A Travel Retrospective

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Let me offer a few unrelated thoughts after two and a half weeks of travel, my longest time away from the office since 1985.

For good or ill, technology allows the office to travel with you wherever you go.  Actually, I enjoy the U.S. markets being open from 3:30pm to 10:00pm, as is the case in Italy and France.  It easily beats the 6:30am to 1:00pm we’re used to in Tucson.

I was struck by the absence of Italians in the restaurants and tourist attractions of Florence, Venice and Lake Como in Italy.  Americans were common, and there were large numbers of Asians (primarily Chinese) and Arabs.  The ethnic profile was clear testimony to how the flow of wealth has changed in recent years.  Hotel and restaurant employees commented that most locals could no longer afford such expenses.  European economic problems are worsening.

Train travel through the Swiss Alps affords passengers an exquisitely beautiful panorama.

Paris remains the most beautiful city in the world with endless history, variety and enjoyable restaurants.  Through the good auspices of a close family friend, our traveling party of four experienced a delightful picnic that began in a village square outdoor market about an hour and a half drive from Paris. It concluded with a guided tour of private caves outside Vailly, which were protective homes for months for U.S. troops during World War I.  Battlefields that looked like moonscapes nearly 100 years ago now are covered by well-manicured farms.

My only regret about Paris in the 21st century is the absence of fresh bakery smells that used to permeate the early morning air decades ago.  I suspect that the baking today is largely done in suburbs, with the still delicious goods being trucked into the city.

Upon arrival home this week, financial news remained essentially the same as when we left.  Most economic conditions around the world continue to deteriorate, and central bankers continue to pledge increasing amounts of rescue money.  We’ve reached the ironic situation in which bad economic news is considered positive for equity markets, because it increases the probability of additional stimulus.  Yesterday’s Financial Times reported that a major U.S. brokerage firm and investment manager has increased its exposure to equities, investment grade corporate bonds, high-yield bonds, emerging market bonds and commodities because of its expectation of “robust” central bank efforts.

So far, investors are concentrating on the promise of more stimulus rather than on the deteriorating fundamentals that are motivating central bankers to assume the risks of extraordinarily loose monetary policies. While central bankers are winning in this cycle, each new rescue effort increases the long-term risks.  No one knows when investor confidence in central planners will disappear.