2012 Ground Hog Day Again

Posted: Dec 20, 2011 12:01 AM

The year is almost over, and once again, it’s time to drag out the chief investment strategists, from Merrill Lynch to Charles Schwab, and from Morgan Stanley to LPL. 

Just like the movie Groundhog Day, when Bill Murray kept repeating over and over his one consequential day, so to will the investment community repeat over and over their pronouncements for their year ahead. 

We’re starting to hear exactly what we heard last year and what we’ll hear next year….buy stocks. 

We’ll hear how the decoupling process from Europe and China, though difficult, will allow the growth of the U.S. to really take hold. 

The decline in the unemployment rate will be discussed as another sign that things are getting better. 

Of course, the most recent announcement by Citigroup and Morgan Stanley of dramatic staff reductions will simply be viewed as another smart strategy where corporations are matching expenses with revenues. 

We’ll hear how difficult 2011 was, and of course, without a crystal ball, they’re not sure exactly what will happen in 2012, but the strategists do know for certain, it’s now time to….buy stocks. 

Normality will be stressed as the so-called “reversion to the mean” will be trumpeted loudly. 

As the asset classes continue to trade in lock-step, we’ll hear how difficult it is for investors, but good for traders.  Diversification, which is one of the building blocks of the buy-and-hold philosophy of modern portfolio theory, will be viewed as becoming more significant for the year ahead as “risk on, risk off” fades into the sunset. 

Our relationship with Europe and China will be diminished as they go into recession, yet we don’t. 

As a matter of fact, the continuing European train wreck will present some wonderful opportunities, so….buy stocks.  Like Groundhog Day, the story is always the same. 

Why?  Because Wall Street, and consequently the strategists, are compensated by how much people buy. 

A strategy of preservation of capital by rolling over T-bills the past few years is not Wall Street.  A strategy of income streams and liquidity is not Wall Street’s idea. 

Growth as being last on your wish list, instead if first, is definitely not Wall Street.  But “buy stocks” is most assuredly Wall Street. 

Therefore, you’ll hear all the preceding reasons, though grounded in fantasy, as why you should….buy stocks. 

It’s Christmas, after all, and like the movie Groundhog Day, maybe a little fantasy is OK.  So, go ahead….buy stocks (only kidding!).