There are a couple of developments that are very problematic for the markets. They are mostly traced back to Europe; however, global growth, in general, is in serious trouble. In fact, socialists in Europe ran out of other people’s money a longtime ago, and the European Central Bank cannot print enough money to make up the difference. Ironically, the central bank president, Mario Draghi, knows this, and may bow out to a combination of political pressure and economic desperation. Nevertheless, it will not help as the spoiled citizens who grew up on phantom largess, and inflated self-worth might need to hit a brick wall to wake-up.
Amazingly, as the experts say, the drums are beating loudly for quantitative easing (QE); Europe is four years behind America. Well, QE has not done anything for Main Street America; it has only been around to prop up the failed banks scattered throughout the continent. Europe needs to go through more pain, and as for America being ahead, it is the reverse… our debt and endless welfare programs place us a few years behind Europe.
Another worry for the market is the hot commodity, crude oil. The price for crude oil has fallen under $90. This will feel good at the pump, but it is a serious red flag about demand as the OPEC is lowering prices rather than cutting production, even though they know it is a demand issue.
Global Pain
On Tuesday, Ford issued an earnings warning based on higher than expected losses.
- South America $1.0 billion
- Europe $1.2 billion
Next, there is the dire warning from the Geneva Report, which states that an economic crisis is imminent in the “fragile eight” countries from high debt and slow growth:
- India
- Indonesia
- Brazil
- Turkey
- South Africa
- Argentina
- Russia
- Chile
It’s crazy for nations like India and Brazil to let petty politics hold back their potential that remains immense. The fact is there will be growing pains, and an even harder landing here and there, (if they’re smart), but the “fragile eight” countries will be more relevant than Europe sans Germany, and possibly the United Kingdom in a decade or less.
Markets
I am looking for a big bounce into the end of the year, but for those that want to take a little edge off a more volatile ride, consider higher dividend investments. Of our open positions, Potash (POT) has a 4% yield. The company is holding on in tough times; when macro conditions improve, get a big move in on stock after being paid to wait. Since WWII, dividends paid up 6000% versus 1,100% for inflation.
