The Independent Market Observer | Outlook. Opinion. Insight.

Adaptation and Healing

Written by Brad McMillan, CFA®, CFP® | Jul 31, 2012 3:01:53 PM

The papers are rather quiet again this morning, which is a good thing. Looking through, I see considerable coverage of ongoing problems: the Financial Times (FT) has “HSBC sets aside $2 billion to cover fines” on page 1, and the Wall Street Journal (WSJ) has “States’ Hidden Jobless Woes” on page A4, “Crisis Saps Euro-Zone Confidence” on page A8, and “A War Footing in the South China Sea” on page A13.

There are also more encouraging articles, though, which have been unusual to find for the past couple of years. I made a point this morning on the CIO panel at the Financial Advisor conference that Europe has adapted to the crisis and is developing tools to make this a more chronic affliction than an acute one—arthritis as opposed to heart attacks. The U.S. has done the same thing, and as the crisis normalizes around the world, we are starting to see signs of healing.

Explicit signs of healing include “Strong Domestic Sales Help Lift Chrysler’s Results” on page B3 of the New York Times (NYT), “Labour reforms boost eurozone exports” in the FT, and “In Crisis, A Rare Swede Spot” on page A9 of the WSJ. Combine those with the article I mentioned a couple of days ago about the Irish recovery, and it is clear that even though problems remain—and heart attacks are still real possibilities—light is appearing in the darkness.

Another very positive sign—and an implicit sign of healing—is that institutions are starting to try to get ahead of the problems. “Muni Rates Examined for Signs of Rigging” on page B1 of the NYT is such a signal. The Libor scandal started the process, and you can’t love that the question has even come up. The fact that it is being examined, however, before a specific problem arises is an excellent sign. “Some At Fed Urging Pre-Emptive Stimulus” on the same page is another positive sign. We can certainly debate the merits of the decision, but isn’t it nice to see that they are thinking ahead rather than reacting?

I will be putting together and posting my takeaways from the conference in the next day or two, but for the moment, suffice it to say there was excellent content and it was time well spent. I found myself in the unusual position of being relatively optimistic compared to many. Don’t worry—I won’t let it go to my head.

Have a great day!