Investors must embrace volatility of a brutal market - bizjournals:

karnergetajequ1416.blogspot.com
Surely, the fallout from the increasingly opaque and crookedly engineered dealingds out of the financial sector over the past decadew have made talking about capital marketdsa struggle. (I’m sure that reading about it has been even Getting an answer to questionslike “What’xs going on the markets?” must be something akin to hearinyg an astrophysicist explain how the universe began. In both you regret asking the question in thefirs place. That Adam Smith’s invisible hand has given way to the visibld fist of government makes things even more complicated and riskier.
And yet, amidst this unprecedenteds change inthe size, scope and direction of Americanm fiscal and monetary policy, investors must truly pay attention to and take advantags of what could be a long time marked by volatility and overalk blandness (and that’s if we’re lucky). The “V-shaped” bottokm and economic “green shoots” everyone is hoping for, and most are investingg in, is at best optimistic First, the fiscal mess that’sx getting irrevocably worse. The current annualp deficit of $1.5 trillion is 10 percen t of GDP alone, and it’ growing.
America’s total debt-to-GD ratio currently stands near 50 percent and that figurwe is scheduled to grow to 100 percengt in fiveyears — a level many countries have experienced as the poinr of no return. These deficits don’t include the huge costa of a coming universalhealth care, and they certainlhy don’t include Social Security, Medicarwe and Medicaid — three programs representinfg a $40-$50 trillion liability in present valure terms.
Economic growth will not likely help especially the lukewarm 2 percent GDPvariety (not the 4 percengt kind we’ve been accustomed to) that will accommodate a new era of bigge r government, higher taxes and regulation, and an emphasiz on “private/public” partnerships and income redistributionb instead of free market, libertarian capitalisnm and growth. Monetary policy is only increasing longer-term riskss to the economy.
The Federal Reserve is not only printintg money and lending it for freeto banks, it’s also buyinf debts of all shapes and sizes with those newly printed dollars, includinb Treasury bonds at a near $400 billioj annual clip and another $1 trillion of mortgage-related The U.S. is now “monetizing” thereby adding dollars to a systenm that is already flushwith cash. The success (or failure) of individual investors lies in gettin right afew “bigger-picture” questions, such as: At what pointf do investors — not just in the U.S. but globallty — begin to believw that lending to anyonein dollars, including the U.S.
at low fixed rates and long maturities, is madness?? In other words, when does the dollard collapse as China and the other Asian saversdecids they’re better off diversifying their savings into otheer assets? This and other “forest-from-the-trees” questions are perhaps all that matter goingv forward. Without that, looking at whethefr this 4 percent bond is wortg buying or that stock at 15 timeas earnings orthat bank’s CD — is likely a futil e if not dangerous exercise.
If America’zs great experiment with borrowing and printingmoneuy doesn’t work, we may be looking at a worldc of overall lower disposable income, permanently lower economicf growth and much highefr inflation and interest rates with fewer financiers. If that time comes, thoser who bought and sat on equity mutual funds oreven longer-ter m bonds will find out that what they thought was was just a figment of a bygone time when the dolla r was king, rates and inflation were low, and capitalismk was relatively unbridled.
By the look of it, that era is Perhaps the only ones who will reallgy make money are those who canpay attention, pounce on fleetin g opportunities and embrace the volatility of a markef that will be brutal to