A quick prologue today: We have had many people subscribe to our blog in the past month. As a reminder to some and as notice to our new readers, our Purchasing Power Portfolio has been created and is managed based upon the beliefs that investment markets are very efficient and that the future is far more unknowable than we tend to acknowledge.
We write a fair amount about “uncertainty” both because we believe it is essential to respect the unknowable future and in order to counter mainstream investment commentary, which has a tendency to promote or suggest the opposite.
It was indeed a nice nod to our approach when Chairman Bernanke recently said that the world was in a period of “unusual uncertainty.” You may have heard many others repeat the phrase “unchartered waters.” While we agree, we further believe that the global financial markets are always uncertain, even when they appear to be otherwise. It was no accident that as soon as market participants started taking about “taming the business cycle” and “the great moderation,” we encountered the worst financial collapse since the Great Depression – a collapse that occurred soon after Bernanke himself infamously proclaimed that “the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained.”
We also write to expose common myths and misunderstandings that are promulgated by the general investment community, usually for their own ends (for example, reducing their own liability, ease/laziness, and obfuscation) and not for the benefit of their prospective and existing clients. Our goal is to help our readers become more critical and careful investors. As we have written before, we educate rather than prognosticate.
So, welcome to our new readers. Feel free to write to us or post public comments on the blog. We encourage the back and forth.
This will be brief.
This weekend I heard a commercial on the radio. A woman exclaimed that she had heard one expert say that the economy was turning around and things were bright ahead and yet another expert said that the worst was yet to come. She didn’t know who to believe. The announcer then suggested that she take things into her own hands and get an MBA at a local university and decide for herself.
Setting aside the notion of overkill (a fair amount of time and money), my question is: how would that help her? She may learn how to approach the question, learn some of the helpful financial jargon, and even learn complex mathematical models to help her come to her own, more informed conclusion. But once she comes to her own conclusion (presumably sometime in the next 2-4 years), I am certain that there will be many reasonable, articulate, equally-or-more educated people who will disagree with her. To counter that, must she return to the University for a PhD? When does that quest end? Judging from the disagreements of the experts that started her quest in the first place, the answer is clear — never.
If the PhD Princeton economics professor serving as Chairman of the Federal Reserve can stare directly into the subprime tsunami just before it hits shore and declare it “contained,” this crystal ball stuff just might be harder than it looks.
At Euclid, we know that savers and investors do not have the option to do nothing. For even nothing is something. And the mattress that appeared to work so well for so long in the US could now be the powder keg for the fires of inflation. It’s time to take a fresh look at your portfolio and time to build a suitable new mattress for these “unusually uncertain” times. We’re here to help.