I know, I know, my title just sounds like I’m a huge believer. That I’m one of the few people that only see the positive in the world and forget, read ignore, the bad things happening. But, truly, I don’t think that the picture is that dark right now. In fact, I think that we are right in the middle of the opportunity of a decade on the stock market. I’m definitely looking forward to 2012. We keep looking at worst case scenarios where the entire Eurozone collapses and provokes the biggest banking failure in history. This kind of scenario is very sensational and is sure sell a lot of newspapers. But what if we make another scenario? A brighter one? Let me do the exercise for you…
What if…
The Euro Zone comes to an agreement and is able to set a viable financial structure to resolve their problems? It is obvious that we won’t have to deal with only Greece, Italy and Spain. Soon, we will hear about Portugal, Ireland and maybe even the pillars of Europe; France and Germany that will have to borrow at higher interest rates. The problems are real, but at least now, people are taking them seriously. This is why I think they will come up with a solution. Will it involve other countries such as China which has a lot of liquidity to invest? Maybe. But I’m sure of one thing; the leaders of the Eurozone are now taking this debt problem very seriously and they will find a solution.
What if…
We get through the US election and concentrate on the real problems? Since the summer of 2011, we have been watching the election “pre-game show”. On one side, we have the republicans and on the other the democrats. One side wants to cut social programs, the other wants to raise the taxes. But all they do is play political games and are not interested in addressing the problems. Once we get past the 2012 election, I hope we get a more stable US political environment that can manage the US debt problems.
What if…
China controls its inflation and continues its crusade for more growth? What if Brazil does the same thing and continues to buy products. The BRIC is facing growth challenges but we all know that they are far from being done with their expansion. Rough economic times are usually a great moments for any growing countries as their companies have no other choice but to review their processes and become more efficient. This is how great economic expansion is created; through productivity!
Speaking of companies… haven’t you notice something very interesting?
Haven’t you noticed that the S&P 500 is trading at a P/E ratio of 12 while the historical average is 15-16?
Haven’t you noticed that the level of liquidity in US companies has never been so high?
Haven’t you notice that the profits are higher than pre-2008?
Haven’t you noticed that companies’ profitability hasn’t been that high for a while?
So let me ask you a question : Do you invest in countries or companies?
‘cause while the countries suck… the companies seem to be in a pretty good shape. This is why I’m so optimistic about the future. Because I am investing in companies that are making money right now and that are in a strong position to make even more money tomorrow.