I try to be objective, with the given that, of course, I will form an opinion. My opinion is I expect a long-term recovery. I do not see a quick "V-shaped" recovery*. I think the current rally in the markets is too optimistic. How does that opinion affect my investment advice? Being objective, it means we invest, but we invest defensively. We attempt to mitigate risk, not eliminate risk. Most importantly, we make every effort to work within your comfort zone. Part of being objective means you're willing to read and study both sides of the argument. Here's an example of two very competent people who disagree. Fed Chair Powell warns of a possible sustained recession while Fed Chair Evans says reasonable to assume return to growth
5/13/2020 WASHINGTON (AP) entire article . . .
excerpts . . .
Federal Reserve Chair Jerome Powell warned Wednesday of the threat of a prolonged recession resulting from the viral outbreak and urged Congress and the White House to act further to prevent long-lasting economic damage.
The Fed and Congress have taken far-reaching steps to try to counter what is likely to be a severe downturn resulting from the widespread shutdown of the U.S. economy. But Powell cautioned that widespread bankruptcies among small businesses and extended unemployment for many people remain a serious risk.
“Deeper and longer recessions can leave behind lasting damage to the productive capacity of the economy,” the chairman warned in his prepared remarks before holding an online discussion with the Peterson Institute for International Economics. “Avoidable household and business insolvencies can weigh on growth for years to come.”
In his remarks Wednesday, the Fed chairman underscored some of the harsh impacts of the recession. Among those working in February, nearly 40% of households earning less than $40,000 a year lost a job in March, Powell said.
Powell’s downbeat view contrasted with a speech Monday by Charles Evans, president of the Federal Reserve Bank of Chicago. Evans sketched a more upbeat outlook and suggested that “it’s reasonable to assume a legitimate return to growth in the second half” of this year and into 2021.
https://www.wsj.com/articles/feds-evans-says-it-is-reasonable-to-assume-return-to-growth-in-second-half-11589214624 (subscription needed)
My point about being objective is listen. Whether it's as important as religion or politics, or if it's as trivial as the debate over Michael Jordan or Lebron James being the GOAT, we have lost the art of listening. Hearing what the other side has to say. When it comes to making investment decisions, you must listen to be objective.
_______________ *Here's an example of how I can be wrong in my lack of faith in a V-shaped recovery. I am shocked.
Carnival Cruise Lines was inundated with bookings after announcing it would return to the high seas starting in August.
Cruise Planners, a company that books cruises for the world’s largest cruise liner, said bookings shot up by 600 percent when Carnival announced that it would begin again on August 1.
The spike is a 200 percent increase over last year.
Side note: I hope Carnival Cruise lines is not flooded.
Comments