“I know something you don’t know.”
In The Princess Bride Mandy Patinkin smiles during an epic sword fight as he is forced back, step-by-step, towards the edge of a cliff. When his assailant asks why, he says that he knows something the other doesn’t: he’s not left-handed. As he changes hands, the tide of the fight turns.
As the market struggles with fears about Greece, concerns about employment, and questions about bank solvency, many participants are smiling: they know something many don’t: we’ve been here before.
Not at this specific point in history with these specific problems. But the problems that we are facing are fairly well understood. Over-indebted nations with a bloated public sector needing debt restructuring? Latin America in the early ‘90s. Only then it was an entire continent, not just the periphery of Europe. A stagnant, jobless recovery and fears of deflation? The US in ’03-’04. Oversupply of a key economic component leading to structural issues? Oil in the late ‘80s—just like housing today.
The triple challenges of Greece, Employment, and Housing are weighing on market sentiment, but they are fairly well-understood, and the economy has faced them before. There are lots of ways for policy-makers to address them. The more the market worries about these issues, the more opportunities there are for nervy investors to make money.
It’s not the problems we know about that should worry us. It’s what we don’t know about.
Douglas R. Tengdin, CFA
Chief Investment Officer
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