Thursday 8th February 2018
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I am personally very pleased we have had this correction. The market had got out of hand and the ridiculous looseness of money supplies around the world had created price stupidity.
At the time of writing, the Dow Jones Index is down 8.9% from its all-time high.
That seems a lot but… we are pretty much back to December numbers.
Seriously, we are back to levels of 3 months ago.
This highlights the stupidity of the markets recently. Going up that quickly and losing it within 2 days is not really a big deal. We had media commentators running around like the world has ended.
Why do I say markets have been crazy?
The persistent growth in prices has been unsustainable.
All western economies have been running external deficits. They are simply borrowing to survive.
The capital that is racing around the world is distorting prices and moving capital from production to speculation.
Most governments simply don’t have the skill to deal with the issues they are facing.
Most are simply trying to hold a Government together and watching the latest opinion polls.
They are all kowtowing to some trade or security agreement they don’t understand.
They are being manipulated by a multi-national because it’s great politics to have more eco-friendly, renewable energy vehicles.
It’s great politics to subsidize a Battery factory so we can create jobs.
It’s great business for a multi-national to threaten to close a smelter or reduce staff at a factory. Most politicians have no economic or financial skill. They only have our money.
Key take-outs of the above:
- This market is going to be challenging.
- It has resisted reacting to the extreme comments by the President of the United States.
- It has resisted reacting to the standoff with North Korea.
- It has ridden through the reality of the finance mess we call Euro Land.
- We have watched the crypto “currency “ boom before our eyes, even though most people struggle to describe what a crypto currency is or how they differ from each other and what block-chain actually does. The boom is in spite of these facts.
When you think about markets you must always relate them back to society.
We have the massive growth of the marijuana industries in the USA.
The markets do seem surreal.
It does seem like a 1970s Student party, where the drugs and booze were mandatory, and reality was left to Monty Python’s Flying Circus.
Finally, we have had a slap in the face.
It has stunned us. Not much more.
Where it goes from here is not certain.
- Be smarter in your investing.
- Make sure that you understand your portfolio.
- Is the risk you are holding right for your personal circumstances?
- Can you stand a small downturn?
- A big one?
- Do you have enough defensive assets?
- Are you happy the income is predictable?
Most people will survive this event.
Will you be in the shape you could be in?
Take some time to reflect on the next stage. Be smart. Take advice.
Understand we are entering the morning after stage.
Things will have a harsh reality. The party of the last few years will take its toll and the head - ache and the dry horrors will be painful.
Don’t stop investing.
Be proactive. Do take advice. Do act.
Brent King B.Com., C.A., R.F.A
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