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Tuesday, August 9, 2011

Wall Street or As the World Turns

August 9, 2011
Wall Street or As the World Turns 
Harsh times – truly. As an investor, how do you prepare and how do you respond? Do you stay put and wait it out or do you try to make adjustments to your portfolio, which seem oh so unpredictable? It seems that every time I read the daily newspapers, the commentary on investments and stock markets is contradicting what it said the day before. And who is to blame with so much uncertainty, economic crises, etc. Who can truly predict how major investors react on a day-to-day basis. Us small fish only seem to be able to make small adjustments, the less risky kind, but we are clearly vulnerable to the large investors that seem to change direction from one day to another, with some fantastic master plan in mind: ripples for them, waves for us.
Just last week, there was an article in the WSJ talking about the promising after-IPO gains investors could benefit from.  The government had reached a consensus and made a budget deal, dare I say there seemed to be hope. Companies such as Pandora and LinkedIn that had recently seen great gains during their IPOs, seemed to signal positive energy in the market.  And then the tower started shaking… Standard and Poors downgraded the U.S.' AAA credit rating and the stock market began sliding. According to USA Today, the Dow slipped over 600 points yesterday, and those shining new stars on the stock market saw their share prices decline. The article continues to point out that the "window for IPOs [slammed] shut". In fact, if you have read any newspaper over the last few days, the most common headlines are "economic recession expected to be worse than in 2007" or "Just when it seemed safe, Wall Street tanks like it's 2008." How comforting. But where to turn?
International investments seem to be a non-option. Climbing debt is shaking the foundation of several economies/countries. The Euro may be a bit unpredictable, maybe not depreciating as rapidly as expected, but so far in 2011, the currency peaked in February and has been depreciating (with a few ups and downs) ever since. Real estate is a tough one these days [think long-term my fellow real estate owners!!]. Gold never seems to fail, up +3.7% yesterday and +20.3% for the year. [Protect your jewelry ladies!!]
So, what are our prospects? The Federal Reserve Policy Committee is meeting today to discuss the state of the economy, but seemingly no one expects a stimulus plan to be presented. The downgrading of the country's credit status has President Obama committed to finding additional ways to cut back and reduce the deficit [tax discussions remain on the table], though he clearly seemed aggravated by the credit rating and the impact it had on the already wounded economy. President Obama, I hear you loud and clear. If things were not bad enough, Wall Street just needs to add another layer of complexity, panic, and financial crisis….Thank you very much!!  While I do have investments and manage my portfolio, my random word associations with Wall Street are "legalized gambling" and "mafia". Too harsh? Obviously with discussions and credit ratings of the current nature, consumers will panic and spending will be conservative. The downward spiral continues. So who is helped? We shall return to this thought... 
To add to the investment and economic confusion, USA Today also reports that "U.S. banks get more cash than they want". With the European debt crisis, investors have pulled away from European banks leading to cash influx in the U.S., but apparently, they don't want the cash either given that there is little current opportunity to invest it profitably.
Oh what a dilemma! Those who have it don't want it and those who don't have it are desperately seeking it.  In the meantime, those controlling it are playing games and setting the world in panic [to make even more money]. So what are we supposed to do? Once again, are we supposed to stay put in fear of rising unemployment and layoffs? Should we conserve our savings and spend cautiously? By the way what is going to happen to our interest rates and inflation? Let's see what the Fed's policy committee comes back with. Better yet, let's not read newspapers for a week and pretend Wall Street does not exist and everything is the same…oh what peace….

1 comment:

  1. In connection with my "brief lashing" at Wall Street and traders, here some interesting news: France, Italy, Spain, and Belgium are banning [likely temporarily] short-selling certain stock "amid efforts to calm market turmoil", reports USA Today, today. "The European Union's markets supervisor, the ESMA, announced the move after two days of wshipsaw trading that saw French banks' market value fall and rise by billions of euros." Applause, applause. I hope the U.S./Feds are watching.