Market Confidence: 4 Things I Think I Think

Everyone wants to know the future; we crave it because we think it defines our safety.

But no one can predict it.

What we can do is be confident of a few things (and some of these may be considered controversial):

Passing the Baton

The generational baton being passed from the Baby Boomers to the Millennials of Generation Y will change our economy for the better in ways far too many are falling short in understanding. The only problem? Demographics demand patience and a long-term view. Traders usually do very poorly with five, ten and 20-year trends. Like a mosquito zipping back and forth around the flame, they might move around a lot eventually they get torched.

Pent-up demand

Massive pent-up demand is building in our economy. As fear recedes, some of the $9.2 Trillion frozen in bank accounts will thaw and move into the system. What does that mean? Even $1 Trillion will produce something in the neighbourhood of $5 Trillion in new GDP, given the cycle of a dollar through our economy.

Corporate investment returns

We have stated the last greatly misunderstood item for years: The corporate investment strike. It was never covered in the press because they missed it completely. Plus, you could never blame anything on Obama for fear of being deemed a racist instead of just talking about bad fiscal policy. Here is the point: Companies have been on strike as it relates to investing new capital. The message was clear: "I will keep the ship moving forward and get as productive as I can but I won't risk a bunch of new capital if so much is being shaved off the top."

US corporate repatriation

My hunch is that a small sliver of investors can even think about the idea that dozens and dozens of companies would come back to the US(!) if they just got better tax treatment.

Those ceilings are now being removed.

However, it’s unlikely these will be overnight wins as the market appears to be assuming right now.

What I would love to see right now is a nice setback for the benefit of all because I’m very concerned that we may be entering another one of those periods like in the 1980s and 1990s.

Back then, if you did not add to your portfolio on a two-three day setback, you paid more in the weeks and months ahead for years to come.