While attending the Investment conference, I was not in search of single- point certainty on the many questions I posed. That would be a foolish quest in this uncertain era. Yet, I was rewarded with insight from around the world, insight that speaks to real interdependencies between economics and politics. What follows is not a series of set-in-stone predictions. Instead I offer the results of careful thought that link economics and politics with finance and finally, to investment. Based upon the experts’ information, as well as some economic report published in the last 2 weeks:
1. America is a great place to live. As Tony Blair said, “that is why so many people are trying to get into this country”.
2. The US will avoid a recession next year – probably. It would be wonderful to forecast a strong global recovery. Yet Europe is still trying to right itself, joblessness stays high in the U.S., and real estate’s ability to escape the malaise remains an open question.
3. Several countries and/or banks in Europe could fail. The impact could start a domino effect that could be dramatic. This must be carefully watched until next summer, at least.
4. The FED will keep interest rates low – Bill Gross calls this “Financial Repression”. Through low interest rates on savings and CD accounts, the savers are in effect funding the recapitalization of the US banks. Bill expects this to continue for some time in the future.
5. Dollar devaluation will occur gradually to attempt to keep US competitive against effects of globalization.
6. Computer trading has become pervasive and creates a problem with fairness in the stock market. It needs to be reined in.
7. There is a big difference between investing in the stock market and investing in companies through the stock market. Investing in high dividend stock is an effective long term investment strategy. Buying high dividend, quality companies is one strategy to defeat the effects of computer traders.
8. Globalization and wild swings in asset prices will continue in the future.