The Big Picture – Investment Strategies amidst Global Debt
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Global/European debt crisis
For the last 20 years, we’ve watched the entire world build masses of credit and debt, and in the last few years we’ve seen the debt shift from the private sector to the public sector.
Now, we’re seeing credit unwinding in Europe and specifically in Greece. On Sunday the Greek parliament voted for severe austerity measures, which caused the riots we are now seeing, as Greece continues this cut-back. Right behind Greece is Italy, Spain and Portugal, which means that the European economy will continue to contract. We think that this debt crisis will cause economic contractions all over the world, which will cause drops in the stock market.
European central banks have managed to keep things together with massive borrowing and printing of new money, which we believe is unsustainable. Despite high markets (what some people might see as a missed opportunity) we think that these economic forces will continue to gyrate and it remains a risky market. Our suggestion to clients and readers is to wait this one out, and see how the global economy fares through the European crisis. We believe that the fundamental foundation of the global economy is rocky and still calls for capital preservation to be and low-risk options. (For more information on the kinds of options we suggest, check out our special report here.)