Terror Strikes in Europe Again. My Thoughts …
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One key problem is the unprecedented wave of migration from troubled countries in Africa and the Middle East. Many analysts fear terrorist operatives are slipping in unnoticed amid the flow of tens of thousands of legitimate refugees.
Experts also worry that Europe’s relatively open border system, and lack of effective intelligence sharing, could allow terrorists to continue planning and carrying out attacks like this one with relative ease. They also cite the insular nature of some of the immigrant communities, and the economic disillusionment many migrants face when they get to Europe, as reasons why intelligence agencies have trouble infiltrating terrorist networks.
Personally, I travel to Europe every fall for an investment conference hosted by the publishers of the German-language version of Safe Money Report. I’ve been to Munich, Cologne, Bonn, Frankfurt and Hamburg in the past half-decade as part of my work duties.
I’ve also spent time touring Prague, Berlin and Amsterdam during my downtime, not to mention London and Paris years earlier. I’ve traveled by air, train, tram, bus, taxi and subway and covered untold miles on foot. I don’t have any intention of changing my future plans.
But I’m sure plenty of tourists and businesspeople are doing so. At the same time, today’s attacks only serve to underscore the fact Europe faces multiple political, economic and humanitarian crises.
“Today’s attacks underscore the fact Europe faces multiple political, economic and humanitarian crises.” |
That’s why investing significant amounts of money in European stocks or European ETFs is a dicey proposition. I would rather stay focused on lower-risk, lower-volatility, higher-yielding, less-economically sensitive companies here in the U.S. Holding safe-haven investments like gold in an uncertain world like this one, can also provide peace of mind and wealth protection.
Now, I’d like to hear from you. Will this latest attack impact your travel plans? If so, how? What do you think about Europe’s counterterrorism efforts? Are there additional steps that authorities could take to prevent attacks like those in Brussels and Paris? In the bigger picture, what does this say about the political and economic challenges facing Europe? Use the comment section below as a sounding board.
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Reader Anthony G. said: “Nature knows that there are too many bulls. The market is overbought. The bears will bring it back to balance.”
Reader Mike S. also sounded a note of caution, saying: “PE ratios are too high … corporate profits are shrinking … and this market is overpriced for reality. Look in the mirror and ask yourself about the market, and you’ll find it’s supported by the Federal Reserve.
“They are not man/woman enough to admit this. They support the market with manipulated interest rates. If we manipulated our business like the Fed, we would be in jail.”
Reader Rickard brought up the impact of central bankers on markets, saying: “It’s going to be incredibly hard for this market to fully break down. The Fed can’t let this market tank because if they do lose control, they don’t have any other tools to stimulate the market (given ZIRP, etc.). Previous bear market cycles like 2002/3 and 2008/9 have had interest rates much higher.”
But what can central bankers really accomplish? Reader Chuck B. thinks it isn’t much. His take:
“What tools does the Fed have to keep the markets from the tank when they decide to go there? There is no visible support for where it is now. Hopes and dreams? They are only good until they are dashed, and they will be, of course – sooner or later.”
Finally, Reader Al said: “U.S. markets may witness an influx of investments from Asia and Europe since only the blue-chip, well-capitalized companies with excellent balance sheets are stable enough to hold up against the financial debt situation and lack of global economic progress. The U.S. markets provide a better safe haven, although trillions of dollars in debt will raise its head sooner or later. A roller-coaster ride is in the cards.”
Thanks for sharing. The biggest issue I have with the kind of central bank intervention we’ve seen recently, and its impact on asset markets, is the timing. The massive interventions unleashed in 2008-09 came at the tail end of a bust phase in the credit cycle. Real estate prices had already tanked. The stock market had already crashed. The economy was already mired in the depths of a recession.
So when the Fed unleashed things like QE, and the Treasury did its bank stress tests, it worked because sentiment was wildly bearish and a lot of the systemic rot had been purged. This time, the European Central Bank and its foreign counterparts are unleashing bazooka after bazooka at a time when the asset markets are very close to their highs. The M&A, IPO, junk bond and commercial real estate markets have started to deflate, but they haven’t fully crashed yet.
That’s why I find it highly unlikely we’ll be up and off to the races again. It’s just not the right point in the cycle. Support for that view comes from the types of stocks and sectors that are doing well, versus those that are underperforming. It’s not technology, financials, materials, and the like rallying sharply to new highs. It’s utilities, telecoms, consumer staples and other defensive sectors leading the way.
Agree? Disagree? Have any other observations? Let me hear about them in the discussion section below.
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Do you believe the commercial real estate sector is topping out yet again, and if so, will the downside be as severe as we saw almost a decade ago? What do you think about oil prices and the chatter about a production freeze? Any thoughts on the latest round of primaries and caucuses? Share them below when you have a minute.
Until next time,
Mike Larson
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