|
TO SUMMARIZE OUR THOUGHTS
12/31/2011
One thing seems reasonably certain. The global economy is going
to continue enduring a significant deleveraging cycle throughout 2012
that affects most if not all parts of the developed world. EU
interventions up to this point have been effective at calming markets
in the short-term, yet Europe remains at a tipping point.
Interventions for the sovereign debt crisis cannot remain
haphazard. Unless the ECB ultimately decides to backstop
“periphery” country debt, Greece and Italy will both
default in 2012, and core European banks will be left holding the bag.
In the meantime, imposed austerity is crushing periphery
countries’ economies and Europe is sliding into a
recession. In order to get out of this vicious cycle, any
solution for deleveraging will be accomplished by some combination of
default and write-downs, debt repayment and rising savings rates.
We anticipate additional market volatility while the issues or the
solutions run their respective courses.
With failed stimulus spending and all the regulatory chaos that has
been created in the U.S., it has been reassuring to see just how
resilient corporate America has been. Notwithstanding the wild
ride stocks had in 2011, the underlying companies of the S&P 500
have never looked better. Good companies exhibit fiscal
discipline while governments do not.
Over time, the best investing results are achieved largely by
purchasing strong companies at attractive prices. Regardless of
what the world throws at investors in the short-run, or how it impacts
a company’s stock price, great businesses still grow value even
in a tepid economy.
In a world where safety, predictability and income are at a premium,
quality matters. We will continue to invest in companies we
believe will deliver healthy returns, with reasonable risk, in the face
of current macroeconomic challenges.
Read latest
quarterly commentary
|