-All eyes on Helicopter Ben
On Thursday, Federal Reserve Chairman Ben Bernanke testifies before the Joint Economic Committee on the economic outlook in Washington. It’s a big deal every time Ben opens his mouth, but this time is of particular importance because the US economy is visibly slowing down as the effects of QE2 wear off and Europe is yet again on the precipice of disaster. Therefore I’d say it’s a given that we will get some form of stimulus, whether it be an extension of QE Mini-Me, another Operation Twist or a full blown QE3. Time will tell if Ben takes Schwarzenegger’s advice to “Get to the Choppa!”
One thing that caught my attention today was the rumblings that the Fed is considering direct bailout assistance to the European Union. Of course they could certainly use our help, but enough is enough already! Never mind the argument that we have enough of our own starving banks in our own country, but lending them money, so they can go deeper in debt to…pay off their debts is absolutely ludicrous. As is said in Facing Goliath – How to Triumph in the Dangerous Market Ahead: “The deficit spending and the Feds massive expansion have prevented the economy from falling harder, but no one in their right mind would argue that these actions have “fixed” what is broken. The truth is the government can’t fix what is broken. It’s not big or powerful enough to do so…and it just makes it worse in the end!”
Yet, there is little that will prevent Helicopter Ben from printing more money and throwing it on the debt fire. Unfortunately for all of us, the markets are addicted to it. Of course the right solution is to let the free market system come to its point of equilibrium. It would be ugly for a little while, but it would flush out the waste and what was rebuilt would be stronger than before. After all, the answer to too much debt is not more debt. All it does is allow the bubble to grow bigger which means more pain when it burst. Wimpy must be a descendent of Bernanke’s: “I’ll gladly pay you Tuesday for a hamburger today“.
I fear that anything less than a full blown QE3, complete with an expansion of the Fed’s balance sheet, will disappoint the markets. Given that stocks have already started to roll over with almost 40% of stocks down over 20% and 20% down over 30%, massive deterioration is well underway. Stocks do not peak all at once on the day the market makes a new high, and when the indexes peak, most stocks are already in a bear market.
That’s why its critical to have your personal exit strategy ready. If your advisor is not preparing you for this and or telling you not to worry because: “you’re in for the long haul, it’s only a paper loss,” or the worst one, “we’re buy-and-hold and the market always comes back”…run! Better yet, give me a call, while you still have some money left. That’s what this week’s Smart Money with Keith Springer is all about, entitled: What if Everything Your Stockbroker was Telling You was Wrong?
Of course you can’t sit in the bank earning nothing either. 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.