Patience in the face of fear

As I am sure each of you knows the U.S. financial markets have been taking a beating as of late.  Precisely counter to my recommendation to buy into those same markets.  Fear has been ruling the day.  Fear that Europe’s economy may collapse.  I hate to harp on the point, but while Europe may take longer to emerge from recession than the United States and it may even experience a double-dip recession, the crisis does have the attention of European policy makers.  I think that it is nearly impossible that the disaster scenario being priced in by U.S. equity traders is going to unfold.  Thus, I am urging patience for investors.  My recommendation to buy was based on my belief that by buying now that you are going to be purchasing interests in U.S. businesses at prices that over a 5-10 year period will look very cheap.  I still feel that way.

Regarding Europe: I am more convinced now than ever before that Europe will address its economic and EU-structural problems.  German Chancellor Angela Merkel is openly saying that Europe is facing an existential crisis and that it must succeed.  Folks this is a big deal.  Germany is the most important member of the EU and it understands what is at stake.  As do the other nations of the EU and eurozone.  An important milestone occurs this Friday when Germany votes on whether or not to live up its contributions to the Greek bailout.  I am fairly certain that is what is causing everyone to fret.  At this point it is difficult to handicap the outcome.  Polls in Germany have the measure running at 53% for the bailout and 47% against.  However, there is quite a lot of campaigning taking place on the “for” side of things.  What if the vote fails?

If the vote fails then to my way of thinking that makes the United States look like the safe harbor for global investors yet again.  As I said in my blog posting last week: where else are you going to invest if you are a greedy investor (as are we all)?  Cash?  That’s a long-term solution?  Yeah, right!  Real estate?  Good luck raising the debt needed to leverage returns on that.  Foreign markets?  Like where?  Brazil where the leadership is courting Iran?  India, where you still can’t count on the airplanes flying?  China, where you still can’t trust the government statistics?  In foreign currencies?  Like the euro, which was trumpeted by pundits for the last several years?  C’mon.  Folks will liquidate into cash then sit on that until they get greedy and watch 10-20% returns pass them by.  U.S. equities are strong investments for all seasons because the U.S. is a great place to do business, has talented business leadership, a lean-mean fighting workforce, a recovering economy, and innovative ideas.

Jason