Tuesday, October 25, 2016

Dueling headlines... Economic uncertainty continues

"City Construction Set to Beat 2007 Peak"

"Tech Investors Grapple With Where to Bet"

"Search for temporary workers started in August, a sign of tight labor market"

"Echoes of Financial Crisis As Countries Hoard Cash"

How does one reconcile these headlines picked out from the Wall Street Journal and The New Times today?  There's significant new money being invested in New York commercial real estate, finding workers for the holidays is a challenge, capital is pouring into tech venture funds seeking the next big opportunity, and European and Asian countries are dealing with saving gluts and seeking safe havens for money that is not finding attractive choices for reinvestment.

It's the dilemma of these times, and what is largely responsible for the low to no interest rates in many countries.  How to maintain growth in China, Europe, and prosperous Asian countries is not clear.  Corporations in general have become increasingly cautious, preferring to spend on stock buybacks, dividends, and generous options for corporate insiders rather than R&D and new projects. The U.S. continues to balk on new and necessary infrastructure spending with its Congress of economic lightweights, as well as safe seat seekers and keepers who are afraid to be leaders. That may not change, despite the election results.  China moves the chess pieces around at its discretion so that anyone who claims to know the growth rate there is just guessing.

It is difficult to be comfortable with new investment and new capital spending in this environment. In many areas of possible investing, the next big thing is not clear.  As an example, Google has made significant investments in imitating Apple recently, a smart competitive move but not especially incremental to the overall economy.

Regardless of the ease of index investing and the inclination by many to make no changes, the thought here is that this is exactly the time to look at allocations carefully, even if just the mix of indexes, and make portfolio changes so that there will be minimal regrets when it's time to hit the mattresses.  At least whatever happens will reflect choices.


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