Hi everybody! Welcome to the December 2011 Asset Management Strategies Newsletter. Hope everybody had a good holiday and happy new year. Early December was dominated again by news out of Europe. They don’t have all the issues resolved there, but they do seem to have a strategy for having a plan in place. That seems to calm the market considerably. Later in the month we did have more political dysfunction surrounding the extension of the 2% payroll tax reduction which really didn’t do anything to help business plan long term. We did see some lower jobless claims numbers and improving consumer confidence numbers. Consumer confidence is important since usually about 70% of our GDP is consumption driven.
If we look at the entire year for 2011and look at is as a snap shot; I often talk to clients about how easy my job would be if I could get clients to look at their statements once a year. If you look at it once a year it takes all the drama out, and we sure had some drama this year! Early in the year we had the Japanese tsunami, we had the expiration of QE2 in the summer which is pretty much a forgotten event, and then we had the debate over the debt ceiling. At the end of the day this entire calendar year result was that we had one of the flattest years we’ve ever had in the stock market. We’ve had years when the markets gone down, we’ve had years when the markets go up, but it’s very unusual this flat of a stock market. There’s only one other year in the last 50 years that the market ended up as closely at the end of the year to where it started in the beginning of the year. My way of looking at 2011 is I think it was really a year of worry. We had all the concern over what happened in Europe; the debt issue there. We had concern after the impact of the tsunami in Japan as to how that would affect supply lines and the world wide economy. We still have a tremendous debt problem here in our own country, and I think that we’re worried about our political situation as well. We also worry about the first time down grade that the country took on its debt which has never happened before. Of course we also worry quite a bit about Peyton Manning.
So what are the lessons from 2011? I think we’ve placed too much importance on what’s happened most recently. This isn’t always the way things will be. We forget that in the late 70s and early 80s we had 10% unemployment, we had 10 % inflation, we had 18% car loans, we had 15% 30 year mortgages. We thought that that was the way things would always be, and yet our most productive years in the stock market were soon to follow after that.
My advice for 2012, cheer up! We don’t have to have all the problems completely solved and put to bed. We just need to have a plan to start. Look at Europe. That’s what they did and it seems we’re going to be able to digest that problem. Small steady sustained improvements will keep us in the right direction.
I had an interesting conversation with a client who was understandably very frustrated. His daughter just graduated from one of the good schools, had great grades, and she was very lucky to find a good job. Corporations aren’t hiring if they don’t see demand and consumers don’t spend if they don’t feel secure that they’ll be working next month and their homes will be worth even less. I think we need a catalyst. We need an igniter. We need some kind of a flashpoint to get things moving, and it’s kind of like an opposite game of musical chairs. Right now there is no music and everybody’s just sitting on their hands waiting for something to happen. It will happen. Maybe it will be the election, maybe it will be continued strong earnings numbers, maybe it will be the absence of bad news, but here’s my bold prediction for 2012. Are you ready?
At the end of 2012, we’ll still be here and my prediction is we’ll be that we’re better off at the end of 2012 then where we stand today. Thanks for listening. As always we appreciate any comments or feedback that you have. Feel free to call our office or shoot us an email at firstname.lastname@example.org. I’ll talk to you next time and thanks.