Friday, June 1, 2012

Make no Mistake This Crisis Has Legs

From the Financial Post an article below.  Here is the thing, where was this article in March when the stock market was smooth sailing.  Things really haven't changed that much between then and now, other than falling asset prices create fear, and every Talking Head tells us we are shit out of luck.

I'm kinda of dumb, so my take is this.  The sky isn't falling, the real world doesn't change very much from month to month.  Publicly traded asset prices do though, because those are driven by a herd which is driven by emotion.

The lesson that I need to learn personally, is that if there aren't articles like this and obvious panic in the markets there is no sense buying stocks.  Sit on your cash, because the next panic is coming a lot sooner than you think.

I'm a buyer today, and was yesterday.  I'm just not sitting on a big balance of cash like I wish I was.

The triple whammy of a rotten U.S. jobs report, slowing growth in China and India, and the escalating European debt crisis has hit Canada’s economy and financial markets everywhere. Stock market indexes are plunging, and other signs of distress are proliferating. The drop in commodity prices — reflecting weakening global demand — has hit Canada and Australia hard as mining companies are now postponing investment. Ironically, this is only a week after the OECD recommended that the Bank of Canada hike rates, which of course, will not happen anytime soon. Indeed, today’s very disappointing U.S. jobs report has triggered calls for further easing by the Federal Reserve (so-called QE3).
Even before the latest weak data, we were in very dangerous territory, owing to the downward spiral in the Spanish and Italian bond markets and broadening concerns of a break-up of the eurozone. Turmoil in Europe has exacerbated the slowdown worldwide as European banks retrench, reducing their lending to Asia and elsewhere, and capital flees to safe havens such as the U.S., German and Canadian bond markets. Bond yields in these countries have fallen to record lows.


  1. Well, I tend to disagree with you on this one, Devon.

    Yes, buy when there's panic. I've been doing some select buying too, as I mentioned (CHK).

    But the euphoria during Q1 was predicated on a false premise: that growth was accelerating. Now reality is setting in (consider that the ECRI made their recession call quite a while ago; it's just that most market participants focus on trailing or coincident indicators).

    Certainly now is a better time to invest than April was, but there will be much better prices once the extent of the destruction is apparent (e.g., US depression and EU collapse).

    Right now is not especially pessimistic. I'm waiting for late '08 style panic selling again.

    In the meantime, all I've been doing is buying out of favor "stuff": natural gas, gold, silver, miners.

  2. "Here is the thing, where was this article in March when the stock market was smooth sailing. Things really haven't changed that much between then and now"

    The bears have been saying the same things for a while. Europe bears, China bears, US bears. All have more or less been proven correct so far.

    As for if things have changed... well, I think they have, especially in Europe. The nature of a financial crisis is that things change when people think they have changed.