Trying to formulate an intermediate-term opinion on a stock right now is like building a house on quicksand.
There, I said it.
Nothing I’m about to say should be considered advice. Rather, it is the doleful lamentation of a Wall Street professional who has seen an important avenue of stock selecion closed off to him.
Someone asked me yesterday about what stocks I liked for the first half of 2010. For the first time in my career, I found myself without even the beginnings of a constructive opinion. Never before have I had so little faith in being able to formulate a stock thesis for the intermediate term.
How did we get to this point, where looking out past any timeframe longer than a quarter would be sheer folly? I suppose I could point to these two main culprits:
– Macroeconomic Forces: Apparently, I must now heed every tick in the US Dollar and be wary of how backwater Eastern European sovereignties mark their asset portfolios.
– Political Uncertainty: The rules in virtually every sector of the market are subject to change at any moment thanks to the miasma surrounding Cap and Trade, Healthcare Reform, Extension of TARP, the Trading Tax and more.
Because of inevitable legislative risk and the hyper-dynamics of world currencies, looking out 6 to 9 months in terms of financial markets has never been harder.
Anyone who claims to be sure about any of these forces should feel free to put on 6 to 12 month positions, but frankly, I haven’t the conviction right now. I can only feel somewhat comfortable with two timeframes when formulating an idea these days:
a. The very short-term, with one eye on the exits and an ear to the ground.
b. The very long-term, with a willingness to bury the physical stock certificates in the ground so as to avoid reacting to changes in legislation or sovereign debt defaults in a desert somewhere halfway around the world that won’t matter in the end.
There is never anything even approximating “certainty” in the stock market as we all know. However, with the sheer amount of uncertainty we currently face, I’ll pass on the intermediate-term investment ideas for now.