Remember that markets go down much faster than they go up. We are living through this reality right now, and everyone needs to stay aware of the risks in the markets.
Europe is still struggling with their debt and deficits, and Germany (the largest economy in Europe) seems unwilling to keep bailing out their fellow European Union members. Greece especially is in a great deal of financial trouble, and there is talk of Greece exiting the Euro. No one really knows how that would work, and if it does it will probably cause a lot of unrest in the market.
We think that international investments are not a wise move right now with all this uncertainty, but we are keeping an eye on developments around the world. Smart investors will have some excellent buying opportunities this year, but it’s critical to avoid getting caught in either an uneducated panic or place of comfort.
We’ve been talking about the European debt crisis for several months now, but we’ve recently coined the phrase “European Blind Side”. You might wonder why we’re so concerned about investors being caught off-guard by developments in Europe, so we thought we’d use an analogy from out here in California.
We see it all the time – it’s a sunny day on the beach, and people have driven in from all over to come to the ocean. Tourists and locals alike are stretched out on blankets in the sand with coolers and umbrellas, ready for a great day. However, it inevitably happens that those who aren’t as familiar with the water, or who just don’t pay attention, will place all of their beach-day accessories too close to the shoreline at low tide. When the tide starts to move in or a big set of waves appears – and they don’t even have time to react – their towels are soaked, their cell phone has gone for a swim and their beach day could very well be ruined.
We think that this is what will happen to many investors who aren’t watching Europe closely. They feel lulled to sleep by the “sunshine” of relative security and up markets here in the U.S., and may very well have their holiday ruined by a big, ugly wave from Europe. Investors who aren’t paying attention to Europe are going to be hit hard and not know what happened or why.
The moral of this little analogy is simple: pay attention and stay educated and aware. Listen to our recent teleseminar for more in-depth analysis of what’s happened in Europe and what is soon to come, and make sure that you are prepared to preserve your capital and keep your towel dry, so to speak.
This is a podcast summary. For more complete details, please listen to the full podcast here.
Here at Fabian Wealth Strategies, we’ve talked a lot lately about the European debt crisis, so you may be wondering why we would call this a “blind side”. Unfortunately, we believe that most American investors have little to no idea what is happening in Europe, and most investors are woefully unprepared for the trouble that is here and what is still to come from that sector of the world.
There are serious implications of the current and coming European economic contraction, and those have not yet been realized in the markets. This should cause concern for investors for obvious reasons: volatility is increasing and time is compressing, as the markets move faster and the swings get wilder.
As we watch the European situation, we continue to stress that investors should keep an eye on their risk exposure and have an exit strategy for their capital. We know that many U.S. investors are concerned about the U.S. debt and deficit, but the European debt and deficit is what is going to have serious implications to your portfolio in the short-term, and, because it is a less well-known problem, it has more opportunity to wreak havoc on your portfolio if you’re not careful.
So far, the European Union’s strategy for dealing with the debt crisis in Europe has been austerity (meaning getting budgets under control and reining in government hand-outs). Most of the economies in Europe are not globally competitive, and as a result, many citizens are reliant on government for many social services and basic needs, making austerity a difficult path to choose.
As a result, this weekend François Hollande won the French election over former president Nicolas Sarkozy, which means that austerity will probably once again take a back seat. Hollande is a socialist and has already promised to raise taxes to up to 75% on the wealthy, borrow more money and continue social programs for French citizens. Hollande wants the austerity strategies dictated by Germany eased in France, meaning that he is going in the opposite direction proposed by Sarkozy and Germany’s prime minister, Angela Merkel. It will be interesting to see if this new tactic works for the markets and how risk is affected by these new strategies in France.
Greece also held an election over the weekend, and the Greek people are struggling with austerity measures as well. There is fear that Greece may default on its bonds, and this is a serious hot-button, short-term issue, that we believe will really affect that markets.
The bottom-line is that even though Europe is far away and seems like something we shouldn’t worry about, the European Union is a huge factor in the global economy and the politics of public debt will make an impact on the markets. Don’t allow your portfolio to be blindsided by European troubles – if you’re not sure how to handle this uneasy market, please call us for a portfolio review at 800-391-1118
This is a podcast summary. For more complete details, please listen to the full podcast here.
Doug Fabian’s next live public speaking event will be in Las Vegas at the Money Show, where we’ll have about six different opportunities to present. Please check out moneyshow.com to register or for more information.
Don’t forget to sign up for our next teleseminar, titled: Strategies for Growth in Uncertain Times, and will be presented by Doug Fabian, on Tuesday May 8th at 1:00 p.m. Pacific (4:00 p.m. Eastern).
While this teleconference is FREE, attendance is limited, so please be sure to register HERE and reserve your spot today.
Listen to Doug talk about the short-term and long-term trends, divergences between the U.S. markets and international markets, AAPL news, the Federal Reserve meeting and policy, European debt crisis, and volatility in the markets.
This week’s video covers a lot of ground, so watch it and remember to keep a close eye on the market for better buying opportunities later this year.
Doug Fabian’s next live public speaking event will be in Las Vegas at the Money Show, where we’ll have about six different opportunities to present, and a special opportunity for our subscribers. Please check out moneyshow.com to register or for more information.
We expect to invest in emerging markets this year, and want our audience to be aware of changes and trends in this area. Over the last 10 years, here’s what’s happened in emerging markets:
2003 ended the bear market and began a new bull market in the U.S. – 400% increase in emerging markets that year.
2007-2009 emerging markets fell 65%
2009-2011 emerging markets moved up 135%
There are over 100 Exchange Traded Funds for the emerging markets. You can invest broadly or even focus on a single country or industry group using ETFs. We think this is incredible, as it gives investors a chance to invest in as specialized of an area as they like.
While established markets like the U.S. and UK have had centuries of equity investing, the emerging markets are relatively new, and have much greater earning potential than developed markets. We believe that emerging markets offer great potential, and that this is an area that you need have in your portfolio long-term.
This year we plan to invest in emerging markets, but our approach holds that we do not want to buy until the rest of the market starts to panic. When that happens, emerging markets will go on “sale”, and we think that is the best time for investors to jump at this opportunity. If you have questions about when to invest and why, please call us at 800-391-1118.
Thanks for reading our podcast summary. If you want more details on what is discussed on the blog, please listen to the full podcast here.
Politics are swinging between left and right as the European Union tries to deal with their debt crisis. Watching this news unfold is important for investors – we think it’s important to know how austerity, deficit spending, taxation and other economic news affects your portfolio.
That said, here’s some of the news we’ve been following about the political and economic climate in the Eurozone:
Just to bring this a bit closer to home, local politics affects our portfolios as well. Here in our home state of California, we have similar deficit, taxation and spending issues to the EU. Here’s a few of those news stories:
Be careful in the markets and stay aware of how politics affects your portfolio – listen to our podcast every week for up-to-date details and analysis, or call us today for a personalized consultation at 1-800-391-1118
It seems to us that right now, the U.S. is a bullish bastion of strength around the world. International markets are all in short-term down trends, and, in contrast, the U.S. is in a bullish up-trend. This is unusual – usually all markets move in similar directions, and because of this, we think that the markets might be topping out soon.
We are also seeing increased volatility in the markets – last week was the worst-performing week of the year in the markets, but we’re still also seeing some highs. This kind of up-and-down action, plus leaders like APPL and GOOG starting to wane, tells us that the market is a very risky place right now. We think that the market is about to top out and start to correct.
First, Europe represents 25% of the global economy. Spain is the fourth largest economy in Europe and it is in economic shambles. The Spanish government is cutting severely in entitlements (unemployment benefits, pensions, etc.) and there is no job growth in Spain. People in Spain are more conservative with their money right now, causing a contraction in their economy, looking to contract a total of 7% this year. (To put that 7% in perspective, that’s about how much the U.S. contracted in 2008 – we all know how that affected the markets and economy.)
Second, Apple Computer is a phenomenal company, and it’s almost a stock index in itself. Apple stock alone accounted for 36% of all the earnings in the S&P 500 in the first quarter. We bring this up because if APPL was to falter, we would see some serious issues in our stock market.
Lastly, we want to remind you that stock markets go down 3-5 times faster than they go up. This is an unfortunate reality, but one to keep in mind as you watch the fundamentals and the global economy in changing times.
Here on the Fabian Wealth Strategies blog and podcast, we’ve talked frequently about the European debt crisis so you might be sick of hearing about it. However, while our listeners and readers might have been hearing a lot about this topic, many mainstream news-readers probably hadn’t before this week’s 60 Minutes special “An Imperfect Union – Europe’s Debt Crisis” aired.
This debt crisis discussion is important to pay attention to, not just because Europe is an important economy in the world, but because the U.S. is headed for a similar problem if we don’t get our deficit spending under control. Deficit spending is usually 2-4% of the economy, but right now the U.S. is spending at 9%, and coming up against the limits of our credit lines. Plus, there is currently a lot of artificial stimulus from the federal government in the economy, and taxes are going up next year – both aspects which are causing some anxiety in the markets.
We think that the European debt crisis will be a critical player in the next few year’s investing plans. Markets, internationally, tend to move together, meaning that the European markets can’t falter without impacting other regions in the world.
(If you read this blog and enjoyed it, listen to Doug’s podcast this week for even more details on these topics, and please share this information with others who might benefit from our perspective.)
