Equilibrium Making a Comeback
Tuesday, May 2nd, 2006
By Mitchell Clark, B.Comm. for Profit Confidential
The whole thing is regressing towards its mean. Equilibrium is almost upon us.
As I recall, economics 101 was not a very inspiring college course, but it was the first time that I considered that everything in the economy does try to balance itself out, albeit with some difficulty.
It wasn’t until many years later that I discovered the same thing happens in our daily lives, international politics, Mother Nature, currencies, the stock market, etc.
Where once there was an Internet.com, soon came about the Internet. bomb. Something new was embraced by the world; things got silly on Wall Street; many people made a fortune; and many people lost a fortune. In my mind, there’s nothing new here. History just keeps repeating itself.
Things are always silly on Wall Street; new technology and new ways of doing things is always the norm; some people make money speculating about it, and some people lose money speculating about it.
Now, what we’re witnessing is the economy regressing towards its mean. It is trying to return to normal, where “old-tech” industries are once again held in regard, and investors can earn a modest but decent rate of return from a CD. The stock market still exists with all its worries and all its possibilities. The days of big index gains are gone, but you can still make a decent return from an equity portfolio with some diligence.
In a sense, Alan Greenspan’s “exuberance” has regressed, and mediocrity is returning. Just look at the latest fashion designs, the clothing trends are much more conservative in nature. Fashion looks are returning to more classic designs.
And with this return to normalcy, so does the rates of return from investments. In the very near-future, you’ll be able to make a decent return from a money market fund, stocks will provide modest but positive gains, and Main Street will return to being more important than Wall Street.
That’s my contention. Equilibrium is about to return.
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Mitchell is a Senior Editor at Lombardi Financial specializing in small-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Penny Stock Reporter, Micro-Cap Stocks, and Monster Profits. Mitchell, who has been with Lombardi Financial for thirteen years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. While Mitchell is not working he enjoys fly fishing, motorcycling and tending to his hobby farm.
