Are You Strapped In?

Recently, I read an article about a 78-year-old roller coaster enthusiast who rode a coaster 90 times in one day.  While trying to calm my queasy stomach over such a prospect, it got me thinking about our economy and the markets.  It seems like we have been on a roller coaster ride for the last three years, and there seems to be no end in sight to this wild ride. 

Looking at GDP numbers may even make this gentleman sick to his stomach.  While we were somewhat stable from 2003 through 2007, the wild ride began again in 2008 when the economy seemed to be in a freefall.  The quarterly year end number for 2007 showed GDP at 2.9%, but by the end of 2008, that number fell to a negative 6.8%.  Then the ride took a turn for the positive reaching approximately 5% by the end of 2009.  Since then, the number has fallen back somewhat, and there seems to be no end to the speculation as to where GDP will go over the next 12 to 18 months.  In all likelihood, the roller coaster ride will continue. 

Housing rode the coaster down and has been stuck at the bottom of the ride for the past couple of years although government stimulus programs artificially helped the industry improve.  And then, just when you thought the wild ride was over, those government programs expired and down we went again.  What is interesting is that some of the companies making up the housing industry have begun to post profits after several years of negative numbers.  Case in point is luxury home builder, Toll Brothers (symbol TOL), who on July 31st, reported their first quarterly profits since 2007.  They even made it a point to emphasize that they are continuing to purchase land in anticipation of higher demand in the future. 

Finally, the stock market endured a pretty significant downturn in 2008 and early 2009 only to see the roller coaster climb another mountain through most of 2009 and early 2010.  Since then we have seen a correction and now seem to be entering a trading range in which we will likely see short term peaks and valleys for the next few years.  In other words, the wild ride continues.  The challenge will be to take advantage of the peaks and troughs through active portfolio management. 

What do you think?  Are you willing to continue to ride the roller coaster or have you had enough of the wild ride?  Where do you think the economy or markets are headed?  Do you need some alka seltzer to calm your stomach?


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