Dear Santa,
Several years ago I was horrified to see that you had been wiped out by Madoff, so I have avoided sending you my Christmas wish list. I hope you have now had a chance to rebuild your fortunes, because we need you.
As you know from your strong track record running the elves’ DB pension plan (ignoring the Madoff affair – Why oh why did you reach for yield?), it has been a rough year for fundamental investors. Correlations among a variety of strategies are at their highest levels in two decades, and once counterbalanced asset classes like gold, bonds and equities now defy all logic to regularly move in tandem. A variety of macroeconomic issues have dominated the news and thus the market’s attention over the year, resulting in month after month of one-step-forward-one-step-back moves that would make Sisyphus despair.
For value investors, the strategy has always been to take advantage of Mr. Market’s mood swings to buy assets at a discount to their intrinsic value. While I am usually not one to complain about already cheap assets becoming cheaper (especially strong performing assets), the issue at hand stems from the feeling that we are at an inflection point which is constantly being stretched out, endlessly delayed. Rather than the change associated with an inflection point, we are living through a fog of indecision, with leaders and policymakers worldwide kicking the can down the road and refusing to atone for the sins of the past.
So this Christmas I ask for just one thing: an end to the madness; risk-on / risk-off is no way to live. Maybe a lump of coal will help encourage the right policy moves?
Merry Christmas,
Frank Voisin
P.S. Readers: what’s on your Christmas list?
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