Merry Christmas 2009

December 21, 2009 Edition, Volume III

Inside Signature Update

- The Takeaway – Merry Christmas and Happy Holidays!
- The Market – Thankfully Quiet this Week… so far
- The Economy – Animal Spirits and Personal Economy



THE TAKEAWAY – Merry Christmas and Happy Holidays

For most of us the shopping is winding to a close, the Christmas cards have been sent and we’re looking forward to Christmas with our families and loved ones. In this case Christmas may be the spiritually-oriented Christian event or it may simply be a holiday season filled with tradition and gift giving. Regardless, it becomes more important than markets and economics; even if only briefly.

It interests me that Christmas takes on different attributes for different households. Regardless of theology, most would agree that this time of year is one during which people are more open, a little kinder, and more likely to be considerate of others. For families with small children it’s a time of great excitement and fervor and it’s hard not to focus on the build-up and energy of Christmas morning around the gift laden tree. Hopefully for more mature families, couples without children in the home, and single adults the holidays take on a warmer, more comforting tone allowing us to reflect on those for whom we care and the more meaningful aspects of our lives.

From the staff of Signature Management and Signature Update, as well as from the Haskell family, we wish you a Merry Christmas and hope you enjoy a wonderful holiday. May you be surrounded by those you love and find a moment to reflect on that which is important above all else.


THE MARKET – Thankfully Quiet this Week… so far

The markets tend to quiet down before the Christmas holiday as traders take time off and hedge funds prepare to settle positions before the end of the year. Light volume tends to give way to a brief flurry of activity in year-end trades establishing tax losses or gains; otherwise activity is limited. This year this all comes as welcome relief and most of us are pleased to bring 2009 to a close.

When a weekend storm in the Eastern United States is the hottest news story on a Monday morning, you know things are quieting down in the market. Early trading on Monday added to the DOW’s gains by over 100 points as some investors moved into health care related stocks; one of the strongest indicators that the White House will have a unified House and Senate bill ready for the President’s signature by Christmas Eve. The winners in this legislative effort turn out to be insurers, drug makers and to some degree the public. The ‘public option’ that we declared dead-in-the-water some months ago is now nowhere to be seen; thank goodness.

Undoubtedly, there will be various corporate developments and announcements to add a little spice to the next week’s markets. Some of those could be meaningful, but most likely they’ll simply be adding detail to existing reports or laying the ground work for early 2010 deals yet to be announced.

Thankfully, most legislators will have left Washington for their home states by Christmas Eve and won’t return until after the first of the year. There’s little they can do other than host a few parties and offer interviews to hungry news outlets; neither of which tends to move markets and sometimes doesn’t even register with voters.


THE ECONOMY - Animal Spirits and Personal Economy

What we call Economics today, was referred to as Political Economy well into the 20th Century, with a few major universities only recently changing department names: Glasgow University in Scotland being the last of these to change its Department of Political Economy to Department of Economics in 1997-1998. Even today, economists are closely tied to political ideologies and many have a difficult time separating the two. Indeed, macro-economics may be inseparable from politics as it deals with economics beyond the scope of businesses and households and strives to explain regional, national or global issues.

The economic conditions of 2007-2009 tested and broke many widely accepted models and theories, and left many economists questioning their decision making and forecasting tools. Some believe we’re entering into an era in which increased volatility and access to massive amounts of information may give rise to an entirely new set of models and theories. Others suggest we’re simply going through a time period in which a given model’s degree of accuracy may falter, but the model itself will hold.

My expectation is that we may not be able to rely on macro economic modeling in the future as heavily as many have come to depend upon. As the volume of economic transactions has increased and the number of empowered decision makers has expanded (with diverse levels of education, preparation and experience) we likely need to consider behavioral economic factors far more than had previously been thought. Keynes referred to these factors as ‘animal spirits’ in his 1936 work A General Theory of Employment, Interest and Money and untold articles and books have been written in an attempt to define them and articulate the impact of their facets and features. In the end, these animal spirits simply refer to human nature; and attempts to confine, or define them to a predictable model may be wrought with disappointment.

We’ve seen that our economies need wider margins for unpredictability and error. In this case 'economies' is intended to refer to the various economies with which one interfaces: economies of household, businesses and government. Even one’s personal economy, a term you’ll hear more often in the coming weeks and months and one that doesn’t refer to facts and figures as much as it does concepts and ideologies, may need to be challenged and considered in a far more important light than ever before.


Signature Update is offered by Richard Haskell, Managing Director of Signature Wealth Management and CEO of Signature Management, LLC