With my tongue planted slightly into my cheek, perhaps the lovely Lauren Bacall had it right.... time to leave this mortal coil to those that continue to wreck it?
As we know, The Fed is continuing the discussion regarding the inevitable "what to do next," then sandbagging our nation with "official statements" that lack inspiration, and are nebulous at best. Janet Yellen is convinced raising interest rates will hurt our fragile economy.
When are we going to do it, then? When we can't possibly sustain the decision? It WILL hurt, simply because it's gone on too long. We're postponing the inevitable pain, people. The truth is it may not be anywhere near as bad as people seem to think it should be. However, if The Fed can hold on long enough, perhaps the rate change will be so jarring, people in power can profit far greater from the national fear response. Sounds like a conspiracy to me.
Abroad, Japan and countries in Europe aren't faring much better. Indifference seems to be the order of the day. Japan raised their national sales tax, forcing consumers to buy everything they could, which caused a spike in the national GDP. The concurrent dropoff was going to be significant (18%+), but it's obvious where it came from. Markets recover, even if people are foolish enough to believe that the drop was real, at least in the greater sense. No, it was simply a country doing its best to stockpile. It's not like half the population went homeless or didn't have money anymore. They simply planned in advance, yet across Japan, this news rippled affecting consumer confidence far and wide.
No market can (or should) fail forever. Countries don't disappear. They struggle, and Japan has struggled for 20 years. Still, why do we listen to economists? What do they know that we don't? Why do we continue to walk through the world of finance looking for the path of least resistance? Why do we gobble up the news they're shoveling? I'd love to know why people choose to remain ignorant. It kills me, really.
Speaking of ignorance, it's not like private individuals are faring much better, at least in how they're investing and trading. Even though some hedge funds aren't producing returns worth the fees they are asking, retail investors are struggling mightily.
"Amidst difficult financial times, emotional instincts often drive investors to take actions that make no rational sense but make perfect emotional sense," said BlackRock back in 2012. "Psychological factors such as fear often translate into poor timing of buys and sells."
Retail investors typically see the market fail and register that feeling with a move out of their positions, which locks the money loss. It's not real unless it's "realized," which of course happens when they sell those losing positions. Retail investors do the same thing when the market rises. They make the wrongheaded assumption that it'll keep moving. Americans love a winner, after all. We've all seen this happen but many investors (some sophisticated as well) seem determined to lose their own money first. At least it seems to be their first choice rather than pay a financial firm to assumptively make the same mistakes for them.
I get that perspective. I really do. However, I can also say that professionals such as myself rarely follow retail logic. We know how to manipulate the markets to work with us. As you can imagine, that's not something you just teach. It takes YEARS. Personally, I've been trading for 7 years, and I'm still considered a newbie. Even though it's rare, I still make the occasional mistake/bad call. Fortunately, my very active position management helps offset the losses accrued from that original "bad choice."
This is why a fund can charge the fees we do. We perform.
This all said, investors and Advisors are seeing Alternatives (such as the aforementioned hedge funds) much more favorably these days. Our fund, Adaws Eagle Fund, LP is an absolute return fund, so you can see we're part of that growth. It's just about vetting the firm and agreeing that their track record is worth the risk you see placing your assets within.
Now that I've got that all off my chest, here are some great links for reading today. Enjoy:
- You're just not good at trading, sorry -
- Europe loves them junk bonds -
- Let's keep blaming Japan -
- Alternatives are hugely attractive, finally -
Today's blog is representative of my personal thoughts only. I want to make that clear, so as not to create more friction than intended, but man.... I feel so much better now. Thanks for letting me yap.
As always, blessings.