Europe is quiet, save for Germany’s latest confidence report. It seems German confidence hasn’t been this low since 2010. That seems bad, right? If it does, think about it this way. The German business confidence index dropped from102.3 to 101.4 in September, but …
Historically, from 1991 until 2012, Germany Business Confidence averaged 100.9 reaching an all-time high of 115.4 in February of 2011 and a record low of 84.6 in December of 2008.
It is troubling that business confidence in the largest economy in the EU is slightly weaker, but it has been up and down over the last few years, and it is not even close to as bad as it was in 2008. My point is: go with the flow, but keep it all in perspective.
- I read your article on housing and retirement plans. You sound optimistic but I am not. With three rounds of QE, at some point, inflation will go up and I think it will mirror 1982 again. We still have the fiscal cliff to face and if Congress doesn’t get its act together soon, we are back in a full recession taking any recovery with it. Maybe for good. What I am nervous about is when to up our allocations in our portfolio. We are 25/75 now in our mid 40s and will head back to 75/25 after the first of the year or when the next drop in the markets occurs. I’m not buying in now since we did the same thing rolling over our 401K in December of 2007. That still hurts.
The reader doesn’t directly ask a question, but he does bring up a few good points worth discussing.
Yes, at some point inflation will go up – it is inevitable. Whether it will be as high as it was in the years 1974-1982, I don’t know. When it does go up, will it reach the 1980 high of 13.9%? Possibly, but before it hit that high, one could see a trend forming, and with that hind-sight perspective, one can now keep an eye out for it.
He is also correct about the fiscal cliff that lies before us. It might prove problematic, if Congress does nothing to remedy the looming tax hikes and budget cuts. But, did you know Congress just passed a $500 billion measure that funds the government for the next six months? Yes, you read it – the Tea Party caucus voted for raising the debt ceiling without even a whisper. Just about a year ago, those folks were willing to take us right up to the edge of an even larger problem – the financial collapse of the US government. Now, quietly, behind closed doors, they vote to raise the debt ceiling for six months. Why?
Most importantly, politics is at play. The Republican brand took a big political hit for its brinksmanship last year. This cycle, many of those folks are fighting for their jobs. Even if they are re-elected, my sense is they do not want to go down that ugly road again. I believe both parties will reach a quiet agreement in the lame duck session after the election or right after we go off the cliff in January. Even if some believe we need to collapse before we can get better, the folks with big wallets do not want this, and, in the end, those folks have a lot to say.
I understand your angst, my friend, but it sounds as if you are on top of the game. My only advice is keep your eyes open, your mind working, remain nimble, and even though the issues you raise are potentially harmful to your portfolio, don’t let fear get in the way of making money.
Trade in the day; Invest in your life …
