The Weekly Report: The Thrift That Keeps On Giving

13 December 2011


As we get into the full swing of the festive period I encourage you to enjoy it as much as possible, but keep in mind that there are some things that may ruin your appetite, based on events at home and abroad.

So I’d advise you to steer clear of financial news just before and after Christmas lunch and dinner. This isn’t exactly a ‘year in review’ entry, but it would serve us well to be mindful of the significant headwinds we’ve encountered during 2011. Just when the markets seemed to have made a turn for the better, some element of doubt (by both emotional and official means) has always managed to rear its ugly head.

Take for instance this excerpt from a Bloomberg article dated December 12th:

American stocks joined a global slump today as Moody’s said that last week’s EU summit failed to produce “decisive policy measures” to end the region’s crisis. Bundesbank President Jens Weidmann told the Frankfurter Allgemeine Sonntagszeitung that while the new fiscal accord represents “progress,” the onus is on governments rather than the European Central Bank to resolve the crisis with financial backing.

Indications that the European crisis is some way off from reaching its conclusion have become painfully obvious. Add in the fact that ratings agencies have threatened to downgrade several AAA-rated countries, and we have ourselves quite the 2012 to anticipate (Mayan predictions aside). We’ve spoken about ‘opportunity amidst crisis’ and ‘cautious optimism’ at great length already, so this web space (and your reading time) would be better utilised differently this time around.

This Christmas I’m here to give you an ample dose of reality (no thanks needed). Whether or not the S&P 500 closes above 1300, much of the story remains untold. These issues haven’t developed overnight, but the markets continue to swing according to how close European leaders are to developing a “bazooka” to blast away their fears. In times of crisis, countries and investors tend to look inward i.e. keep their liquidity put! This is where the idea of thrift comes about, as per this week’s title. In a global economy so starved for growth, there remains little to be cheerful about and even less to convince investors to part ways with their funds. If you think about how some of us perceive “thrift”, however, it really becomes more of a self-defeating cycle rather than a way to preserve capital.

Locally, the CBTT governor has delivered some coal in our stockings as well, citing several of the downside risks that ought to continue throughout the short to medium term. You should know most of them already, but what stuck out to me was his call for diversification:

“We could no longer expect dependence on the energy sector, now facing a situation in which growth and unemployment generation will have to depend increasingly on a diversified and competitive non-energy sector…” (T&T Express)

The energy sector can only prop up T&T for so long, so what can motivate a paradigm shift from glib word-usage to urgent action? A local crisis? Let’s hope not, but there comes a point when ‘I told you so’ is the last thing you’d want to hear.  Union standoffs with management at our ports don’t bode well for the country becoming a trans-shipment hub. I think the importance of resolving these issues are lost on us, as low Christmas sales may be the least of our worries.

Rest assured that this isn’t an attempt to kill your Christmas spirit, but your holiday grog is only a (perhaps much-needed) distraction rather than a panacea. I do have tidings of great joy though! Here at Firstline Securities we have ideas to keep you and your portfolio in a festive mood. Give me a call @ 622-1346 or send me an email at gerard.stephens@nullfirstlinesecurities.com for a fa-la-la-la-la investment low-down!

Gerard Stephens
Account Executive | Sales & Trading

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