Investing in a world of intervention

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This post is a guest contribution by Bennet Sedacca*, President of Atlantic Advisors Asset Management

I am not sure what makes people believe that the action of turning the calendar to a new year will act as a “magic bullet” for them. I have to admit to having my own New Year’s Resolutions over the years – typical promises to myself to lose weight, spend more time with family and friends, etc, etc. I don’t know anyone that, as the ball falls in Times Square each year, has not had a resolution to make things better for themselves. Yet, lo and behold, when we wake up on January 1, not much has changed, right? The thoughts of resolutions start to fade into the distance and most folks revert to their ways of old. Present company most definitely included!

When the history books are written, 2008 may very well be remembered as, “The Year of Intervention”. For those that have read some of my previous pieces, I may seem a bit whiny or frustrated, and indeed you would be correct! Winding one’s way through this market and economy is challenging enough without daily/weekly interruptions and interventions from Governmental and quasi-Governmental authorities (the Treasury Department/Federal Reserve), but when we introduce the constant interventions/interruptions, we are being asked to change our behavior as investors. Therein is the most problematic issue for investors these days, and what might explain the daily volatility of truly historic proportions that we have experienced of late.

Simply put, free markets are no longer free; rather, they are markets that have outside influences that seem random and deem our heretofore disciplines moot. Rather than whining, we must ask ourselves, how do we, as investors on our own behalf, or those working with other people’s money, react to these outside influences?

Click here for Bennet’s full report.

* President of Atlantic Advisors Asset Management, Bennet Sedacca brings with him more than 26 years of securities industry experience. From 1981 to 1997 he worked for several major investment banks, specializing in high-grade fixed-income securities marketing, trading and portfolio management. While working for PaineWebber as a Senior Vice- president, Bennet was a member of the Chairman’s Council for four consecutive years. During his years with Salomon Smith Barney as a Vice-president, he established an institutional fixed income presence in Central Florida.

In 1997, Bennet formed Sedacca Capital Management focusing on portfolio management for high-net worth individuals and small to mid-sized institutions. He is also a contributor to the financial website, www.minyanville.com and is regularly quoted in Wall Street Journal Online, Barron’s and Bloomberg.

Bennet graduated from Rutgers University in 1982 with a degree in Economics and was a member of the International Honor Society of Economics.

 

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3 comments to Investing in a world of intervention

  • This is a great piece. Since the credit crisis began over a year ago, I have been saying the following: 1) the markets are one big national obsession (read casino); 2) our elected officials have done their very best to “talk the markets down”; the market is down and they goose it up with an intervention so there has almost always been an opportunity to get out at higher prices.

    Almost everyday now we have a well timed intervention and it doesn’t have to come from Bernanke or Paulson. It could be Pelosi or Barney Frank at 4:15 pm EST or it could be Trichet. It is a very well oiled machine.

    Lastly, I doubt this will happen (but don’t put it by anyone). I have always maintained this could happen: As George Bush is departing as President, I can now see him at the corner of Broad and Wall Streets, and THE STOCK MARKET IS AT AN ALL TIME HIGH! In his annoying Texas twang (no offense to your Texas buddy John Mauldin) he says (with two thumbs up): “You see, I told you so. The economy is strong. Mission accomplish.”

    Mission accomplished indeed!

  • Michael Hargrove

    The last paragraph may have been said tongue in cheek but it is not far off the mark (i.e. “the spirit of the times”).

  • Frank Wordick

    The thing about a new year is that it is all artificial. It’s not the new year for the Chinese nor even for the Irish. For that matter, our own calendar has been changed thru the years a number of times. The earth doesn’t know anything about new years. It just keeps going around and around in its orbit. The volatility in the market is information. It tells you that things are no good. Outside intervention is not new. We just have a lot more of it. We never have had a free market, or if we did, it was no good. It was littered with the likes of Jay Gould and others of his ilk, constantly trying and often succeeding in manipulating it. Sedacca talks about “the Rules of the Game”. I have always been taught that the rule that applies here is that no matter what government agencies do, they cannot change what is going to happen in the market. They can only take the sharp edge off it. As for thinking like a regulator, I don’t recommend it. It is not unlikely that you’ll kill yourself financially. I don’t even think you should bother asking your bank manager or any other banker anything about anything other than what’s going on in his bank, because they wouldn’t know anything worth hearing. And here we are again, bashing Socialism. For goodness sake, just take a good look at what Capitalism has handed us.

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