Volker Talks - We Must Listen
April 2005
When Paul Volker the former Federal Reserve Chairman speaks we should all listen. Without Volker's steel nerve and resolve to defeat the inflation perils of the 1980's it's likely that the civilised world would not be as prosperous as it is today.
On the 10th April he penned an article in the Washington Post entitled An Economy of This Ice
Volker's main point is that although everything (in the US) looks OK superficially (from an economic standpoint), "under the placid surface, there are disturbing trends: huge imbalances, disequilibria, risks -- call them what you will. Altogether the circumstances seem to me as dangerous and intractable as any I can remember, and I can remember quite a lot. What really concerns me is that there seems to be so little willingness or capacity to do much about it."
It's a devastating article that's for sure. Who knows perhaps it was one of the major contributing factors to last weeks dreadful stockmarket performance.
Hussman Reflects As Well
As we've remarked many times on this website the trouble with the internet is there are too many opinions, especially on the stockmarket. The best way to tackle the problem is to try and stick with just a few tried and tested sources. One we use is the fabled Swiss economist and hedge fund manager Dr Marc Faber. (see this post for more details).
Another excellent stockmarket commentator is John Hussman President of the Hussman Funds. The Hussman funds are always up there with the best performing funds on Wall Street. And there's no better a manager when it comes to generating risk-adjusted returns.
Hussman himself writes a very well researched weekly investment report and last week stated that the climate for stocks had shifted from a positive to a negative. Hussman likes to use probabilities, so although stocks can still rise when the climate is negative the probabilities suggest sideways to downward movement.
Summary
You don't get bigger than Paul Volker. You don't get a more rounded and sound investment manager that Paul Hussman. Dr Marc Faber spoke about the same topic a few weeks back (see here)
Stocks seem to be losing their shine and fan base. Things are looking shaky when it comes to the global economy. Has too much cheap credit been granted? Has the property boom fuelled too much excess?
All these questions and many more are looking for answers over the next 2-6 months. Now seems like the time to be more concerned with protecting what you've got rather than looking to make money.
See Also
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