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Steady As She Goes

Sean Sun
Friday, 7 Oct 2011 | 4:15 PM ET

Our economy continues to trudge along. In a time when rates are already at historic lows, it’s difficult to see outsized benefits from Operation Twist. Further fiscal stimulus is also unlikely with deficits at around 10% of GDP. During a time when the Fed is out of bullets and Congress unwilling to enact other economic boosting measures, it’s hard to see where the domestic economic recovery would come from. Unemployment has stayed at 9.1%, dampening chances of increases in housing prices. Corporations are holding off investments despite historically low borrowing costs because there are few worthwhile projects in the U.S. Some investors, including George Soros, are arguing that we’re already in a recession.

As we work our way through the excess housing inventory, there could be a gradual recovery. But it’s clear that through the pre-crisis excesses will take a long time to deleverage. But in the end, the global recovery will inevitably be tied to Europe. Despite the promises of European politicians, it’s not clear that long term austerity will be beneficial to those living in Greece. As hedge funds poll the sentiment of German voters about further bailouts, where should the average investor put his or her money?

Certainly, times are gloomy. But doom always foreshadows times of expansion. In the coming months, our team continues to see weakness in the Euro and is investing in U.S. companies that we believe will outperform the broader market on a relative basis. We also continue to hedge our investments with gold and other ETFs for downside protection. While none of us can clearly see the future, we do believe that there are currently plenty of bargains to be found that will pay off in the future.

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