A Star Is Born?

Every decade there’s a new star. And every decade, it starts with skepticism.

In the ‘70s it was gold; the ‘80s had Japan; the ‘90s saw the Nasdaq; and the ‘00s had China. These markets rallied some 10-fold during their heyday. What’s next?

One approach is to look for the asset that no one wants. In the early ‘80s Japan just made cheap electronics and small cars; in the early ‘90s no one wanted US stocks. Both Japan and the US started with financial crises.

So which market gets no respect, today? My money is on Europe. The problems with the Euro are well-known: the industrialized north is growing at the expense of the service-oriented south, and financial and economic tensions are ripping the Euro apart. If the currency fails, all bets are off.

But all this is priced into the markets. Sir John Templeton once said that bull markets are born on pessimism, grown on skepticism, mature on optimism and die on euphoria. The best time to buy is when pessimism is strongest.

Douglas R. Tengdin, CFA

Chief Investment Officer

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