Lately I’ve been considering that fact that “informed intuition” about investment markets, the very stuff we hope to warehouse in large quantities at Pinnacle, can be tainted by any one analyst’s appetite for risk. We train ourselves to see bullish and bearish investment opportunities when they appear, and with training our goal is to see the world differently from the consensus. As someone who is not a big personal risk taker, I have to go out of my way to not let my personal predisposition to avoid risk color my ability to see bullish opportunities in the risk markets when they appear. And since one of the most tried and true methods of identifying risk taking opportunities is to be a contrarian and recognize that investment opportunity is often born of despair, I’m wondering if this isn’t the most bullish investment opportunity of all time. It looks pretty dark out there to me.
For example: We don’t manufacture things in the U.S. anymore. The profits remain here for large corporations but the jobs go overseas. Does anyone believe that we are better off? We have deficits everywhere, from fiscal deficits to trade deficits and now the Federal Reserve is running a “print up some dollars and buy all kinds of stuff” deficit of their own. It seems obvious to me that we can’t afford the social contracts that we’ve made in terms of pensions, social security, and health care, but no one has the courage or political will to do anything about it. I suppose we can blame our politicians but we really have the political system that we deserve. Most Americans don’t vote, and many of those that do are frighteningly uninformed about difficult and nuanced issues that defy “sound bite” explanations suitable for the evening news. Nowadays we pay attention to some kid writing a blog at 3PM at his parent’s house where he lives because he can’t get a job. We have 10% unemployment where the percentage of Americans who want to work but who can’t find jobs is frightening. Corporate earnings are up on the back of cost cutting (meaning layoffs) and government stimulus plans that we can’t afford. It appears that we are throwing the dice that all of these programs designed to thwart the next Great Depression by manufacturing either asset inflation or price inflation will work out well. Everyone knows we are on a high risk path for curing our national malaise but we all seem to be shouting at each other at such a volume that if there is a reasonable solution to be had, we just can’t seem to hear it.
We have a national foreclosure problem that is a disgrace and could lead to hundreds of billions of bank write-offs as well as another 10-20% decline in real estate prices. At the moment there ain’t no one interested in insuring titles to homes anymore because with the originate and distribute model for mortgages no one knows who actually owns the note on your home. The dollar is falling on the back of our unofficial national economic policy of debasing the currency, and “beggar thy neighbor” fiscal and monetary policies are breaking out around the globe. They say that every generation in U.S. history had a better standard of living than the one that preceded it, and every parent along the way worried that their kids wouldn’t do as well as they did. Well, I’m wondering about my kids and their kids. I’m afraid we are messing this up so bad that they won’t be able to continue the streak. So….the obvious conclusion is to back up the truck and buy stocks. If you are a contrarian, it’s hard to see how it can get much better (or worse) than this.
