Friday, May 21, 2010

Focus Too Narrow

The financial press has missed the boat. In its coverage of May’s extreme volatility in the stock market, they have focused on European debt problems. Reporters worry that the economic problems of Iceland and Greece will spread to Italy, Portugal and Spain. They blame the stock market’s wild ride on economic problems. But they may have overlooked the real story.

The North Koreans did not miss the boat. Apparently, earlier this year, a North Korean submarine fired a torpedo at a South Korean naval vessel and sunk it, killing 45 sailors. And when the United Nations called them on it this week, the North Korean dictator threatened all out war on South Korea. North Korea believes that China is her ally. South Korea believes that modern G8 nations are her ally. Did North Korea’s navy commit this act to intentionally start a war? Have they been preparing for war for years? Was the sinking of the South Korean vessel supposed to trigger war? Didn’t George Bush include North Korea in his Access of Evil speech when he was preparing America’s response to the 9 – 11 terrorist act? The financial press has missed the boat on this long-storming sea of trouble.

On May 6, 2010 the Dow Jones Industrials dropped 900 points in the twinkling of an eye. Is it possible that Fat Finger Day happened because of a leak in naval news? Did someone find out the results of the UN study before it was released and those fat fingers pushed panic button, selling stocks in anticipation of renewed conflict in Korea?

Or maybe the real story is a cold war – an icy stand off between China and the west. That would certainly end the rosy glow of China – American trade relations. That would certainly change the investment world.

The heads of state of various countries will continue to posture and position themselves economically and militarily. And financial press will continue to report whatever they feel is important. What will you do?

Don’t you miss the boat. Remember what happened to the stock market in late 2008 and early 2009? It dropped in half. Remember what happened to your RRSP? Were you one of the millions of investors afraid to open their 2008 year end investment account statements? The stories about European debt indicate an increased level of risk in the economic world. The threat of war, cold or hot, also indicates an increase in the level of risk in the economic world. It’s time for ordinary investors to DECREASE the risk in their own personal economic worlds. It’s time to sell your risky securities and buy safer ones. Don’t allow your portfolio to be torpedoed again.

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