Global Markets, A Mess Or Just Cleaning Up? (7/8/10)

I realize this is a heated debate and as I type, I am concerned with some of the back lash I may get no matter what I say. All being equal, we are paid to have opinions and to get more right than wrong.

These markets are trying for most, including the professionals. While much of the up and down movement is on relatively light volume, that does little to calm any investor since their money is still moving violently-in many cases because of the result of passive buy and hold strategies. We wrote last quarter in our report, and writing again in this quarters report, that we still think this economy is on track and that the developing nations will help us all get back to building a sound fundamental base over time. Systems, such as the economy, need to be “cleansed” of the toxicity that can build within them over long periods of excessive neglect or abuse.

Some positive things that will hopefully come out of this whole mess is greater productivity and creativity within the workplace. Unemployed workers that eventually will get hired will be much more motivated to “do the right thing” by the employer and become producers versus just the standard worker-be types. Many have gone on to be entrepreneurs and some will fail, but some will succeed wildly and this is what the country needs.

As for some insight into the marketplace, it looks as though the correction we all thought was coming has occurred. I am sure there will be more tumultuous activity throughout the summer but company cash levels are high and this cash needs to be spent. Whether it is raising dividends, buying back stock, or buying other companies it will spur activity and hopefully jobs. We think this may start to occur in the early fall.

In all, the market should end higher this year but what you are invested in will be critical to how well your portfolios perform. This may seem obvious, but many do not pay attention.

For now, if you don’t feel your investments are performing or are seriously under-performing and you are hoping for the best, then the most you may receive from this is hope. Investing is not a passive sport, if you are feeling like that is what is occurring contact us and let’s just have an informal conversation to see why you may be feeling this way and if our solution is appropriate for you.

All the best as always.
Bob Fuest
COO & Head of Investment Research