-Euro sharks smell blood
Whether Greece exits the Euro a year from now or in a marathon 46 hour session this weekend between the close of trading on the New York Stock Exchange and the open in Wellington New Zealand on Monday morning is irrelevant. It’s going to happen. The sooner someone puts them out of their misery already the better. Then we can finally get on with the rest of the destruction of Europe.
Clearly the massive debt load of Europe is a powder keg with the fuse lit. Don’t get too confident about us on this side of the pond either. We are in the same boat, just luckily not as bad. As my friend, world renowned economist Dr. Lacy Hunt likes to say, “In a beauty pageant of ugly girls, the least ugly wins”. Well that’s us and explains why the US dollar continues to be so strong…for now! Watch for Dr. Hunt appearing on my radio show next Saturday June 2nd and be sure to listen in. You will not want to miss this show!
The silent 800lb gorilla in the room no one wants to discuss is our very own debt and entitlements problem. As I mention in Facing Goliath: How to Triumph in the Dangerous Market Ahead… “The basic fundamentals have not changed. We still have a financial system dominated by large banks with impaired balance sheets…a continued housing problem with a never-ending supply of foreclosures…and the largest generation in history – the baby boomers – who need desperately to downsize their lives and save for retirement”. Until the government or the Federal Reserve stops increasing debt as an answer to too much debt, the bubble blows larger until the inevitable.
Although the current correction may have been satisfied with a nearly 10% drop from the highs, and we get a relief rally here, the market may have already peaked. However, it could be argued the majority of NYSE stocks are already in bear markets. When the DJIA rose to a new bull market high on May 1st, 30% of NYSE-listed stocks were already down 20% or more, and 18.7% were down 30% or more. These are already greater losses than were present at the major market tops in 2007 and 1987.
As I have said, a QE3 will push stocks to new highs and all will be forgiven, for a few months anyway. However if we do not get additional stimulus we are likely in a topping pattern. Naturally we can’t just “hope” as ‘hope” is not an investment strategy and you can’t just “sit in cash” at 2/10’s of 1%, so the key is to be “Tactical” and avoid buy-and-hold (buy-and-hope) at all costs. Be the expert or hire one. If your portfolio does not need the risk of the market, then don’t take it and concentrate on investment vehicles with a guarantee of income and principle. Yes they do exist, just ask me. Otherwise, focus on the market’s “sweet spot”, which is, currently, higher yielding investments such as preferreds, corporate and tax-free bonds, and MLP’s, many yielding 8-10%. This way you can get the best of both worlds of appreciation along with a healthy dividend, but with less risk.
…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.