It's that time again.
As they have done each January for nearly four decades, the globe's mover-and-shakers are gathering at the World Economic Forum in Davos, Switzerland for five days. Among the many items appearing on this year's agenda are heightened competition for key resources, the growing influence of sovereign wealth funds, and the economic and financial fallout from an unraveling credit bubble.
For investors, though, the key to getting any real value out of this year’s confab is to look past the press releases, the pronouncements, the heart-tugging speeches, and the lofty, almost new age promises of an event subtitled, "The Power of Collaborative Innovation."
Forget the conventional wisdom
Last January's gathering was notable in one respect: among those in attendance, there was an almost unanimous belief that 2007 was going to be another great year for global growth, corporate profits, and financial industry bonuses. Based on what happened since, of course, that optimism proved to be more than a little misguided.
Indeed, gatherings like these often highlight the fact that even those who have achieved considerable personal success or who make decisions that can and do have a far-reaching impact on others' lives remain vulnerable to the kinds of behavioral foibles that have plagued even the savviest of investors, such as a willingness to extrapolate past trends well into the future and to run with the herd.
With that in mind, the best takeaway from this year's event may be to try and figure out those areas where participants seem to be in strong agreement, and then position portfolios for the opposite.
Listen for voices in the wind
One of the leading antagonists at the 2007 World Economic Forum, surprising to some, was a government official named Jean-Claude Trichet. Trichet is head of the European Central Bank and he suggested that certain elements in global financial markets were "not necessarily stable," and that the "low level of rates, spreads and risk premiums" could spur a sudden "repricing."
Ed Wray / AP
European Central Bank President Jean-Claude Trichet.
In hindsight, Mr. Trichet's warnings proved prescient, though at the time they were pooh-poohed by the large crowd of private equity moguls and investment bankers who had long been gorging themselves at the trough of easy money.
No doubt ongoing turbulence in world credit markets and growing evidence of a slowdown in U.S. growth will spur even more admonitions this time around. Still, investors may want to pay especially close attention to the words of those whose views are dismissed by the crowd as out of hand.
Assume key themes won't be major investment opportunities
Although the Davos agenda is comprised of what are generally viewed as major global concerns, several factors suggest that investors are probably best served by ignoring those items placed high on the list.
For one thing, many of these topics are almost certainly chosen with media appeal in mind, and even the world's sharpest operators seem easily captivated by issues that just happen to have drawn the attentions of well-known figures from the arts and entertainment worlds.
The themes that end up becoming key focal points for each year's conference also represent complex, long-running, and politically-charged issues that would likely be difficult to resolve over the course of a decade, let alone during the next twelve months.
Under the circumstances, the better strategy may be to spend Jan. 23-27 digging deep into the stream of news and commentary coming out of Switzerland to see if there are any real nuggets of opportunity hidden beneath the surface.
Put Davos in its proper context
In the end, though, investors should keep in mind just what is happening at Davos. One gets the distinct impression that for many attendees, the five-day event seems more an opportunity to bask in the spotlight of global media recognition or to network with other movers and shakers than as a way to tackle these issues head on and change the world.
To be sure, some would argue that progress has, in fact, been made over the past twelve months on one key agenda item from last year's Forum, global warning. Maybe so, but other efforts aimed at reviving the Doha round of world trade talks, getting Israeli-Palestinian peace efforts moving again, and reducing poverty around the world have foundered.
Most likely, it will be more of the same following this year's event. For the majority of investors, rather than focusing on the latest from Davos, it may be a better idea to direct attentions elsewhere.
Michael Panzner is a 25-year veteran of the global financial markets and is the author of Financial Armageddon and The New Laws of the Stock Market Jungle.