were also treated respectfully. Indeed, it was refreshing to listen to Simpson/Bowles discuss the deficit problem without all the partisan spin -- proving it can be done.
7. With respect to Europe, there is a general sigh of relief that "Super-Mario," head of the European Central Bank has "saved" Europe the way Bernanke "saved" the United States. I think that means they prevented a financial collapse, which should buy enough time for the politicians to fix the fiscal problems.
Generally speaking, there was far less acrimony than I've seen in the past. Financial advisors are quite bullish, which worries me somewhat.
Still, my own analysis is that the underlying economy is indeed stronger than most investors expect, that Europe is healing slowly, and that China is strengthening again. With all that, the stock market should continue rising. Don't forget that only about 10% of the money that flowed out of stock mutual funds has returned, which means there is still more than $350 billion of investor money waiting to get back into the stock market.
However, until Europe addresses its fiscal problems, there is a strong risk of financial collapse on the scale of another "Lehman Brothers." That doesn't mean we should stay out of the market, but it does mean we should act quickly to sell, if and when that becomes necessary. For the long-term investor, a recession is not to be feared, but a financial collapse is!
Of course, the best part of any trip or conference is . . . getting home!
