2005 has presented a variety of events for the economy to digest: hurricanes, rising oil prices, interest rate hikes, and growing global interdependence. There are mixed opinions about whether the financial markets are headed north or south from this point. Given the current economic fundamentals, I believe stocks are well-priced and have the potential for a strong year-end and prosperous 2006. We’ve seen tremendous growth in the value of real estate, GDP growth despite continuing interest-rate increases (which have helped the US dollar), and improved corporate earnings. The double-digit investment returns from the 90’s may not occur again as quickly as we’d like, but the potential for overall positive investment returns is. In a market with the amount of volatility which we’ve seen recently, it’s important to watch the direction of cash flow and try to understand the changing trends in the market. This is how an investor can spot where the opportunities may be. Google announced last month that their 3rd quarter was seven times more profitable than it had been a year earlier and sales had doubled. You’ll notice, and not just with Google, an overall trend towards online retailing, and internet-based advertising. I believe the sectors of the economy which produce innovative technologies will have the greatest potential for growth in 2006. This is opposed to years when a good strategy has been trying to locate corporations which may be under-priced by the market. This is commonly referred to as value-oriented investing. In light of this increasingly volatile economy, I’ve composed a list of alternative investment opportunities. What I’ve found are investments which have a higher potential return with a lower potential risk than other traditional stock and bond investments.
Continue reading "November Newsletter from Russell Bailyn" »