Last Thursday evening, JP Morgan announced it lost at least $2 billion on trades related to “egregious” errors on its “synthetic” investments. The complex products that were meant to protect the bank instead blew up in their face. Perhaps if JP Morgan stuck to the business of making better loans, it wouldn’t be so enamored with a need for the “best” protection. (View a printable version of this Economic Update: Plain Vanilla).
Mark my words. The age of Plain Vanilla investing is set to rise. Only when your vanilla is bad can you honestly believe that adding Snickers, Gummy Worms and Sour Patch Kids will make it taste better. More expensive, perhaps, but better? Unless you’re five years old, no way!
In spite of the election year politics and an imposing fiscal cliff, a once in a generation shift is at work in the economy, aligning the stars uniquely in our favor. In its own return to vanilla ways, America is in the early stages of an industrial renaissance, made possible by the advent of cheap natural gas and a corporate sector that has taken its fiscal medicine. We’re fitter than anyone on the planet, open to business, and ready to compete. Consumer confidence, in spite of high unemployment, is at record levels, and people are even starting to buy homes again.
We’ve said it before and we’ll say it again; now is America’s time to shine.
If you’ve been burned one too many times by the very things you thought would give you some protection, give us a call.
Our vanilla is pretty damn good.
Doug MacKay, CEO & CIO
Bill Hoover, President