Now that the Greater Fool Decade is over, I thought I would dust off my prognosticator hat and do a little strategic planning since we just experienced the stock market’s second worst performing decade ever.
Here are a few of my top, and relatively simple, investing themes for 2010 that will weigh upon the financial markets:
The phrase “no credit wanted” might be broad sweeping theme for many U.S. consumers in 2010.
No longer will consumers “bet the farm” or leverage themselves to the breaking point just to buy more stuff. That ship has temporarily sailed. The cost of being an indebted consumer is just too high (20%+), and too much resentment exists from debtor nation to (voluntarily) carry a balance.
Hat tip to Mike Mandel at the Innovation and Growth blog for posting one of my favorite charts of the last decade. If there was ever an X-Y plot to symbolize the irrational behavior of 2000 to 2009, this might be it.
If the popularity of walking away from your debts gains momentum in 2010 (I and several others think it will), more Americans who owe more than their home is worth will elect to walk away from their homes even though they can afford their payments.
Americans love to walk among the herd, and if others begin to do it, the sting of foreclosure’s social stigma will become even more diluted. Perhaps walking away from an underwater home will become the default (pun intended) game plan for anyone who finds themselves in this unfortunate position, and willing to take the hit on their credit score.
A reduction in rainfall has been wreaking havoc for California farm owners, and while water won’t become more valuable than oil (per barrel) anytime soon, the controversy surrounding water availability for the southwestern states will become even more heated as we move into 2010. It’s not a national debate — yet — because it’s fairly isolated to the southwestern states, but if Governor Schwarzenegger’s appearance on 60 Minutes chanting “We Want Water” is any indicator, 2010 could be a very big year for the water conservation movement.
Like clockwork, the fear of the unknown has pushed more investors away from equities and into the “safety” of bonds when they should be looking for bargains elsewhere. Most of the analysts I’ve seen are very bearish on bonds and suggest jumping off the momentum train before the bubble pops.
(My purely unprofessional opinion only.)
When you find yourself in the the unfortunate position of buying just because everyone else is buying (e.g. the herding mentality), it’s a good idea to switch to a third person view to get the lay of the land and buy the undervalued assets that no one wants for the short term but still has a positive long term outlook.
Got any big picture ideas that will move the markets in 2010 and beyond? If so, please share them with the group.