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The Year Nothing Works, Knowing What Not to Buy, and More... - Views on News from Equitymaster

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The Equitymaster Research Digest

The Year Nothing Works, Knowing What Not to Buy, and More...
Jan 20, 2016

Bloomberg called 2015 'the year nothing worked'.

Last year, US bond prices fell further...commodities tanked...and US stocks posted the best gains at 2%.

With the Sensex down 5%, Indian markets fared no better last year.

The shaky start to this year is giving investors the sinking feeling that 2016 will be another year nothing works.

This reminds me of an article I read many years back that compared investing to farming. Whether sowing seeds or harvesting fruit, the farmer must always be timely and patient. Haste or callousness in either activity will not produce the desired fruit. And the farmer does not give up cultivation after a single year of drought. He knows this is an occupational hazard. Similarly, a smart farmer does not expect every year to yield bumper harvests.

The takeaway for long term investors is to not pin too many hopes of recovery on 2016. As much as we would like to believe otherwise, little data suggests that stock markets and commodities such as oil and gold have bottomed out. There is a huge overhang of risks in excessive borrowings. The biggest economies, i.e. the US and China, have a lot more pain to endure before the global economy sees any real recovery.

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