Below is the full 2010 Bespoke Roundtable Q&A with Jeff Miller of A Dash of Insight. Click here for a printable PDF version.
1) What has surprised you the most and least about financial markets in 2009?
2) What do you believe are the most important lessons to be learned from the 08/09 financial crisis?
3) How has the 08/09 bear market impacted your view on asset allocation and investing as a whole?
5) Starting with 100% cash, how would you allocate it to various asset classes to start the new year?
6) What do you believe will be the dominant investing themes of 2010? What will be the biggest surprises of 2010?
7) What is your current view on Buy & Hold as an investment strategy?
8) What do you believe is the contrarian call on equities right now? The economy? Is investor sentiment currently misplaced?
9) Which sectors should investors be overweight/underweight heading into 2010?
10) What is in store for the US economy in 2010 (V-shaped, double dip, U-shaped)?
11) Will we see a jobs recovery in 2010?
13) When will the Fed begin to raise rates, and will this be too early, late, or just about right?
Let me start with some facts. The Fed has outstanding personnel and credentials, and a strong and diverse economic team - over 350 economists. Their process is very open, with transcripts available after five years, minutes after a few weeks, and considerable freedom for the scores of people involved to state their views. There are many appearances before Congressional committees. There are also many speech-making alumni who are free to offer criticism. There are more than 50 people sitting in at each specific meeting.
Fed bashing is a popular sport. This is mostly second guessing the decisions of those who had to make tough decisions. Some do not like the concept of a central bank. Others disagree with the decisions made. Some have personal or political motives.
Some even disagree about the Fed mission. These people would prefer that the Fed ignore threats to economic growth and emphasize concern over inflation, even though the dual Fed mandate is a matter of law. In addition, they want to substitute their own definition of inflation - usually related to changes in commodity prices or a similar measure.
I have some clear advice for investors: Ignore this background noise! If you want to make successful investments, the job is to predict the Fed, not to criticize the decisions.
Turning to the specific question, it would be presumptuous for me to guess when the Fed will start to raise rates, since they do not yet know themselves. The statement is that rates will be low for an extended period. If we knew how quickly the economy would rebound and knew when normal bank lending would resume, we would have our answer.
As to whether the Fed will act in a timely fashion, history shows that they have sometimes been too slow. The current membership is acutely aware of this fact, so perhaps they will do a bit better this time. As usual, the punditry is divided on what they should be doing right now.
14) How worried are you about inflation?
There is little reason to worry about inflation until we are closer to the normal trend of economic growth.
More importantly, it is clear that the Fed takes this viewpoint. Don't fight the Fed.
15) How worried are you about the decline of the dollar, and do you see the greenback making a comeback in 2010?
Currency values adjust to reflect trade imbalances, so it is a long-term story. Without cooperation from China, there is no easy answer. It is not a cause for concern if the adjustment is slow enough. In general, this is a hobby horse for extremists and it is easy to sell to a gullible public. Those advancing the argument always use the word "debase" and are either running for office, helping someone who is, or selling gold. I recommend that people consider the alternative viewpoint of someone like Bob McTeer, the former Dallas Fed President. He is a free-market guy and very conservative. He is also pragmatic and exudes common sense. I cite him often on my blog.
16) What are your current thoughts on gold - bubble, just the beginning, or just about fair valued?
Inflation fears and panic both drive gold prices. Both are currently overstated, but it is not a bubble. People see too many bubbles!
17) Oil has largely been forgotten given the current focus on gold and the dollar. Will the price of oil have a major impact on stocks and the economy in 2010?
We were near an important tipping point in the price of oil before the economic collapse. We'll see this again, but perhaps only hints of it in 2010. As a nation, and as a world, we are not very good at solving problems without a slap in the face.
18) We've just gone through a decade where emerging markets largely outperformed the G-7 countries. Do you foresee this trend continuing in the coming years, or will developed countries begin to make a comeback?
19) Which emerging markets are you most/least excited about heading into the next decade?
20) At the peak of the crisis, the prevailing theory was that Wall Street was dead as we knew it. After the rebound we've seen, many people think it's now back to business as usual. What are your thoughts on this?
21) What will be the biggest impact Washington has on Wall Street in 2010?
22) What do you think are currently the biggest disconnects between Wall Street and Main Street? Wall Street and Washington? Washington and Main Street? How can we correct this?
23) Will the following be up or down (positive or negative) in 2010? Where noted, what are your 2010 year-end target prices?
-S&P 500: Up 17%
-Long-Term US Treasuries: 4.2% on the 10-Year Treasury
-Corporate Bonds: Prices down a little as interest rates rise.
-High Yield (Junk) Bonds: Less risk, but higher rates. Call the prices a push with a good return.
-Gold: No strong feeling. Probably near current prices or a bit lower with dollar strength and less fear.
-Oil: This could move higher with a stronger world economy. Trying to go out more than a few months is crazy.
-Dollar: I see some stability, but the long-term trend is lower. Call it about the same as now, given the recent decline.
-Average US Home Prices: I'll go for a ten percent rebound, but we will probably not see any strength until mid-year.
-China's stock market: Chinese stocks should improve, at least in line with the US. Call it up 20%
24) Please provide readers with any stock ideas that you really like right now and for 2010 and beyond (and why).
25) Do you have any other advice that you would like to share with readers heading into next year?
Thanks for inviting me! The questions were interesting and stimulating. My best prediction is that we will have a year with plenty of debate on politics, the economy, and the market. My best advice is that investors should focus on the market when trading and politics when going to the voting booth.