Financial Markets: Outlook 2007
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There’s a lot of money to be made in the coming year, say these practitioners from different areas of finance, offering just a few notes of caution. They offer a grab bag of investment tips for average consumers and entrepreneurs in this annual Enterprise Forum event.
Frederick Lane sees the baby boomer generation accumulating capital, lugging around hefty pension plans and generally looking for good homes for their money. He says, “The greatest way to not make money is to go in the market and get out.... The truth is, the best thing is to stay in.” Investors “need to be cautious about when the top is the top.” He sees a healthy economy in general: “I don’t think we have a big problem in this country, because guess what, our standard of living keeps going up and up and up. Most of us could lose a few pounds, tighten our belts a bit, make do with fewer cars, fewer boats and vacation homes.”
Deborah Kuenstner doesn’t see “unbridled optimism, like the 1999 environment,” where everyone jumped into investing. This is a good thing, because it means “a broader and healthier market.” Indeed, she says, “For the economy to slow down this year, it’s not a bad thing.” She points to difficulties with actively managing a portfolio: “I don’t think the dynamic in marketplaces will change and active stock picking become easier until we have a clearer idea which way the Fed is going, and not living data point to data point.” She also notes that average “Americans have lots of challenges,” including a slowing housing market and slow wage growth.
“The party continues, and it looks good on most fronts,” says Benjamin Howe. He points out that index funds are “outperforming smart money managers across all metrics.” He’s worried by the fact that “consumers are pushing credit cards above historical levels,” and that “competition from certain countries will continue to accelerate.” The U.S. has lost on the manufacturing front, and India and other nations are moving into finance and technology in a big way. Valuations of overseas companies are growing fast. In the U.S., alternative energy is “where we’re seeing far more funds going -- explosive companies doing advanced battery technology for cars, or energy management. There are massive amounts of dollars going into that.”
“There are many next big things,” says Axel Bichara, whose VC company “takes the long view.” While the “amount of capital being deployed is quite high,” Bichara doesn’t see this turning into “another bubble.” He views the whole digital media world, “the monumental changes in how content is produced and consumed,” offering “at least another five to 10 years of investment opportunity.” He perceives a strong entrepreneurial surge coming from India and China, which is a factor for the companies he invests in and who they partner with. “The conclusion we came to, our kids need to learn Mandarin, and not French.”
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