Volatility is Coming

The main risks we are facing are slowing global economic growth and the European currency crisis.  Both of these are political risks driven by fiscal (i.e. Congress and European Union Bureaucracy) policies of taxing and spending, not monetary policy (Federal Reserve, ECB, etc).  Central bankers cannot solve our problems, only politicians can.  Unfortunately, that isn’t very inspiring with the leadership we’ve experienced.  I believe the euro will survive but it will have fewer countries in the currency block during the next decade.

Financial markets are going to be manic depressive for the next four months.

1. The elections this fall will set the tone for economic policy in the coming decade with two polarized camps with completely opposite and contradictory solutions to our problems.  The Bush Tax Cuts expire in 2013.  The Obamacare tax hike will arrive shortly thereafter.

2. Europeans have implemented another short-term fix to their long-term problems.  The currency zone will shrink with Greece being the template for expunging countries.

3. I recommend that you watch “Duck Dynasty” on A&E and avoid financial news channels. They don’t add value.  They just create unactionable noise that is detrimental to peace of mind.  I also like Forbes magazine and the weekend edition of the Wall Street Journal.



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Filed under + Economics, Politics and Financial Planning

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