There's a few commentators & posters here suggesting we're in the eye of the storm.
Various macro indicators have shown tentative signs of improvement, and anecdotally stocks & house prices are rising.
We appear to have survived the banking/financial crisis. So what's going to be the catalyst for the expected 2nd leg down ?
Is it going to be known known - like unemployment rising ?
Or an unknown unknown ?
Or something else ?
I'm not sure how to answer this.
There are two components a direct (answering your opinion) and an indirect (whats the effect on my investments).
To answer the first:
i dont think there is a high probability of a 2nd leg down. How can we get a 2nd leg down, if the leg is still on the floor. Sure we are seeing potential greenshoots, but greenshoots are just that: indications that things maybe turning for the better. Dont tell me we are going to see another period like November to March (from an economic point of view, not with regards to any asset classes).
Look at the drop in trade figures during this time, look at the freezing of finance. There was a period here that was really scarey. I dont know if anyone watched the latest Warren Buffet interview on cnbc asia (i posted it somewhere in this forum), but he said that there was a brief period where big business was at risk of performing basic business like issuing payrolls through the banks.
From current levels we are not going to see some of the drastic quotes that we saw in recent times, like trade figures down 30-40% in a month (especially as over time these will be from lower bases).
To answer the second:
It will depend on the relationship between actual performance and expected performance. The higher asset classes move in the anticipation of better expected performance, the greater the chance of disappointment if things dont turn out as expected. So many people fail to understand this key point.
All my investment energy is being directed based on the assumption that we are in for a 'L' type recovery (but try to get that 'L' on a slowly upwards moving projectionary, i can't type it here cause there is no symbol, but basically its not flat, just moving up slowly from the bottom).
Why am i investing this way?
Well if it turns out to be a 'v' recovery then i will still do nicely. If it doesnt then my investment strategies are not predicting 'blue sky', and hence there is not much room for disappointment in the market, and hence my investments shouldnt be shot down (at least not from the point at which i purchased the investment).
If i highlight two things for this forum:
1) dont understimate mankinds ability to adapt to his circumstances
2) dont understimate the ability of capitalism to direct its efforts towards making profit.
These two characteristics have served us well over the centuries, always have always will.
Future profit will probably not come from the sources that generated profit in the near term past, especially if we are in for a time of structural change, but profit will be made, its up to people to research where those profits will come from. Those that successfully identify the profit catalysts will do very nicely, regardless of the times.
). There is something distinctly unsustainable about their mix of quasi-market economy and full-on state control that will trip them up at some point in a big way IMO.
