THE BULL BEAR DEBATE – A COMPLACENT MARKET OR A RESILIENT MARKET?
This morning’s Barrons had a good piece by Michael Santoli discussing what he refers to as a market “held hostage” by Europe. And it very much is. Mr. Santoli cites the bull-bear debate surrounding this environment:
“The crux of the bull-bear debate today, then, is whether the market’s perseverance is best compared, in boxing terms, to a resolute fighter with an iron jaw or a punch-drunk tomato can without enough sense to go down. This can be a fine and imprecise distinction, and the first condition can morph into the second with one blow too many. But when a market refuses so many perfectly good excuses to collapse for good, its resilience probably deserves the benefit of the doubt.
As put on Friday by veteran market strategist Vince Farrell of Ticonderoga Securities:
“The market seems to handle whatever [is] thrown its way. The Greeks tried to take the system down, but it looks like, as the Spartans of old, they are being carried back on their shields. The Italians are hoping the full [Mario] Monti will pull a bunch of technocrats together and muddle through. U.S. economic news, on balance, continues to improve. Inflation came off the bubble in China and some are guessing the government will ease [interest rates] a bit by the end of the year.”
So, is the market resilient or complacent? I don’t think it’s either. For once, the market is acting quite rationally. The concern in Europe is that the EMU’s leaders will let everything collapse. This worst case scenario is incredibly frightening from the market’s perspective as it has the potential to cause a 2008 repeat. So, when the news headlines appear to hint at Europe falling apart the market rightfully craters. And when the worst case scenario appears to be off the table the market rallies back. Despite the market’s fairly rational response so far, we are likely to remain hostage to the Euro crisis until a real fix has been implemented. Don’t hold your breath on that….
An excellent complement to your post via ZH:
http://rationalcapitalistspeculator.tumblr.com/post/12652367759/weekly-bull-bear-recap-veterans-day-edition-2011
And some good reading from Consuelo Mack, which I had not visited for an while, on emerging market debt and equity investing.
I missed the link: http://wealthtrack.com/transcript_11-04-2011.php
Another good one from CM:
http://wealthtrack.com/transcript_10-28-2011.php
This has been the most helpfully thought I have read in the last few years:
MOHAMED EL-ERIAN: Right? And there are these shifts and you’re going to feel uncomfortable. It’s like someone in the middle of an earthquake. They’re going to feel uncomfortable, but the answer is not necessarily abandon the city, but rather understand what’s going on and understand what is fragile and what is valued- because if you understand and have the right mindset, you can navigate. We did something, luckily, on the business side that has helped us a lot. Back in ’08, ’09, we invited a professor from the London Business School to come and speak to us. He made his reputation, his name is Don Sull, by looking at why successful companies split into either remaining successful or not. And it’s really interesting. It’s not because they don’t recognize the paradigm shift. Companies are very good at recognizing when the world is changing. It’s what do they do next. And the biggest trap that a company can fall in, the biggest trap that an investor can fall in is that they recognize the shift, but then they become hostage to what is called “active inertia.” Active inertia is active in the sense that you do something, but inertia you’re doing more of the same, but your world is changing and, therefore, you have to evolve with it. And therefore, you know, the message that we tell investors is you’re right to feel unsettled. Okay? That’s because the world is changing, but understand that that requires you to also evolve with it. I’ll give you an example.
I have been mainly in US assets for the last 10 years and done well. I keep on reading of the importance of non-US assets, emerging markets in particular, but due to inertia done nothing about it. I cannot do this forever, probably this not the right time to make the shift but I need to start thinking about it.
I think that every market participant knows by now that a change in the ECB’s mandate is the solution (at least until they decide to go on with fiscal unity). This is enough for the markets not to collapse.
Can I see a santoli, kopian tan, A. Barry or Epstein negative piece? Show me one…on the economy not individual names.
Show me one positive piece by Abelson.
Every week it’s the same play. Each actor saying the lines that were written for there character. This has gone on at Barrons for a number of years.
hey MIke Santoli …..Resilience? All this risk and stocks are up 1% over 11 months. Correct me Santoli…but didn’t you infer to the readers and give them your professional push that…this year has in the past been up 22%….and..you wouldn’t fight history…..or that this year reminded you of 1998. Or how about you secret super duper double secret mystery masked trader named ????? …what of this made up friend …what does this voice tell you to tell the readers to keep on buying those walls st merchandise no one wants…stocks.
The same play will be performed next week….each playing there assigned role over at the theatre not off but up wall st ass.
Agree! I cancelled my WSJ/Barron’s subscription two weeks ago.
Follow the money folks.
Commentators are beholden to whoever is paying their bills.
Nothing new here.
I’m not sure if globally the worst-case scenario is off the table. When EU wakes up to their options they will at the least begin devaluation. This will begin another tumultous period of global infighting, adjustment, uncertainty. And in the same way, Spain will buck against austerity imposed by Germany, the developed world will buck against Asia. The world, and current currency arrangement, will be the new Euro. We will then need the GMF (galactic monetary fund) to bail us out … oh wait, it’s called inflation.