Bespoke Investment Group, an investment research and advisory firm and publisher of the Think B.I.G. blog, invited me and other bloggers to offer our thoughts on the current investing environment and the outlook for the year ahead. Below is a brief excerpt from the write-up they put together, which they've just posted at http://bespokepremium.com/roundtable/:
At the end of each year, the big financial media outlets typically conduct roundtables to get outlooks from key players in the financial markets. Over the past few years, the individuals that run the best financial blogs and websites have become key players in their own rights, and their opinions are highly regarded by millions of loyal readers. This year, we decided to conduct our own roundtable with some of the major names in the online financial community, and it's all available for free to anyone with Internet access!
Twelve of the most popular financial blogs/websites agreed to participate in the roundtable. Each participant was asked to respond to the same 25 questions regarding their 2010 outlooks as well as their take on 2009. The responses we got were incredibly insightful, and they should really help investors form their own opinions on what is to come for financial markets in the year ahead.
Below is a list of our roundtable participants. We have created a page for each of them that has all of their responses, and we encourage you to visit their websites as well if you haven't already done so.
A Dash of Insight - 2010 Bespoke Roundtable Q&A
Crossing Wall Street - 2010 Bespoke Roundtable Q&A
Financial Armageddon - 2010 Bespoke Roundtable Q&A
Footnoted.org - 2010 Bespoke Roundtable Q&A
Paul Kedrosky's Infectious Greed - 2010 Bespoke Roundtable Q&A
Investment Postcards - 2010 Bespoke Roundtable Q&A
The Kirk Report - 2010 Bespoke Roundtable Q&A
Random Roger - 2010 Bespoke Roundtable Q&A
The Reformed Broker - 2010 Bespoke Roundtable Q&A
VIX and More - 2010 Bespoke Roundtable Q&A
Wall St. Cheat Sheet - 2010 Bespoke Roundtable Q&A
World Beta - 2010 Bespoke Roundtable Q&ATo start off the roundtable, we've created a matrix highlighting prognostications for various asset classes in 2010. Not all participants took part in this section of the Q&A, but the ones that did are included in the matrix below. As shown, the consensus view is that the S&P 500 will be up in 2010, bonds will be down, oil will be up, the dollar will be up, US home prices will be up, and China's stock market will be up. The projection for gold was split.cPlease visit the individual Q&A pages (links above) to view each participant's projections along with price targets where applicable.
Below we provide various responses to each of the 25 questions. Remember that there is a Q&A page for each participant that shows all of their responses as well. The links are posted next to each participant's name above. Enjoy!
1) What has surprised you the most and least about financial markets in 2009?
Most participants thought that the sharp rally off the March lows without a meaningful correction was the most surprising thing about 2009. There were a wide range of "least surprising" answers. Below are a few responses.
Financial Armageddon: Least: The fact that equity investors don't really have a solid grasp of macroeconomics or geopolitics. Most: The willingness of policymakers and investors to repeat the same mistakes that helped bring about the worst financial crisis this century.
Footnoted: Obama's seemingly uncanny ability to call the bottom of the market (most). How some executives still don't seem to get the fact that outrageous perks, including tax gross-ups are disgusting (least).
Infectious Greed: How quickly U.S. consumers began spending again. Maybe it's true that U.S. consumers can't stay downbeat more than 18 months.
Random Roger: The size of the rally off of the March low has been the biggest surprise. After events like 2008, massive rallies are very normal, but the lack of a meaningful correction along the way has been surprising.
The Reformed Broker: The market's ability to put the blinders on and rip for 10 months has to have surprised everyone, myself included. I'm least surprised by the resumption of the commodity obsession that was abruptly put on pause in the heat of the credit crisis. It came back without missing a beat.
A Dash of Insight: My biggest surprise was the short honeymoon for the Obama Administration and the stock market reaction. For me, the least surprising thing was the general improvement in the economy and stocks throughout the year.
2) What do you believe are the most important lessons to be learned from the 08/09 financial crisis?
All of the responses to this question are worth reading, and they are listed below.
A Dash of Insight: We learned what happens when you get a complete cessation of lending in an economy that depends upon normal and sensible borrowing for regular commerce.
Crossing Wall Street: When market participants panic, governments panic as well. Not a new lesson but a good example of an old one.
Financial Armageddon: 1) The mistakes of the past have a habit of repeating themselves. 2) Bad policies beget bad outcomes. 3) While there may be free money, there's no such thing as a free lunch.
Footnoted: Greed isn't always good - sometimes it leads to serious problems. Greenspan wasn't the maestro he was made out to be. There's only so much crap that even skilled hucksters can repackage and sell.
Infectious Greed: 1) Don't watch television. I'm kidding. Mostly. 2) You can know that an epochal bubble exists, and you can know how to profit from its looming decline, but time the trade wrong and you might as well have stayed home that decade. 3) Credit rating agencies are a pro-cyclical disaster.
Investment Postcards: Banks' financial statements do not necessarily reflect the true financial picture. Geared hedge funds are responsible for extreme excesses in financial markets. Failure by central banks to enforce their monetary policy on banks as executors thereof eventually leads to financial and economic disaster.
Kirk Report: 1) Capital preservation is always more important than capital accumulation. 2) Wall Street is undergoing changes in ways that will make our markets more volatile than ever before. 3) America has significant challenges that must be addressed to restore its economic leadership over the world. If nothing is done, the standard of living for most of its population will be in decline over the next decade.
Random Roger: The details causing the crisis were different but the behavior of the market was not. Human behaviors repeat over and over, misusing leverage as one example. People have very short memories with regards to market turmoil.
The Reformed Broker: 1) Someone who went to Wharton can just as easily lose you all of your money as anyone else. 2) Someone who sits on charitable foundations regulatory boards of directors can rob you blind. 3) When rich people panic, really bad decisions are made with taxpayer money.Vix and More: 1) Always know your exits (especially where to take losses) in advance and do not deviate from the plan. 2) In a fat tails environment, the feedback effects will trump the underlying economics for an extended period. 3) Disasters almost always happen in stages.
Wall St. Cheat Sheet: Risk management, Risk management, Risk management. If you have any money in speculative products such as financial investments, you MUST have a stop loss point that allows you to call timeout and reevaluate the situation. Trends and emotions can always go much farther than we expect, so we need to have a simple line in the sand which acts as complete protection against the unexpected. Since most of us are not psychic, the unexpected is always around the corner.
World Beta: Avoid losing money. Investors dislike losses much more than they enjoy their gains. If investors and advisors were to design portfolios with that fact in mind, they would be much more proactive about managing their risk rather than maximizing their gains.
Click here to read the rest.
I thought the variance between forecasts was oddly surreal after reading them all...until I looked at each of the participants websites. After that, it all made a lot more sense. Tunnel vision is alive and well.
Personally, I think 2010 is the year we really hit the iceberg (and we sink in 2011 and 2012)...but what do I know, I'm not an active investor and not in the Wall Street world (where all of reality is created and maintained).
Kudos on your own work...you are one of a small cadre of people who mostly get it.
Posted by: John Ludi | December 24, 2009 at 06:34 PM