Author: John Linnemeier
Covestor model: Opportunistic and Adventurous
Investors are always dealing with a murky future, but I must say that things are far more murky than usual. I find it very troubling that the U.S. legislative and executive branches of government appear to be unable to agree on a reasonable balanced budget. This is compounded by some very basic problems in our financial sector. Due to the fabulous lobbying power of those dealing in speculative financial instruments, like CDOs and credit default swaps, I don’t see much hope for serious regulation. This is just a time bomb. We’ve had two serious disruptions, and at this point, I see no way of predicting when the next one will hit. I hate to be such a Cassandra, but that’s the way I see it. For various other reasons, Japan and Europe are in equally bad shape.
Internationally, the only major country I see with a rational fiscal and monetary policy is China. Stock markets in the emerging world can be tricky, though. They have a tendency to overreact both ways, up or down. I’ll be looking for reasonably priced Chinese ADRs with an emphasis on consumer spending, an area that the Chinese government appears to favor.
In general, I expect to stay mainly in cash over the next few months. That said, I’ve seriously considered getting into McDonald’s (MCD). It’s a company that tends to perform well even in a recession. Also, they are expanding aggressively throughout Asia, which of course is where many expect much of the world’s growth will come from in the next ten years or so.
I’m always looking for good high-tech stocks either in America or elsewhere. We’re all profiting from a technological snowball, which has been gathering strength since humankind picked up the first tool. It continues to grow exponentially and this factor alone may save us economically despite all of our political stupidity.
In 2011, I fault myself for getting out of American Water Works (AWK) and McDonald’s too early. I reacted too quickly to what turned out to be a short-term downturn. In a market like this with such tremendous volatility, I shouldn’t have sold so quickly.
All the best wishes,