My weekly musing, followed by an extra long list of links (blame alcohol induced insomnia!)
A cute post [1] on The Motley Fool this week frames rip-roaring German second quarter GDP growth in the context of The Matrix:
The two sequels to The Matrix were disappointing; the directors couldn’t pull the wool from our eyes twice. But if the Wachowski brothers fancy returning to the theme of parallel realities, they could do worse then cover investing in Europe in 2010.
It seems investors have been living two lives. In one life, they panic about a double dip recession. They worry about European sovereign debt and austerity measures choking off growth, and they park their money in low-yielding government bonds.
The other life is the real world, where the major economies have returned to growth and companies are reporting booming profits.
It’s true that Germany posting GDP of 2.2% has surprised almost everyone, including all 34 economists [2] that Reuters polled ahead of the news.
It didn’t particularly surprise me to see solid growth, though I was taken aback by the extent to which Germany shrugged off the bad news agenda on Europe. I’ve noted before on Stock Tickle that the so-called sovereign debt crisis [3] bothers pundits much more than the markets. I even looked into buying German manufacturers a couple of months ago, but was scared off by the £/ € exchange rate.
So far, so normal – as usual I’m out of kilter with the punditerati. While I’ve been trying to shuffle a bit of money into safer (yet still equity-like) securities such as preference shares, I’m still overwhelmingly positioned for growth and inflation.
From a long-term perspective, I am very comfortable with this; shares have underperformed for decades, and are due a bounce back against government bonds.
I also see little mileage in all the long complicated stories about the end of the Western World that have been gripping investors for years now.
Firstly, I don’t believe they’re accurate predictions. Secondly, if I did it’s not obvious how to prepare for it.
Even my brother was in touch this week, forwarding some rant he’d copy-and-pasted about the US being about to go bust and asking whether he should put his money into a silver ETF.
My brother! He has a lot of fine qualities, but the closest he’s ever come to a contrarian view on investing is overturning the board in a game of Monopoly. I can’t help thinking an email from him is the bearish equivalent of Joseph P. Kennedy’s [4] stock tipping shoeshine boy in the roaring ’20s.
I told him as much, and also pointed out in the world he was preparing for – society breaks down in the US and all that – he shouldn’t count on being able to log into his online broking account to sell a few silver ETF shares to pay for the baked beans and shotgun cartridges.
I agree if you want to be scared, there’s plenty to be scared about; this Bloomberg interview with Boston University professor Laurence Kotlikoff [5] is the latest dire warning to give everyone the willies.
But I’ve got doom and gloom fatigue.
A successful investor told me many years ago that stock markets crash on sky blue days, while bull markets climb a wall of worry.
It’s proved true so far.
From the blogs
- When coach potatoes go bad – Canadian Couch Potato [6]
- The ten year results are in for lazy ETF portfolios [7] – MarketWatch [8]
- Ben Graham on asset allocation – Oblivious Investor [9]
- The Pinch reviewed – Simple in Suffolk [10]
- Money illusion – The Psy-Fi blog [11]
- Rebalancing to reduce risk and boost performance – Munro Blog [12]
- Best investments during inflation – Market Folly [13] (c.f. deflation [14])
- The magic of compounding – Barbara Friedberg [15]
- Climate change catastrophes [post links to PDF] – Simoleon Sense [16]
What the big boys say
- Fears of US double-dip overblown – The Economist [17]
- Day of the (brain) dead – The Economist [18]
- But will it make you happy? – New York Times [19]
- Personal finance on a napkin – New York Times [20] (featuring Carl [21])
- The great stock myth – The Atlantic [22]
- Buffett preps his portfolio for inflation – The Motley Fool [23]
- Why I still think stocks are cheap – Wall Street Journal [24]
- Pimco’s El-Erian on bond market violence – FT Alphaville [25]
- Crunch time for house prices – FT [26]
- Investors misled on risk and return – FT [27]
- Papa smurf threatens Blackstone coup – Telegraph [28]
- Inflation threatens value of savings – Telegraph [29]
- ‘Hindenberg Omen’ [guffaw] or FTSE 6,000? – Telegraph [30]
- The gender gap in British business – The Independent [31]
- Best way to buy solar panels – The Guardian [32]
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