You can go your own way
You can call it another lonely day
- Fleetwood Mac
Many readers have commented on my use of song quotes. In response, I've received many good and many not-so-good suggestions. The above quote, however, fits this column on my 2010 outlook exactly as all market participants look for their "own way" to protect principal while garnering above-market returns.
In short, we will all have to "go our own way" as we react to government activity, market pricing and constituent influences.
In 2010, I see three consistent and enduring struggles to be hashed out in the public arena. Each of these will consume an enormous amount of energy and debate, the result of which will be important for gauging ongoing economic activity into the future.
First, and where I've directed most of my e-ink, will we finally face the facts on Fannie and Freddie and answer the tough questions in Congress that will finally move our mortgage sector back towards a free market environment? Today, some nine out of 10 new mortgages have some kind of government support (bailout?) and the U.S. government owns three out of 10. In the long run, a socialized mortgage market will not provide for stable home prices and will keep the consumer and our economy at bay.
Second, is the outsized government spending we see today going to provide long-term benefits, or will it simply help smooth the rough edges of this troughing economy? Our government leaders should target both short-term and long-term gains when scribbling in the taxpayer's checkbook. There are many areas of investment the government can make that will help slingshot growth once the economy gains traction. It is up to us in this republican form of government to ensure the best of investment ideas are enacted.
Third, how will the American family react to this extended period of forced saving and increased uncertainty around job stability and wealth? Many have said that Americans have overspent for far too long and need to cut back in favor of saving for that proverbial rainy day. Today, it is raining, but I'm unconvinced that the gathering storm is enough to create a cultural shift away from spending and toward saving. Perhaps 2010 will be the turning point, but given the hype around ever-new consumer technologies such as Apple's to-be-announced tablet and the latest electronic readers, I remain unconvinced.
These are the major topics to be hashed out in 2010. Market action, Fed response, and investor demand will revolve around these three debates. Of course, all eyes are on Washington for the first two of them, but you and I — the consumers — must decide the third.
A Brief Comment On Haiti
Capturing the country's attention as it has this past week, I thought it impossible not to comment on the multitude of fundraising efforts mobilized in such a quick period of time.
I consider myself blessed to live in a country rich with generous citizens who happily give to disaster survivors and recovery efforts not only their money, but their time and effort as well.
Having said that, please be sure to investigate your donation conduit as this is exactly the type of disaster that can bring about the worst in people as well.
December retail sales declined 0.3 percent, upsetting expectations for an increase of 0.5 percent. However, November's number was revised upward by 0.5 percent. Even after disappointing, sales of retail goods in December were at their second-highest level since October 2008.
The University of Michigan's consumer sentiment survey inched up from 72.5 to 72.8 in January. The current conditions component rose to 81.0 from 78.0, achieving its highest reading since March 2008, but the expectations component declined from 68.9 to 68.7.
The views expressed in this column are solely those of the author and do not reflect the views of SVB Financial Group, or SVB Asset Management, or any of its affiliates. This material, including without limitation the statistical information herein, is provided for informational purposes only. The material is based in part upon information from third-party sources that we believe to be reliable, but which has not been independently verified by us and, as such, we do not represent that the information is accurate or complete. The information should not be viewed as tax, investment, legal or other advice nor is it to be relied on in making an investment or other decisions. You should obtain relevant and specific professional advice before making any investment decision. Nothing relating to the material should be construed as a solicitation or offer, or recommendation, to acquire or dispose of any investment or to engage in any other transaction.
SVB Asset Management, a registered investment advisor, is a non-bank affiliate of Silicon Valley Bank and member of SVB Financial Group. Products offered by SVB Asset Management are not FDIC insured, are not deposits or other obligations of Silicon Valley Bank, and may lose value.