It looks like the whole world is in a mess. Everything that can go wrong is going wrong. I am not talking about the political world, but the financial one.
Since the physical world has gotten smaller and everyone is trading with each other, when one country gets a cold, some of the others may too, get sick. The creation of this financial melting pot is actually a blessing in disguise. If this were not the case, we in America, would have been in a much worse financial situation. We are saved by this corporate and financial geographical diversification. If for example the demand for certain goods or services are low in one location, it is offset by higher demand in another. The corporations make sales and financial deals and hopefully everyone benefits.
I am neither a stockbroker nor a serious investor. I see myself as a casual observer of the financial world, specially of the American stock market. The market has been acting like a yo yo in the past recent months. There seem to be no rhyme or reason. One day the stocks are up and the next day they are down. It seems to me that there are people who buy or sell large numbers of shares just to create trade. For this reason, I am a proponent of buying shares in great companies and holding on to them for a very long time. To be a trader, you will be just a little dinghy in the rough seas. This erratic fluctuation is also a telltale of the lack of investor confidence and nervousness.
The Federal Reserve has tried to assure the world that the US economy is sound and its financial markets are and will remain intact. To this end, it has been been cutting rates in the recent months. These cuts have been too little and too late. But one effect they have had has been to lower the value of the dollar. This has been one of the reasons for the price of oil to climb over $100 per barrel. The Federal Reserve has also tried to assure everyone that they will stand behind all the financial institutions and will inject new money if need be. With only $920 Billion in assets, the Federal Reserve will not be able to do this if other financial institutions fold as Bear Sterns did over the last weekend.
Yes, we are in uncertain times. Times we have not seen for over seventy years. But I also believe that our present financial world is not the same as it was in the 1930s and we will pass and overcome these rough times.
