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Thoughts on 2011 & 2012

If you missed it S&P 500 index closed the year at 1257 exactly where it had closed one year earlier in 2010!  Setting aside having identical closes two years in a row which was a statistically low probability event; the meager performance on its own wasn’t too surprising considering earnings for S&P 500 companies were up just 3.2% over the last 12 months.

Nash equilibrium

Whether President Obama’s recent job plan aka fiscal stimulus plan will be passed in its entirety or passed partially is still not certain, but what is certain and factually supported given the work of Reinhart and Rogoff is that solving or getting out of this malaise or hangover from our recent credit bubble will take more than just several years.

Joy of Cash

With countries like Portugal, Ireland, Italy, Greece and Spain facing a burdensome amount of public (government) debt the risk of having a sovereign debt default or restructuring which are fancy ways of saying bondholders will lose all or good portion of their money seems increasingly likely … especially in the case of Greece.

Current Investing Paradigm

The financial crisis in 2008 effected many different facets of global economy one of which was to increase the uncertainty and risk in various investment decisions.

Reference Scenario

Here is an excerpt from an excellent article in Institutional Investor magazine written by James Shinn highlighting the four key events that will determine the near term direction in financial markets:

Your Destination Check

Came across an interesting article in an investment advisory trade journal. The author (Bill Bachrach) began by writing about a fictitious event in which a traveler had boarded the wrong flight. Upon hearing the usual destination check that is done by the flight attendants he jumped up and loudly asked to be allowed to get off the plane.

Round Trip Fallacy

Often so many of the news items or opinions we read or hear – especially those with some basic data are fraught with what can be referred to as ‘Round-trip Fallacy’.

PIMCO Treasury Position

Not that money managers that manage $230 billion can’t make a mistake on their call, but considering the intense investment process and access to quality insight and research that shops like PIMCO have it is only prudent to consider the implications of their recent move.

Q1 2011 Selloff

As always on any given day pundits and reporters try to associate a particular event to why the market has gone up or gone down. This week many are associating the recent sell off with the events in Libya.

Return Expectations

One of the common questions investment professionals often receive is on return expectations for various asset classes.  Prior to the 2008 financial Crisis a common long term return assumption that many pension funds were using was about 8% for a typical balanced portfolio, while many were using long term return expectations of 10-12% for an all equity portfolio.

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