Global Meltdown or just Ugly?

After seeing nothing but red arrows facing down today for any and all types of investments, I wanted to share my views. Today gold  lost its luster, commodities are lower, the yield on the 10 Year US Treasury is only 1.72%, and there isn’t one stock that’s up in the Dow, to top it off the headlines read “Global Meltdown.” How is it that when Europe sneezes, the rest of the world catches a cold?

It all began more than 18 months ago when Greece was facing financial troubles and it has spiraled out of control since.  Today, it looks as though Greece could run out of cash in the next couple weeks and default on its debt. Being part of the Euro zone with 15 other countries is what makes this more confusing than ever. Stronger countries like Germany that has been more responsible financially speaking,  does not want to bail out a country like Greece who can’t make the difficult decisions of cutting back in order to get its financial house straightened out. Greece is looking for more bailouts, but it may be time for them to rein in the entitlement programs that are out of control.

Some will say that Greece is just one small country, how can it’s problems  affect the rest of the world? The answer is because the world is flatter than ever before and as Thomas Friedman now says, hyper-connected. Banks around the world feel that they have little if any exposure to Greek banks because they bought insurance in the form of swaps, but which financial institutions are insuring those risks? If you haven’t watched the HBO movie “Too Big To Fail”, please do so, it is fascinating how the Great Recession of 2008 got so out of control, and remember, it was AIG who was inurning all of the banks then, need I say anymore about insuring the risk?

Back in the US, President Obama has been unsuccessful four times this year at coming up with a deficit reduction policy and the Senate hasn’t had a budget in over 900 days, their failure to act is just unacceptable to the American people. After the S&P downgraded our stellar credit rating from AAA to AA+ in August, everyone in Washington including our President went on vacation but now they’re back, well rested and deeply tanned with all kinds of new ideas but polar opposites in their expectations. We have been waiting for weeks to hear about the latest and greatest attempt of creating new jobs and there just doesn’t seem to be any traction with  President Obama going after the rich. The Federal Reserve Chairman Ben Bernanke is as studious as they come on the Great Depression and what worked or not, and this week the Fed’s  “Operation Twist” (no this isn’t a Dancing With the Stars promo) is the next stimulus program to revive the economy, although the past packages haven’t done much good to date.

Bottom line, there is still a lot of uncertainty surrounding the economy and whether or not we are slipping back in a recession. I do believe there is a lot of bad news built into the markets and feel that we are closer to the bottom of this latest correction. Stocks are probably a better value than any other asset class, but for some investors, they just aren’t comfortable owning stocks. This is the time to look beyond the end of the day or week or month and remember what you are investing for, and for most its retirement that’s years away. As long as you have a good mix of investments that are prudent for you, then the best thing investors can do is turn off the TV so you don’t have to  watch the breaking headlines that are meant to drive fear into your psyche so you watch more TV (and then TV can sell more advertising…just brilliant).