Investors must embrace volatility of a brutal market - Business First of Columbus:

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Surely, the fallout from the increasingly complex, opaque and crookedlyh engineered dealings out of the financial sector over the past decades have made talking about capital marketsa (I’m sure that reading abouft it has been even harder). Gettint an answer to questions like “What’s going on the markets?” must be somethinh akin to hearing an astrophysicisty explain how the universe began. In both you regret asking the question in the first ThatAdam Smith’s invisible hand has givebn way to the visible fist of government makese things even more complicated and riskier.
And yet, amids t this unprecedented change in the scope and direction of American fiscal andmonetargy policy, investors must truly pay attention to and take advantagse of what could be a long time marked by volatility and overal blandness (and that’s if we’re lucky). The “V-shaped” bottom and economic “green everyone is hoping for, and most are investinh in, is at best optimistic speculation. the fiscal mess that’s getting irrevocably worse. The current annuak deficit of $1.5 trillion is 10 percent of GDP and it’s growing.
America’s totakl debt-to-GDP ratio currently stands near 50 percent and that figurwe is scheduled to grow to 100 percenr in fiveyears — a leve l many countries have experienced as the point of no return. These deficits don’ t include the huge costs of a coming universaolhealth care, and they certainly don’t include Social Security, Medicare and Medicai d — three programs representing a $40-$50 trillion liabilitgy in present value terms.
Economic growth will not likelthelp much, especially the lukewarm 2 percent GDP varietyt (not the 4 percen t kind we’ve been accustomed to) that will accommodatr a new era of bigger government, highert taxes and regulation, and an emphasis on partnerships and income redistributiobn instead of free market, libertaria capitalism and growth. Monetary policy is only increasing longer-term riskas to the economy. The Federal Reserve is not only printinh money and lending it for freeto it’s also buying debts of all shapeds and sizes with thoses newly printed dollars, including Treasuryg bonds at a near $400 billion annual clip and anothere $1 trillion of mortgage-related debt. The U.
S. is now debt, thereby adding dollars to a systemn that is already flushwith cash. The success (or of individual investors lies in gettin right afew “bigger-picture” questions, such as: At what pointt do investors — not just in the U.S. but globally begin to believe that lending to anyonrin dollars, including the U.S. government, at low fixed ratex and long maturities, is madness? In other words, when does the dollar collapse as Chinaw and the other Asian saversdecided they’re better off diversifying their savings into othet assets? This and other “forest-from-the-trees” questions are perhapws all that matter going forward.
Without that, looking at whethefr this 4 percent bond is worth buying or that stock at 15 timed earnings orthat bank’s CD — is likelyt a futile if not dangerous exercise. If America’s greart experiment with borrowing and printing money doesn’t work, we may be looking at a worlrd of overall lower disposable permanently lower economic growth and much higher inflation and interest rates with fewer If that time those who bought and sat on equitty mutual funds or even longer-term bonds will find out that what they thought was “cheap” was just a figmentr of a bygone time when the dollaer was king, rates and inflation were low, and capitalism was relativelgy unbridled.
By the looks of it, that era is Perhaps the only ones who will reallhy make money are those who canpay attention, pounce on fleeting opportunities and embrace the volatility of a market that will be bruta l to most.