Tuesday, July 13, 2010

G8 Mop-up

July 2, 2010

It’s all over but the whining. The super expensive security program that commanded the media’s focus before last week’s world economic summit continues to command their attention. Notwithstanding the criticism, it did work. The international leaders who visited Canada for those few days all returned home safely. Congratulations to the security forces who succeeded in keeping our visitors safe.

Those visiting dignitaries all issued their summary statements at the end of the conference, as they usually do: reassuring words designed to give us the impression that the worlds banking and economic system is still safe. We are economically safe – that’s been the continuing theme of the G8 conferences since the crisis of 2008.

Pretty boring stuff. No wonder the media focused on the one-day riot where so-called protesters got violent, vandalized police vehicles and smashed windows. It was the only juicy bit in the whole conference.

And now the media has taken the usual tack: the police over-did it. I saw a photo in the Toronto Sun: police had seized a quiver of arrows with huge cloth-filled bags on the tips. Apparently these arrows looked like they were designed to be soaked in gasoline and lit on fire. Imagine the effect of flaming arrows coming down on police lines? Naturally, those carrying these potential weapons were arrested and held for questioning. After the conference was over and peace returned, the Robin-Hood protester claimed the arrows were part of some theatrical group’s props. In other words, Robin Hood came up with a great alibi. I’m sure the guys they caught with tire irons were merely going to help people who had flat tires. And the ones they caught with baseball bats were only trying to help out by trying to organize a friendly game of softball. Why would those mean old police arrest people who were only trying to help out?

In my investment book, Beyond the Bull, I wrote about what it takes to become a successful investor. One of the keys is to not be distracted by the juicy stories. Last week’s conference was a total bore except for the juicy security stories. But it’s the boring part that’s interesting to investors. Those of us who are planning our retirement or managing our family’s finances need to know those boring bits. Two years ago the Canadian and US stock markets dropped in half in nine months. People’s savings were devastated. Can this happen again? The lesson we all learned was that we can be punished for other people’s crimes. In the time leading up to 2007-8, certain bankers became outrageously reckless: when their greed–crazed lending practices blew up, it was our RRSPs that lost 30%+. Governments rushed in to bail out these monster failures and the system survived. Did the governments bail out your RRSP? Will the government bail you out if another wave of bank failures starts? Not a chance! We have to bail ourselves out.

For investors, the G8 conference was not a “bread and circuses” entertainment event: we really need to know whether another 2008-9 stock market crash is possible. We really would like to know so we can make adjustments to our investments to protect ourselves from further loss. And we don’t want to hear the governments’ “Don’t Worry – Be Happy” rhetoric. [Bobby McFerrin’s 1988 reggae song]. We need to know about risk: did this G8 economic summit increase or decrease the risk of my losing my shirt in the stock market again? The real G8 security story is – did all those important politicians and economists make my world safer? Or do I have to make my own financial world safer?

Our Advice: make your own world safer. Reduce your exposure to risky assets and increase your holdings of safe investments. This is a time to focus on not losing your money. There are no super expensive security forces keeping your investments safe. You have to do that yourself.

To order your copy of Beyond the Bull and the Five Levels of Investor Consciousness CD, or to sign up for Ken’s free monthly webinar, visit www.gobeyondthebull.com (Bullmanship Code = SS32).

Contact Ken directly at ken@castlemoore.com.

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