Objective Thoughts on Subjective Thinking

When someone tells you what they think, its often foolish and time-wasting to ask them why. They may not give you the right answer, and furthermore, they may not even know themselves! In one case study, coworkers were constantly arguing over the “mismanagement” of the ongoing merger the two companies were undergoing. Suddenly, a seemingly unrelated bicker broke out as to why employees don’t say hello in the mornings. The problem wasn’t one of mismanagement or misjudgment but rather a matter of respect, and why people weren’t getting it.

In investing too, we must constantly dig to uncover what it is people are really thinking. What are their true concern and motives for behavior.

I wouldn’t be bold enough to put forth some of those assumptions, but I do have some questions that may help us answer them.

Stocks: Everyone seems convinced we are at or near a bottom in the stock market. Yet at the same time, prices continue to fall, and confidence continue to wane. Why? Are people still hopeful of recovering that which they’ve lost? Do people even have the money they say they are going to invest when market hits “bottom”?

Bonds: And I mean Treasuries in particular. Interest rates fall yet the Dollar rises relentlessly. Furthermore Warren Buffett, while manintaining a fair amount of faith in the U.S., its currency and stocks in general, has nevertheless stated that the Government Debt in the form of Treasuries may be a bubble. Do people have too much faith in the “risk-averse” Treasuries that our Government sells?

Gold: Gold and Silver have made new highs. But are precious metals (and I refer to the metal not the paper that backs it) being bought by new investors or old ones increasing holdings? Are new investors buying physical or paper metal? Are they buying based on growth (prices will rise) or value (financial insurance)?

Housing: And I guess in it the heart of the issue. Sales are up, inventory is decreasing and prices are falling. But how will the effects of a further deteriorating economic situation play out? In what can we identify the bottom? What should we expect after prices start rising again?

Economy: No one seems sure anymore. One day good, next not so good. When Obama speaks markets fall, when Bernanke talks they rise. Nationalization or none at all? Bottom or Bear market rally? When will we know that the market has forseen the end? What does housing have to do with it?

Without answering these issues, we cannot expect to find clarity. When subjectivity surrounds us there are no “right” answers. There are just those who sit in denial and those who don’t.

Clarity can only be found in the objective.

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