I was asked last week why I hadn't written something significant
for Minyanville recently. My response was, "I am watching the world
around us instead." The person I was speaking to walked away
perplexed and shaking his head. I was a wimp for not having an
Turn on the TV, open the paper, or click into the blogosphere,
everyone has an opinion - and a definite, if not extreme one at
that. Investing is all about confidence, and if, as a pundit, you
don't have a clear, absolutely certain view, there is no room for
you today. Do you see the world as black or white? Choose, damn it!
When I offered to another friend recently that I actually wasn't
sure where the markets were headed from here, he emailed back, "You
know that in financial publishing you can't stay on the fence too
Don't stop to reflect, just opine. Did you not hear me? Just give
me black or white. If I wanted 50 shades of gray I'd have read the
book. OK, I'd re-read the book.
To be clear, my pause for reflection is not at all a function of my
prior for better or for worse views on the market. I write as I see
things. When I am right, great. When I am wrong, I am wrong. But I
call them as I see them.
My current state of indecision, though, reflects what I see as a
market in need of a new story, or said more accurately, new
. From the Fed to
) to gold to the circle of leading economists, I sense, as the
Wall Street Journal
put it yesterday regarding Apple, "a crisis of identity." The
clear, strident universally-shared views of the past are under
siege and no longer certain. Last week, for example, I saw stories
(aka analyst reports) suggesting that gold will go on to make new
highs in 2014, while other stories suggested that the metal should
be valued for its industrial utility (well below current price
The lady or the tiger. Choose.
And the same could be said for housing today. This first quarter
was either the pause that refreshes or the beginning of a major
So which is it?
I don't know.
You would think that with equity prices at record highs the signals
would be clear, but they are not. The same economic recovery
Pew presented yesterday
abounds in American social behavior today. For the very high end,
Pew's top 7%, it is
The Great Gatsby
. For the other 93%, it is more like
. As a socionomist I see the distinction every day. The luxury
market abounds with wealth-effect behaviors, while the rest of the
economy suffers from adverse income effect. Not in modern times has
America seen such a contrasting experience between the owners and
users of financial and commodity assets.
As I see things today, do economic conditions now improve for the
93%, or do the 7% -- who have been driving the economic recovery --
now roll over?
I don't know.
But that is what I am watching for closely.
From my perspective the markets are at a significant crossroads
here. Confidence rises and brings with it broad, accelerating
economic growth, or this is as good as it gets and the economy --
along with the equity market -- rolls over.
But I would note that with bonds and equities, both at record highs
at this critical juncture, the financial market outcome is all but
certain to surprise investors. As best as I can tell, Modern
Portfolio Theory never contemplated this moment.
So I watch. And at the risk of overstepping, I'd recommend that you
do the same.
What's next is going to be big. Very black or very white.
Right now, though, it is all 50 shades of gray.
Peter Atwater's groundbreaking book "Moods and Markets" is now
Barnes & Noble
"Peter Atwater brilliantly provides a framework for understanding
both the socioeconomic hubris that led to the great credit bubble
of the past decade and the dark social-psychological hangover that
has resulted from its collapse. In so doing, he offers an
invaluable guide to what promises to be a very difficult and
turbulent period ahead as we experience what he calls the 'me,
here, and now' behavioral tendencies of the post-crash world."
-Sherle R. Schwenninger, Director, Economic Growth Program, New