bull over bear

The US government has reached a temporary deal on the debt ceiling issue reopening government and putting an end to the psychodrama,  only until March 2014 however. Warren Buffet commented this week on this issue by saying “Credit worthiness is like virginity, it can be preserved but not restored very easily, so it is crazy to play around with it.”  He also added, “These guys may threaten to take their mother hostage, but they will never hurt their mother.” This sums it up well and shows how a big part of this saga is for show.

At our L.A. conference, I had the pleasure of hearing Howard Dean, former Vermont governor and candidate for the Democratic nomination for President of the United States in 2004.  He gave a good description of the tactics and stratagems used by the Tea Party to bring their agenda forward in times like these.  He also stated that the future of politics will be quite different with changing demographics and the “Global” Generation fast exchanging information and being more homogenous in wants and needs.

As far as the now is concerned, tapering of Quantitative Easing is unlikely until the debt ceiling is finally resolved. In the meantime, the US continues its healthy recovery. Equity Markets continue their ascent especially in the US and if you checked your investment portfolio lately you are very pleased to see impressive returns.

We continue to prefer equities over bonds as we see better yields and less interest hike risks.  At the same time, we favour developed over emerging equity markets and stocks tied to the North American and European economies.   Even Nouriel Roubini and David Rosenberg, the dubbed “Perma Bears” i.e. permanent pessimist, have turned positive on the current state of the World economies and bullish on equities.  Here is what they currently say.



Always remember that equity investment returns are closely tied to corporate earnings growth and the price you pay for those earnings. Historically, over the long term corporate earnings have been fairly stable and have grown along with productivity gains and inflation. Stock valuations though are more volatile than earnings since they are influenced by investor sentiment, which swings between optimism and pessimism.  So, ignore the noise, avoid reacting to the daily news and stay the course with your annually reviewed and tweaked portfolio.   You will never go wrong holding a diversified portfolio of quality investments.