Recent events in North Africa led me to think about a quote from a movie called "Goodbye Pork Pie", New Zealand's version of Easy Rider with a yellow mini instead of a motorcycle...(if you ever find yourself on an 18 hour flight, it helps kill the time).
"There's only one sure thing in this life and that's doubt, I think."
That sums up quite a bit. Now is the time for caution - and for some selective buying.
Will U.S. equity markets test interim lows? Will U.S. bond rates come in with some safe haven buying? Will U.S. high yield rates back up to more reasonable levels? Will QE3 be just over the horizon or will QE2 be left to pass?
I would add the following corollaries:
1. It is impossible to predict virtually anything with any sort of precision.
(Five year forecasts? How are they possible?)
2. Be very wary of anyone who is 100% sure of anything.
(Most high profile example: The Bernank. First thing you learn on Wall St. is to never guarantee anything, but then again The Bernank is an "academic".)
3. Revolutions do not end in days or weeks.
(It is clear that nobody remembers the Spanish Civil War, WWII. It takes time to move people and materials around the world, you cannot move ships, people and material via email, yet. The revolutions may end well but we will not know for quite a while)
4. Recent past experience guides most people's thoughts and opinions.
(Market up, sentiment up, high yield rates down, covenants being loosened again)
5. Just because a problem persists for some time, or longer than expected, does not mean that it is not a problem and does not mean that the problem will mushroom into a crisis.
(U.S. looming debt crisis)
Yes, there is quite a bit of negativity out there. On the plus side, the economy is improving, real interest rates are negative, and the prevailing trend for equity prices is usually up so it is better not to be completely neutral or bearish unless the world is falling apart.....
(It is a product of its time, the late 1970s; not appropriate for children)
