The Market Sees Dumb People
-Market action, not headlines, tell the story!
The market seems to be learning quickly. No, not investors, the market. If you read most of the news stories and talk to the man on the street, aka “investors”, the financial crisis is only a step away from being solved. The problem is that it’s always a step away…much like soccer is the sport for the future, and always will be. Just one more stimulus package or one more LTRO or Operation Twist or how about another QE Mini Me, and this mess will surely be solved!
Clearly men run the financial world over there because selective memory has never been more brazen. They must realize that these stimulus programs continue to add debt to the private and public financial systems in countries that already have way too much debt, and worsening demographics as the rapidly aging populations of the developed world naturally spend less as they get older. It’s almost laughable that we act surprised when these countries continue to see their economy weakening and then need further and larger bailouts. After all, the answer to a debt crisis of too much debt will certainly be solved with more debt, right? Ugh, I think we all see dumb people now.
The market is taking a much more practical approach and is trending lower, just not in big enough chunks to alarm the general public. It sees the crisis building because debt is increasing, NOT decreasing. The market knows that if you can’t service your debt at a lower level, more debt will be nothing more than a Band-Aid. As I fervently explain in Facing Goliath – How to Triumph in the Dangerous Market Ahead, what must be soon realized is that investors who buy these Nation’s bonds expect to be paid back. If and when they worry about getting paid back, they jack up the interest rate they demand or they don’t buy anymore. Social services such as pensions (social security), health care (Medicare), and job security are not a god given right. Somebody has to pay for them, and it can’t always be somebody else!
The good thing right now may be all of this negativity. The U.S. economy is grinding to a halt, Europe’s recession is deepening with unemployment in the Euro-zone now at 11.1%, China is crashing, and investor sentiment is ridiculously negative. Sounds like rally territory to me, eventually, but not yet! There is no doubt the market is screaming for a QE3, and they will eventually get it. But, at this stage of the game it is unlikely to make a difference for more than a few trading days or weeks.
Of course you can’t sit in the bank earning next to nothing either. There are plenty of ways to make money in this market and in the dangerous market ahead, but the key is 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.