Byron Wien, vice chairman of Blackstone Advisory Partners, and I were on Larry Kudlow’s show on Monday night, and Byron was bullish.
He said that he felt that the economy was doing better than the data showed. While he said that this was mostly a feeling, he thought that strong corporate earnings were a compelling positive. Byron is a very smart and experienced guy, and while such finger-in-the-wind opining could be easily dismissed from others, Byron has earned greater consideration.
How do you feel about the economy? It is a critically important question and so is your answer. Your feelings about things economic will guide your behavior as a consumer and investor. You can see how mass sentiment can be self-fulfilling.
I took the more cautious stance against Byron. The data show a good deal of weakness and that weakness will likely continue for some time. I don’t believe that maintaining a bullish or bearish stance at all times is completely necessary, but I do think it is critical to have an honest, realistic assessment. Mine is, and has been, that there is no V-shaped, bounce-back recovery from this economic contraction and that emerging from it (as we most certainly will) will take time. During that time global economic growth will continue (albeit at a more tepid pace), and money will be made. Investors with exposure to international growth across different economies and conducted in different currencies should benefit. Stocks in companies with strong balance sheets, outstanding management teams, and dividend yields that compare favorably to Treasuries should outperform the overall market. This is not a “swing for the fences” stock market. This is a market in which longer-term returns of 7-8% should be gladly accepted and appreciated in light of the alternatives.