Investment Strategies for the Age of Global Change

Global capitalism is in the process of a fundamental restructuring characterized by the rising of emerging economies, the evolution of large pools of international investment capital, the slow-down of economic growth in the industrialized world, largely the result of industrial countries' balance sheet contamination, and the aging of the Baby Boomer generation.

Some of these trends are a continuation of economic forces unleashed at the fall of the Berlin wall, which added billions of workers to the global capitalist labor market, and kept downward pressure on wages. Technological innovations in the 90's helped fuel steady productivity gains which further contained labor costs. Historically low interest rates and a savings glut in rapidly growing emerging markets in the 2000's led to an expansion and ultimate explosion of easy credit. While much of the developed world borrowed and consumed more than it should have, many emerging economies saved and produced to meet the twin demands of easy credit and inexpensive goods. Though some issued prescient warnings along the way, the global masses seemed content to believe getting something for nothing was now possible. Just as it took time for the imbalances to reach critical mass, so it will take time, as well as painful adjustments to regain balance. The 2008 global financial crisis was a devastating manifestation of the secular restructuring taking place.

To quote El-Erian, the CEO of PIMCO, and previously in charge of Harvardís gigantic endowment fund:

Through a series of transitions, collisions, and trade-offs (the journey), we are heading to a world that is re-regulated, de-levered, and growing less rapidly in the industrial countries (the destination). It is a world in which concerns about the dark side of globalization tempers enthusiasm for its net benefits, and in which politics matter a lot for markets and the economy.

The world of investment management has changed fundamentally. Like all evolutionary change, the new world (what El-Erian and the folks at PIMCO refer to as the New Normal) crept up on us without most of us noticing. Think of Greenspan's now famous quote in testimony to Congress in 2005 about his 'conundrum' of long-term interest rates failing to move in relative tandem with short rates. We didn't fully understand the nature of the restructuring. Only now are we coming to grips with this new world. Let me rephrase, some of us are coming to grips with the "New Normal." Unfortunately, the majority of investors we meet are still investing with the mindset and strategies of yesterday. Too many advisors and Wall Street firms are placing hope ahead of experience and relying on the same outdated assumptions that were proven to be hopelessly inadequate during the meltdown of 2008.

How successful was your investment strategy in mitigating past market meltdowns? Are you still working with advisors affiliated with investment firms that not only contributed to the 2008 crisis, but were so out of touch that they made themselves insolvent if not for government bailouts? Would you like to learn about some of the protective strategies similar to those we recommended to our clients for them to navigate through the financial crisis?

We invite you to contact us to schedule an appointment for a second opinion review. There will be no obligation, and we won't try and "sell" you something. Please click here to schedule an appointment with us.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results.

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"Unfortunately, the majority of investors we meet are still investing with the mindset and strategies of yesterday. Too many advisors and Wall Street firms are placing hope ahead of experience and relying on the same outdated assumptions that were proven to be hopelessly inadequate during the meltdown of 2008."