Euro Cavalry to the Rescue!
Written by Keith Springer
June 29, 2012
The European Commission bails out the banks…
After much speculation, the stock market cheered as the 19th European Summit on the crisis in the Euro zone finally allowed bailout funds to be directed towards private banks and financial institutions. Why? Not because anyone believes that there is a solution in sight. No, they love the sound of those presses printing currency at their fullest capacity. Clearly, the world’s stock and commodities marketsremain addicted to continued stimuli.
Any agreement to funnel more money to troubled European banks will continue to fuel a speculative fire in our land of bubbles. The agreement, which is broad in scope and light on details, outlines how the new European Stability Fund (ESM) can send money directly to banks under specific conditions, as countries have to allow their financial institutions to be overseen by a new regulatory body still in the theory stage. How much of this unrelenting removal of control of their nation’s currency and erosion of national sovereignty will the people accept? A lot right now, but I suspect a backlash down the road. It will be nonsensically interesting when Spanish, Italian or soon to be French banks stumble under this new Utopian structure. Will investors accept a resolution to be wiped out by a German-run European banking regulator? Ya right! You know the answer. Enjoy the euphoria while it last, it could be short-lived.
Nevertheless, all this cheap money could keep the market afloat for a while longer, rather for the upcoming months not years. Eventually the market will figure out that further stimulus through more debt hurts more than it helps, but until then stocks will rally on the promise. Longer term, the bull market is long in the tooth. We are in the 43rd month of this Bull, already well surpassing the 39 month average. Plus we are in the 4th year of a presidential cycle, which usually is the top, before the market heads down usually bottoming at the end of the 2nd year (2014), which could see a 20-40% correction/bear market. Investors should look to pare back risk as we get past the election.
There are plenty of ways to make money in this market and in the dangerous market ahead, but the key is to be tactical, not buy-and-hold, and to do it without all the risk. Managing money, especially your own, is a daunting task and that’s where we can help. Our “Invest for need, not for greed” approach combined with our hands-on proprietary Top-Down Tactical™ investment management strategy can help you manage risk and deliver returns. If you would like to learn more and/or get a free second opinion on your portfolio, simply reply to this email, click our Appointment Request Form or call for a no-cost no-obligation consultation today at (916) 925-8900.