Current Thoughts On The State Of Capital Markets

This is my current thinking (for what its worth) and what I am saying to clients who have called in the last couple of days:

1) Economic issues are front and centre in the media: increased unemployment, severe slowing of economic growth across most sectors, tight credit markets (and on and on, blah, blah....).

2) All of that is built-in to the current valuations of holdings (and in some cases, in smaller and less liquid investments, there is significant undervaluation).

3) Historically, equity markets tend to lead the economy, i.e. they usually respond / react to negative stimulus well before the economy turns down. The reverse is true on the upside (6 to 10 months ahead).

4) While most investors wait for signals in the economy to give them more confidence, more shrewd, value oriented investors are bargain hunting.

5) There has been so much liquidity provided by the governments and central banks globally that, as some confidence is restored, all that money will have to be put to work and the trillions of $$ that are currently sitting on the sideline earning close to 0% returns will re-enter the equity market with some urgency.

6) Unfortunately it is tough to predict the timing on this, however my best call will be March or April of 09 (unless an unexpected shock of political or economic significance interferes in the interim).

7) It is tough to stand by helplessly watching and waiting when we are impatient to see improvement.

8) If you have $$ to invest and do not require the $$ for lifestyle needs for at least 2 years, then this is likely to be the best time to put it to work, i.e. be as fully invested in a globally diversified portfolio of good companies as possible.

9) Given the nature of the "melt-down", no asset class (other than cash) has gone unscathed.

10) For now we must wait for the "true" value to return to current portfolios (which will happen eventually) and let the managers make the necessary adjustments.

11) I will be vigilant to make sure that they (the managers) are acting in your best interests.

Hope this is helpful.