I wrote a commentary for the SMID cap strategy at the end of 2009 talking about the likely battle to take place over the next 2-5 years between cyclical forces of recovery coming up against secular headwinds. Here is an excerpt:
"Don't get too comfortable. The economy is fragile, and both short term and long
term risks abound. A legion of risks are in plain view. At some point, cyclical
tailwinds will run into secular headwinds. Structurally we are in many ways
worse off after the recession than before. We lack the political will to make
the hard and necessary decisions to get things right. We have, once again,
failed to allow the market to clear, and so are left with the burden of
accumulated deferments. The lesson from this whole mess is that we haven’t
learnt the lesson. There is a price to be paid for profligacy and denying the
laws of economics. As a country we (many other developed countries are in the
same boat) have lived beyond our means and made promises we are unlikely to
keep. Those secular headwinds will be reflected in rising inflation and
interest rates, lower growth, increased savings, higher taxes, more regulation,
and constraints on government spending going forward."
In hindsight it looks as though I was a little early. But I stick by that general view of the forces and factors in play.
If I might be so repetitive. Now is probably a good time to brush that thesis off and deliver it again.
They say a clock is always right at least twice a day. Perhaps I'll be closer to the truth this time around.
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