Broad Oak: your emotional support animal

Tuesday, May 04, 2010

It's not the ship, it's the tide that matters

The great problem for investors in today's environment is that there is no return on short-term, safe assets yet the higher risk levels on longer-term, higher return assets are too uncomfortable for most people...

The centerpiece of our own strategy [...] is understanding liquidity flows. They are the single most important force driving investment markets both up and down. Contracting liquidity caused the crash in 2008-2009 and dramatically expanding liquidity since March 2009 has triggered one of the greatest bull markets in U.S. history. The next bear market will also be driven, at some point, by a contraction in liquidity flows. However, as long as the great reflation is doing its work, that day can be postponed. [...] The music is playing again. People are back out on the dance floor. But, if the great reflation is as artificial as we believe, then this is still musical chairs. When the music stops, there won't be a chair for everyone, just like the last time.

John Mauldin

The only winning strategy "for the long haul" is to be fully committed to the market when it is rising and economic fundamentals support that direction, and to be entirely out at all other times.

Karl Denninger

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