The New Investment Reality
As summer winds down you can sense the pick up in energy that we experience in our lives. The start of school or college, a new football season, the end of reruns on television, the best movies of the year, new product introductions — they all make September the “real” start of a new year much more than the often dreary month of January. If September is where the action is, it is often been a horrible month for stocks, including last year’s financial meltdown. A strange juxtaposition — new beginnings colored with economic uncertainty.

This September has been different. A nation recovering from recession has a little less energy to spare for the cultural renewal of autumn, yet the slow recovery of our economic confidence has made September a calm time in the financial markets, continuing a climb from the March lows, into a slowing but still upward recovery of values and net worth.

It has been my opinion that if we can get through October without any more unusual and violent economic disturbances, then the financial markets will have exited the panic and bounce phase and entered into a more stable time of evaluating the speed and durability of an economic recovery. It is during this period that stocks will move less as an indistinguishable asset class and more on the fundamentals and economics of each potential investment. Industry and company specifics and prospects will matter more than the questions of recession, depression and recovery we have been forced to confront for more than a year.

All this does not mean the process of investing and financial planning will get any easier. In fact, over the past year the one question has been depression or recession, and the one decision has been to own stocks or not. It mattered less what stocks you owned, more if you decided to stay in the market at all through the dark days of late winter. Arrival Capital fortunately decided to keep clients involved in the stock market, as it was our belief that all economic rules had not been re-written and that value still mattered. Even while we kept more cash as a buffer, almost all client accounts have bounced back strongly and fully participated in the market recovery.

Now the process becomes harder. What stocks to own becomes the key question. Once again, it will be important to have a thesis to build upon, a way at looking at the world and a way of looking at potential investments. Perspective, also, will once again matter. What is your time horizon, and how does this compare with our view of the changing economic conditions of the country and the world?

Our thesis is that long term trends will re-assert themselves. For example, the developing economies of Brazil, Russia, China and India will continue to drive the revenues and profits of resource and industrial companies, as well as select consumer businesses. The aging population of the developed world will continue to lead to opportunities in the healthcare space, with or without insurance reform. Other incipient trends will also appear over time. We will look at these trends with a value oriented, opportunistic mindset, only committing client capital when potential rewards exceed potential losses in a meaningful way.

So please enjoy the autumn and all that it brings. Remember that as a year winds down, new opportunities are around the corner. Arrival Capital is happy to lend a hand to help you grab those financial opportunities whenever and wherever they appear.
- posted by Jay @ 1:53 PM