Archive for November, 2009
Much has been voiced already about the events coming out of Dubai. Are they small and contained, and will pass from the headlines in a matter of days? Or, are they indications of an ongoing pattern of debt defaults that will continue to spread for an extended period until global deleveraging runs its course? What does this all mean for industry, the economy, and asset management?
While, in absolute size, this event is not large, it seems to be reigniting some fears of contagion. As I wrote recently, market sentiment moved from fear to greed quite quickly in less than a year. This creates an environment which is ripe for disappointment. Further, since we do seem to be experiencing an extended period of deleveraging globally, Dubai provides a reminder that there is much work to be done before we get the all clear signal that conditions are relatively normal again. Indeed, as I’ve written before, we seem to be in a “new normal” environment which will be unlike the recent boom times.
For asset managers, as well as managers of other businesses, the events of Dubai remind us that we must manage our businesses with the very best practices in order to succeed in the “new normal” environment. We need to move forward, but in a cautious way with great respect for unknown risks and events which could appear without warning. A well managed business is the best way to overcome such events without losing significant momentum.
November 30th, 2009
Led Zeppelin had nothing on these markets. They seem to be climbing a stairway to heaven. We have gone from extreme fear to greed in less than a year. Am I wrong? Should we expect this advance after the extreme oversold condition in March? Are others as unsettled as I am about this?
November 23rd, 2009
Investment managers are still not operating as if this recovery will have legs. Budgets continue to be tight, and hiring, while picking up some, is being done judiciously. In past downturns, some forward looking firms spent, while others didn’t, and gained a leg up during the recovery. I don’t see that happening this time. There seems to be a sense that we are going through a transformational period which creates uncertainty about the future. Uncertainty always causes firms to slow their decision making.
What will change this behavior? Continued market rallies? Clearer economic recovery? Just more time? Or, will we be in a new environment, one in which industry dynamics continue to be sluggish for a prolonged period? In any case, managers are being forced to be more strategic in their decision making as they navigate through uncertain waters.
November 18th, 2009
“…what it is ain’t exactly clear.” Those old lines from Buffalo Springfield describing political and cultural changes of the sixties (I’m showing my age!) could easily be applied to the current economic and market environment. What exactly is happening here??? Equities and commodities are off to the races again today. The bond market has been relatively stable of late. What does gold know that bonds don’t, or is it vice versa? When will the declining dollar no longer be good for stocks?
Unemployment continues to rise while earnings improve. Is this just the typical productivity led recovery, or is something else happening here? Is it possible these jobs won’t come back and technology will pick up the slack? What are the global implications, and where will the U.S. land on a relative basis?
As I talk to asset managers, I get the feeling that things are picking up a bit. Many are beginning to grow again, and they are hiring judiciously. But there remains a high degree of caution. Most that I talk to don’t quite trust what is happening, but they can’t explain it. There remains a high degree of uncertainty.
Is this the usual wall of worry that the market is climbing, or is there something else truly happening? What about all of that debt??? What are your thoughts?
November 9th, 2009
Is the economic recovery real? Last week we received a rather strong report on the economy for the third quarter. The question is: what caused it and will it continue? We know that government stimulus played a major role in the bounce in growth that we’ve seen. Nevertheless, this result is surely better than continued economic contraction. The issue becomes how the economy will perform in the inevitable absence of such extensive stimulus.
We are transitioning from a secular increase in leverage and debt to a secular reduction in such leverage. This transition will ultimately override shorter turn moves in the economy and markets. Such a transition does not occur in a few months or even a couple of years after the previous secular trend took place over a generation. It will dictate the “new normal” in the economy and markets which will be characterized by muted growth and uptrends, depressed profitability, and false starts.
In this environment, companies and their executives will need to differentiate their performance from their competitors in order to succeed. The best firms will excel. Many of the rest will struggle. Best practices across all functions will need to be adopted if firms are to grow and prosper.
November 2nd, 2009
RSS Feed