Tuesday on Twitter I said “Moved the % of US equities in my long-term portfolio down from moderate to basically zero.” I got a lot of questions so here’s more.
What? · I’m too busy to be an active investor; most of my portfolio lives with a nice low-MER low-ceremony investment firm where I pick the proportions that go into various buckets and they try to go down the middle of that bucket in risk-reward terms. So I didn’t get to ride the pre-crisis zoom all the way to the top, but I bled quite a bit less than most others when the you-know-what hit the you-know-what. (I’m still in favor of jail time for a substantial chunk of the Wall Street executive scum.)
Anyhow, when I sat down with them Tuesday morning, I asked them to take all the money from the “US Equities” bucket and put it into others.
Why? · It looks to me like consumer spending in the US is pretty well flat for the foreseeable future. Management is (appropriately) biting down hard on expenses so profits are trending up and share prices are ramping reflexively. But I keep reading these stories about the frightening number of mortgages that are underwater or otherwise troubled; which is to say there’s still some air in the big mortgage bubble and that top-line is going to stay flat for a whole lot of the economy.
Here’s a little symptom that crossed my radar, one of the many straws that broke my US-equity-tolerance camel’s back: Why NetApp Is Winning, by their CTO Dave Hitz. Dave quotes an analyst who thinks their quarter was “supersonic” and says: “The quick summary is that our revenue was flat from a year ago, up 9% from the previous quarter. Profitability has also recovered.”
He argues that NetApp’s doing well because they have a better virtualization story. Maybe so, but a market where the winnners have flat year-to-year revenue just doesn’t smell investable to me.
Trans-Pacific · I’m a fan of the United States of America and would like to be an investor, but I just can’t see doing it until there’s progress on a couple of really hard problems, one each side of the Pacific.
The necrotic malignancy eating away at the conservative half of the US political spectrum. Any healthy civic dialogue requires a sane pro-business conservative voice, arguing that grand plans are prone to grand failures, and that the public sector is prone to subtle systemic corruption. Unfortunately, America’s official opposition has become a self-parodic rump, all about sex and superstition and obstruction. I just don’t think it’s possible to be usefully pro-business and anti-science at the same time.
One consequence, just for example, is that the US political arena is entirely lacking in rational debate about how to pay for the services that a voting majority of Americans apparently want their government to provide them.
The Chinese regime’s ongoing embrace of mercantilism; all those political and monetary resources deployed in support of keeping the currency unreasonably low and the export opportunities unreasonably high. With, as a consequence, insufficient money flowing into service industries and, more important, middle-class pockets. I continue to think that what China needs is some good old-fashioned Social Democracy, where you use labor laws and bank regulation to route spending power to working peoples’ wallets.
If that happened and for a while the RMB soared and the dollar sagged, it’d be good for both China and America. But it’s not going to, because China’s oligarchs are blinkered and corrupt; existentially threatened by any slackening in economic growth, they’re just not going to change the recipe that’s kept their heads above water this last few decades.
At the end of the day, all the world’s big problems are essentially political. I’d promptly reinvest in an America where there was fact-based dialogue between sane Left and Right factions and which had a Chinese trading partner interested in a sustainable relationship. I’m not holding my breath.
I wonder how many other people there are like me?