With very little time left in the year, the S&P/TSX Composite Index has a YTD loss of 11.36% and trending lower. The S&P 500 Index is also now in negative territory with a YTD % change down 3.3%.
In all of my reading and watching, the two statements that I often notice repeating themselves are that the European mess will take at least a decade to solve and possibly much longer and that the period beginning in 2008 will be a lost decade for investors.
All of that may not matter so much to you if you are young with a long time horizon and, in fact, it may afford you many buying opportunities. However, if you are nearing retirement, or already retired, a lost decade or more has a more profound effect.
In the past, I have been accused, many times, of being too negative in my comments but, quite honestly, do any of you see much cause for optimism in the current globalized economy given the debt problems in Europe and America?
Minus those problems, I quite imagine that this would have been a positive year for the markets. However, the current debt problems are going to be with us for several years to come.
What does that mean for you as far as expectations for the markets in the years to come? Do you see any cause for optimism? Despite it taking many years for the world to dig out of the current debt problems, can the markets still rebound any time soon or, are we indeed facing a problem that will take many years to solve and a potentially lost decade for capital appreciation in the equity markets?
In other words, if the markets can't overcome their fear of the debt crisis now, and the debt crisis is going to be with us for many years to come, is there anything to make you believe that the markets will be able to overlook the debt problems in the coming years and provide much in the way of growth opportunities for investors?
You have to understand deleveraging to understand why "the markets" dive in contagion, it has not to do with investors, it's institutions that are being forced to raise capital and liquidating assets for currency
Why raise capital? Because institutions operate on commercial paper short term funding, raise eyebrows of your creditors, they will stop short term funding, you lose liquidity and collapse over night
This is why its important to invest in dividend paying companies, which despite all the hype about being the "latest and greatest craze", still offer fantastic yields in many industries. Invest your money at an average of 5% yield over several industries, and if the markets haven't moved in 10 years, you've at least earned 50% and have probably beat inflation.
People keep mentioning Europe as a big problem but the US isn't much better. Wasn't very long ago and we were only talking about how horrible the situation in the US was and the US dollar was going to zero and so on. Solve the problems in Europe and then the US will be the target again.
Putting it all together with liquidation as ddkay mentions and an unfavorable demographic situation going forward we can say the stock market does not look like a good place to be. If the Fed and European banks however are able to print enough money to turn the tide then all hard assets and stocks will need to be owned. At this time however Germany has no stomach to go down the Weimar road.
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Originally Posted by Jungle
