Positive Change at the Margin Continues

I was up 13% for the year to date on this date. It wouldn’t last. The U.S. economy and corporate earnings were looking good, but Greece and Europe would rear their ugly head again.


March 16, 2012

Here we are with equity markets hovering around recovery highs and threatening to break out. Nevertheless, the world is still a mess with an ugly bunch of structural problems, although perhaps a little less messy than a few months ago. What to do now? My reaction is that it’s too soon to take off risk and that at the margin the chances of a financial apocalypse and a double-dip recession with all of its drastic social consequences have diminished quite significantly. There is still a huge amount of hedge fund and long-only money that has missed this rally and is hurting.

To be specific, the threat of a euro-European breakup has lessened; a slow, gradual economic recovery seems to be taking hold in the U.S., China, and most other parts of the world; and a war with Iran skyrocketing the price of oil appears less likely. Are we for sure out of the dark, deep woods? No, of course not, but maybe after a long, five-year stretch of more and more bad stuff happening, we are going to get an interlude of better weather. If so, equities will be the primary beneficiary as investors scramble out of their dimly lit, minimal-return storm cellars into the sunlight. ...

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