What Troubles Me, and What Should Trouble You Too
"The problem with the world is that fools and fanatics are always so certain of themselves, and wiser people so full of doubts."
- Bertrand Russell
As Grandma Koufax taught me, I often live in constant fear that the "Cossacks are Coming."
This is not an innate condition of fear or a permanent state of investment paralysis. Nor is it, as some have claimed, the status of a Perma Bear -- as I actually am long a number of stocks.
Rather, it is a reflection of the realities, concerns and uncertainties that investors face over the next 1-2 years.
Tomorrow's opening missive will discuss the threat of central banks' normalizing interest rates in a world heavily laden with debt.
While the Perma Bulls will call my concerns a " Wall of Worry," I believe that is far too glib and a non rigorous response to serious issues.
In the past twelve months I have consistently and continuously written that never in my investment career have their been so many market and economic outcomes -- many of which may be interpreted as market unfriendly. (This is something my pal and legendary brokerage executive and investor Ira Harris mentioned to me a few years ago).
I also wake up every morning with some nagging questions -- now totaling eight! -- " This Aint No Seder " -- which makes this market different than other markets.
Yet, many are self-confident -- and use as their baseline expectation that we will see a "hockey stick" of nominal GDP growth and U.S. corporate profit growth in the next two years coupled with some further expansion in price earnings multiples.
I am deeply skeptical of that outcome. The lack of political, geopolitical, economic and market certainty of outcome helps to explain, in part, why I have shorted my investment horizons]Shorten Your Investment Horizons and Hang Tight") and reduced the size of my trading and investment positions. I recognize this eight year global bull market will not die easily thanks, in part to a combination of animal spirits (they call them animal spirits because animals are dumber than humans!) and central bankers (who often act like animals)!
At the same time I also recognize these pearls of wisdom from another friend, Byron Wien:
"Disasters have a way of not happening."
From my perch, the growing list of developing uncertainties is not market friendly and will weigh on valuations for, as The Oracle has taught us, the intermediate- to longer-term the market is not a voting machine but rather is a weighing machine.
I remain honest in view and uncertain and lacking of confidence of direction over the near term. At the same time I remain negative over the intermediate term -- in which downside risk is likely at least 3:1 versus upside reward.
