Posted By:
Matthew PimeHey Guys, Happy New Year. I've been a lurker for what seems like a thousand years. Thanks in advance for allowing me to join the conversation. I'd like to share my viewpoint on what I feel is a crucial thread and respectable town forum.
Without a doubt, we are amidst a very unique geo-political and geo-economic time. Fear is rampant worldwide. Here in the US, discomfort is at an all time high.
As a registered investment advisor and FINRA appointed Registered Principal, I am on the frontlines of the economy. Fortunately, we're independently affiliated with the most solvent insurance based firm in the business. However, the news isn't good for most and will likely continue in some fashion until 2011, possibly all the way towards 2015. Here's why-
1. Investments have either evaporated (this time affecting many upper 2%'s due to investments in derivatives and Bernie Madoff fallout) or have dropped between 30-50% on average within the equity markets over the past year.
2. Nationwide leveraging in both corporate and personal capacities. Capitulation is likely to occur between 2010 and 2011. Corporations will be unable to refinance debt obligations and millions of homeowners will see their option-arm mortgages implode.
3. TARP money is likely to be ill-appropriated. Some executive players (i.e. Krause with Merrill Lynch) will be teflon, while others may be indicted. This will again create fear and an unwillingness to trust Wall Street as we know it. Recently, FOX News sued the government on a 'freedom of information act' claim. They petitioned for a public record accounting of these monies. So far, no dice. It's not looking good at this point. The average taxpayer is likely to be individually responsible for $5k-10k of their income to fund these mysterious bailouts.
4. Bernie Madoff is essentially the Jesse James of investments; the crook of all crooks. He is responsible for a generational wealth gap that in most cases in unrecoverable. The headlines alone are enough to discourage most of the nation from investing heavily in the equity markets. Hedge funds will likely shrink in number once redemptions are possible. They will have to unravel their portfolios, which may possibly produce other ponzi-schemes.
5. There will be a new generation of broke senior citizens like we've never seen before. Even when the equity markets were performing well, there was concern that most boomers hadn't saved enough and were over-extended. Fast forward several years and you'll find that they are leveraged to the hilt and whatever they had saved has lost a dramatic amount of principal.
Imagine a 55 year old with a $500k 401k balance who wants to retire and take distribution by age 70. If the investor acheives a 6% annual return, he will have $1.275 million when he needs to turn it into income. Based on a 6% distribution rate, that equates to approximately $72,500 of lifetime income. However, the reality is an absolute 'double negative.' First of all, investments are likely to either have flat or dismal returns over that time horizon. Combine that with higher income needs and the fact that people are living longer than ever...and you've got a serious wealth crisis amongst the elderly. They will essentially run out of money because their distributions will outpace their returns.
So....Bruce isn't that far off on his predictions.
I do see a silver lining and ultimate rebirth of the economic system when this has all flushed out. It will likely create a tremendous bull market for those who participate and more responsibility through proper regulation.
Now...when it comes to cards (whew!!), protected wealth will likely support pricing because the market for premium examples is thinly traded. People like Bruce and myself will hopefully be able to participate in fractional bargains because we see value. High end cards are truly tangible and in most cases have better name recognition and headline capacity than most fine art and other high end collectables. (antique furniture, non-gold coins and others)
I've been buying nice cards lately between $400 and $5000 at deep discounts to their respective peaks. I've participated for over 20 years because it is a sentimental investment, and a valuable part of my financial portfolio. From my perspective, Generation X'ers like myself will assimilate better towards fine art of the Mantle,Mays,Cobb,Ruth genre than Picasso,Matisse,Hockney kind of old.
The 'right' cards will continue to rise in value due to simple supply and demand during these tough times. Bottom feeders will pick up discounts and their will be a flight to quality within all portfolio fundamentals.
Be safe in 2009 and hug your loved ones. They are your most prized possessions.
Hopefully, I'll have time to contribute in the coming year.
Best,
Matt