It doesn’t look good this morning.
The S&P 500 futures are pointing to a down open in New York. The euro is down further against the dollar in trading in Europe, hitting $1.2935, a 13-month low. European stock markets are down as well with London dropping almost 1% and Paris a little more than 1%. Selling isn’t limited to Europe either. Overnight Hong Kong was down more than 2%. Shanghai, however, bucked the trend and rose slightly.
Europe—and in particular Greece and Spain—remain the epicenter of the shock waves driving down stocks around the world.
One fear is that protests in Greece or political difficulties in selling the $146 billion bailout to German voters will still scupper the European Union/IMF rescue plan.
And public statements from Spanish Prime Minister Jose Luis Rodriguez Zapatero yesterday just fueled fears that Spain is next. Trying to squash rumors that he was in Brussels negotiating a $360 billion bailout with the IMF (International Monetary Fund), Zapatero just succeeded in demonstrating that Spain still doesn’t have credible financial leadership. Rumors of an IMF bailout are “complete insanity,” Zapatero said. It was “simply intolerable,” he told reporters, that such rumors were circulating to the detriment of Spain’s standing in the financial markets.
That, of course, completely ignores the financial markets’ increasing belief that Zapatero doesn’t have a clue about the size of the Spanish debt problem or any plan for preventing the Spanish debt problem from becoming the Spanish debt crisis.
On the other hand, purely economic data from the United States released over the last two days signals a solid, if not stunningly robust, recovery in that economy.
More on that in my next post in about an hour.
wb.3355,
True enough. However, I’m talking about European stocks moreso than the overall economy.
25% I sure hope not! I can see 10% yea and then we work our way back up from there.
I’ve been nervous fall of last year. But still not liking 1.1% in the bank.
EdMcGon,
The overall problems in Europe won’t be cured just by exports. Too many of the countries in southern Europe rely on government spending.
wb.3355,
The only problem with shorting the European markets is that an inflated euro COULD be beneficial to European exporters, which would limit the upside on the EPV.
IF the Europeans wise up and just inflate the euro like they should, the European markets could actually become attractive opportunities.
If you are looking for another way of investing in the troubles in European economy, you may want to look at the “EPV” (ultrashort the Europe index MSCI).
Jim, yes, the US economy is giving positive signals, BUT the market is still overbought AND the global economy is definitely slowing. Place your stop-loss orders and keep an eye on your watch lists. I truly hope for a 10-15% correction this time.
Ed, hate to say it, but I agree with you and also bought EUO yesterday – the EU may truly be unravelling.
davecove,
That’s why I bought EUO. 😉
Guys, if you want to have at least one thing in your portfolio going ‘the right way’, look at DRR (MORGAN STANLEY MARKET VECTORS DBL SHORT EURO).
When Jim started telling us about Greece taking the Euro down, I’m not sure why he didn’t mention a stock that double shorts the Euro. Seemed like a good idea to me and it is up about 6% in the last 5 days…
Full disclosure: Yeah, I bought some of that…
When a stock market goes up 70% in a year it is to be expected that you’ll get a pull back at some point. Whether you think it’s called for or not is completely irrelevant. BTW, this isn’t even a meaningful pull back…at some point, whether now or in a few months, stocks are going to drop 10-25% (at least). Again, that’s completely in line with historical fluctuations after a massive run.
Just my opinion but if this mild pullback is making you this nervous, I guarantee you’re going to let your emotions drive your decision-making and you’re going to make a terrible mistake that you’re going to regret (i.e. sell at the lows). Might want to consider a different tactic for investing.
Domino412,
For what it’s worth, the most pessimistic prediction I’ve read so far called for a 25% correction.
Domino412…
Breathe! I’m in the same boat with you and probably several others on here. I’m seeing RED in my portfolio but hopefully (long term) we’ll make it through this terrible storm!
Hang in there…
I’m literally nauseous this A.M! This rout, in my opinion is totally uncalled for. The average American is clueless to the news since they are too busy out shopping. The’re still snatching up i-products, the drive thru at MCD is still backed up, and the auto showrooms are full of prospects. But, what should we do Jim? Buy more or wait and see? How low can she go?
Today’s not the day! Thank you for your cue yesterday; I trimmed some positions then. I just wish I’d done more . . . now wait and watch.