2015 Investing Year Starts in Earnest

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With Monday just hours away the 2015 investing season gets underway in earnest–last week didn’t count of much as everyone was still focused on the holiday season.

It is good to remember that investing is a ‘marathon’ and not a ‘sprint’ and when we talk about the 2015 investing season we really mean that no matter how good or bad you did in 2014 (and 2013, 2012 etc) the performance charts on you brokerage website when now say YTD and if you use eTrade (we have 2 accounts there) you will have a new line chart mapping out your progress (or lack thereof).

We have clearly posted our goal of a 7% return many times and that is where we are focused–but the real fun is playing out day by day as the global economic situation plays out.

So what should be watching closely?  Domestically and immediately we need to watch the oil patch closely to see how it works out.  For instance we will see the weekly rig count tomorrow (Monday).  Critically, we want to see how fast the count drops (or doesn’t) so we can get a feel for how soon and how much production may drop down the road–this is so much more important that anyone believes.  We believe that the capital spending nationwide will drop so quickly and deeply that the ‘bonus’ received by the consumer in the form of lower gasoline prices will not replace the spending cuts in the oilfield.  We shall see.

On an ongoing basis we always watch 10 year U.S. Treasury yields.  There is seemingly no reason for rates to move sharply higher–but if they did they would help to choke off the economic recovery.  We would be shocked to see them moving above 2.4% anytime soon as the global recovery is dependant upon the current low rates.  It is not only Europe that is an economic basketcase, but Japan and the emerging markets. Emerging markets in particular are very dependant on a low U.S. interest rate-with rising rates defaults on emerging county debt will rise.

Globally all the talk is whether the EU will truly institute debt purchases (QE).  If they do so, later in the month, look for it to provide more reasons for the U.S stock markets to head higher.  If they don’t start a true QE we think that European markets will react negatively as Draghi has set the table for QE (but will Germany actually allow a real QE program?).  While we are not a QE fan we don’t have other answers for the EU to get the economy moving. If 1.9% 10 year bonds in Italy and German 10 year Bunds at .6% won’t get them fired up–will QE?

The Chinese economy continues to slow. The ‘talking heads’ continue to talk as if they (the Chinese) are the only game in town.  If they are the only game in town we are in trouble.  We have continually written with the question – do we have a global economy? Or can the U.S. stand alone?.  This question will be answered this year–likely not until mid to late year.

For now let’s get the year going and see what sort of surprises—good and bad the world has waiting for us.

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