Autumn Leaves Will Soon Be Falling
Most of us enjoy falling leaves. Falling stock prices, however, as the saying goes, NOT SO MUCH.
It seems that all we have had lately is one decline after another and it is disheartening. Most of you have seen your monthly or quarterly statements from the custodians or brokerages and they were awful. For those of you for whom I have the privilege and responsibility of Investment Supervisory, your quarterly analytical statement will be in your hands soon. While it offers much more information and perspective, it does not change the fact that most portfolios are down for the year and down substantially in this last quarter.
I will tell you that things are not as gloomy as they appear for two reasons. One is that we are in a period of very unusual and significant volatility. Stock prices are routinely moving several percentage points in a single day. It feels like the direction is always down but in reality it isn't. True, the trend has been down but there have been many positive days and weeks. Psychologists tell me that we experience gains and losses in very different ways. A loss creates greater anxiety than the joy created by an equal gain. As I write this, the major indices are UP about 5% since the quarter end, only several trading days ago. I'll bet you didn't notice that. Had today been the end of the quarter, your statements would look dramatically different.
Are these gains permanent? That is unlikely in my view but neither are the losses permanent. Greece got into a heap of trouble with its debt (call me if you want a more technical discussion - I don't do that here) and the markets plummet. The ripple effect, I am told. Really? Greece has an economy not much larger than that of my college endowment! Then things appear to be working out (more accurately, bailing out) and markets soar. But wait! Today Slovakia blocks a key component of the deal. SLOVAKIA! C'mon. Let's see what the market does with that tomorrow. I mean no disrespect to these gorgeous and wonderful countries but their respective economies are just not going to bring down The United States of America. The markets are overreacting in both directions and all we can do is wait it out.
My other reason for optimism is even greater. There are vast amounts of capital - both financial capital and human capital - waiting to be deployed. There are THOUSANDS of Steve Jobs out there and TRILLIONS of dollars to be deployed, but there is a wall between them and that wall will fall.
The entrepreneurship and creativity that has made this country great, in an environment of liberty, is alive and well. The spirit and drive for innovation and new ideas exists in companies large and small. Think of those thoroughbred horses ready to race but held by the gate. When that gate opens, and it will soon, they will burst out with energy and vitality not seen in a while. We will see greater prosperity, happiness, optimism and health in America than ever before, crossing all social and economic lines. The only ones left out will be those who choose not to participate. Then of course, as always, all that is good in America emanates throughout the world.
I have written before about the New American Renaissance and, I admit I did not anticipate this current set back, but my belief is unshaken. I cannot speak to any timetable but I do know that dramatic change typically occurs just when we least expect it.
I know something else as well. That is that it is always an Intelligent Decision to never bet against America.
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