Let's be both optimistic and realistic. The US economy expanded at a faster pace during the fourth quarter of last year than during the previous two quarters. I think there are reasonably good odds the trend will continue in the US this year, at least for the first couple of quarters and perhaps all the way through if we start to see unemployment decline more than a hair.
I like that! BIS. So now I have a name for what I've been feeling.
Independent economist Ed Yardeni describes the fact that investors would like to turn upbeat, but still feel beat up by last year's volatility as BIS--Battered Investor Syndrome.
He notes, "This ailment can trigger frequent panic attacks. It can also cause blindness to an improving investment picture. You may have heard of a 1966 book written by Richard Fariña titled, Been Down So Long It Looks Up to Me. Today, many investors could write a book titled, Been Down So Long I Don't Know Which Way Is Up."
Investors in emerging economies may just have a cultural aversion to risk. Countries in the industrialized West have a tradition of upward mobility, which is an incentive for investment in the market. Notably China has had growth in its upper middle class, though there has been a squeeze on this from both government favoritism and the global economic reality.
Couple that with the fact that U.S. dollars are essentially free and it quickly explains why world currency/bond markets are so volatile... it's the ancient carry trade. If you are an investment bank/hedge fund/speculator you borrow in the U.S. at 1% (or lower) and take it overseas into a currency yielding 5%+, pocketing the spread. Works great until that currency or bond collapses as happened to MF Global with Italian bonds. Then, poof, you are dead because the money is borrowed and you are leveraged. This is the grave danger of the Fed ZIRP policy and why the world has become more volatile.
Re : Investor Uprisers Still Fearful About Economy
yalanand
1/4/2012 10:02:04 PM
All told, it's a pessimistic view. Almost 77% expect some kind of recession somewhere.
@Scott, thanks for the update. If there is a recession what will be the nature of recession ? Will it be double dip recession ? How long we will take to recover from this recession ?
Re: Move to Brazil
yalanand
1/4/2012 9:59:42 PM
next decade or so will see the rise of investors in the developing world and their propensity to invest in fixed-income securities and not equities
@Broadway, already this phenomenon is happening. For example in India fixed Income deposits fetch investors interest rate of 10% which is pretty huge compared to the negative returns they are getting from stock markets. The percentage of the total population who invest in equity markets is pretty less.
Re: Move to Brazil
driven
1/4/2012 9:31:42 PM
Gee, thanks for sharing that uplifting bit of analysis, @Broadway.
Re: Move to Brazil
Broadway
1/4/2012 9:27:51 PM
One story that I've seen in the financial press that's got me feeling more doomier and gloomier -- particularly for the longer term -- is the research put out by (I think) McKinsey, saying that the next decade or so will see the rise of investors in the developing world and their propensity to invest in fixed-income securities and not equities, thereby draining money away from the equity markets in proportion to other investments.
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