We’ve been reading article after article this week and there’s so much going on right now I really can’t put my finger on one thing to dig into, so I’ll just tell you what’s coming up on our radar as noteworthy.
- There’s the election, which has completely taken over the world of electronic media.
- There’s banks pulling stunts of unnerving magnitude again. I’m referencing the imaginary accounts of Wells Fargo and Deutsche Bank’s likely need for a bail out.
- There’s corporate debt with negative interest payments that has gone UP in value since it was issued!?!?!?
- The EU and Japan are pumping Trillions of dollars per year into their economies under QE with no huge notable outcome.
- Our stock markets keep going up on very faint signs of growth
Bill Gross just had a press conference basically saying that trying to make a definitive pick in the market right now from a top down standpoint is like going to the casino. There is a lot at play out there.
The one space that we feel is the most important to watch closely are the radical measures central banks are using to create growth. We get the feeling that the world is just looking at the tip of the iceberg as far as how these policies will really effect the markets and economies going forward. We’ve heard from portfolio managers for years that pretty trustworthy historical correlations haven’t been playing out in the market and still aren’t in some places. These policies and market manipulations could change the way markets react and cause all kinds of unexpected behavior in the future.
We met with a portfolio manager from Newfleet asset management this week who mirrored the views of many financial professionals we talk to which is: things aren’t necessarily bad, there are ways to make money, but there are a lot of risks right now. Not all of these will blow up in our faces, but they can definitely change the landscape behind the scenes.
Bottom line is this is why diversification is so important. The financial world is getting more complicated, not simpler and our strategies have to be up to the task of dealing with situations and environments no one has dealt with before, like the one we’re in now.