Who would have believed the title? Yes it’s true… Germany is being relied upon to SAVE Europe. That’s a first, at least as far as I know of. If Germany and perhaps France, who is not without their own problems, do not step in to defend (another word for Bailout) Europe, the threat of a European contagion will continue. At this moment, the European Central Bank (ECB) is the only tool to help the weak European nations out of their fiscal problems and the concern is that they do not have sufficient ammunition to solve the problem let alone contain it.
At home we are faced with an increasingly slower economy. The demographics of our aging populace is not spending enough to drive the economy. Essentially we have too many old people, and a massively over leveraged population who have lost all their spending power, will keep investors nervous. Stocks rise as earnings rise, and with a lot of headwinds, the very headwinds I discuss in depth in my exciting new book, Facing Goliath: How to Triumph in the Dangerous Market Ahead. We may have seen the peak in earnings for this entire bull market cycle. As mentioned in Forbes. If that is the case, then stocks have also peaked and investors should get more defensive and focus on dividend paying stocks; which include such issues as Preferreds and Master Limited Partnerships (MLPs) as well. Corporate bonds are also very attractive here, especially the lower rated issues.
Going forward, it is critical for investors to take a pro-active approach to investing. The economy is slowing. A slowing economy means less demand for goods and services. Less demand for goods and services means less people are needed to make those goods and perform those services that every one of us need in our daily lives, as well as in the future. If all of us start to need less goods and services, also known as “stuff”, then fewer people will be finding jobs because they are just not needed. All the talk out of the Whitehouse can be about job creation, but if there is no aggregate demand in our economy, nothing is going to make them needed.
Regards – Keith Springer