OPENING POSITION

September 2012

We are living in some tough economic times globally, and when investors start to favor the US dollar over other currencies, we begin to realize just how bad things really are. The currency markets are affected by global economic news, and with negative news currently being released almost every day from all over the world, there is no telling what might happen from one day to the next. With the ongoing crisis in Europe, it is no surprise to see capital being pulled out of Europe and invested in safer pastures.

Then there is the slowing growth in China as well as in some emerging markets. This makes finding those “safer pastures” in which to invest a true challenge. With so many countries unable to pay their debts, you really need to think hard about where to put your money.

The picture is not much better in the commodities markets. It just seemed like yesterday when gold and oil were gaining the attention of investors. They, too, have been hit hard. And look at the bond markets. The US Treasury yields have been trading near record lows!

All this increasingly disappointing global data has created anticipation for further central bank intervention. But how much more stimulus can the central banks provide, and given that previous attempts still haven’t fixed the problems of the world, are additional shots of stimulus really the answer to fixing the global financial crisis? Things are looking so bleak that I wouldn’t be surprised if we saw another bear market in the near future. That the Standard & Poor’s 500 has rallied as much as it has in 2012 in the midst of such gloom leads me to look at the markets as being on the verge of toppling over. And let us not forget the added pressure of the US elections that will take place later this year.

The latter part of 2012 will be an interesting market to watch very carefully. There’s still a lot of uncertainty, and the current situation is nowhere near resolved. By no means am I trying to discourage you from trading the markets; I am simply telling you to hope for the best, but prepare yourself for the worst. We are not out of the woods yet, and the last thing you want is to be caught off guard.

Jayanthi Gopalakrishnan, Editor

Return to Contents