Future of Financial Markets in 2012
Future of Financial Markets in 2012
Where are we headed ? DIJ ?& SP500 and the tech sector in 2012 ? read more below :
There have been many predictions during the past year from economists and financial experts as to how the Financial
Markets will fare in 2012 but at some point the market will figure out that it is impossible for us to resolve our borrowing, no matter how much the Federal Reserve prints in its Quantative Easing Programs I and II.
In reality the national debt is approximately $1.7 trillion. A lot of creative accountants might put it at 1.2. or 1.3 but the numbers can be juggled and crunched several times over before the $1.7 million becomes the fact that can’t be denied.
We have seen what has been happening in Europe; in particular Greece and Ireland, and we can directly compare the European Union crisis with what is occurring within the USA. You simply cannot continue to spend what you don’t have.
The EU states are imposing austerity measures; the USA is printing money which is not an option available to EU members. California and Illinois, to name just two, cannot print money and those two states are in almost the same situation as Greece and Ireland. Austerity measures are not working in the EU where there is widespread discontent so why would anyone believe that similar measures would be successful in California? It just doesn’t make sense.
With the eighth biggest economy in the world, California’s debt is astronomical and rising; the austerity measures that are being put into action have impacted badly on new business start up. The Secretary of State has closed all its agency offices putting more pressure on its main office in Sacramento.
It can take up to 20 weeks to form a business, how good is that for the economy and Financial Markets? Perhaps it would be more appropriate to redirect a little from the $2.1 billion it spends annually on its prisons and some of the $4 billion that it has budgeted for building new prisons into business start up.
Unfortunately, there is no quick fix for the greatest recession since 1930, more particularly when we allow institutions such as banks to be bailed our by the American taxpayer.
Naturally if the taxpayer doesn’t dip his hand in his pocket the banks will close and it would appear that the governments of the USA and Europe are alike in their reluctance to confront bankers, tell them that it is their mistake and close them down.
The bad investments made by the bankers would have to be absorbed by everyone but before we issue licenses to the queue of budding entrepreneurs waiting to
open new banks, a massive banking reform bill needs to be passed so that this sort of crisis never occurs again.
The speed with which commodity prices have risen is directly linked to the devaluation of the US dollar and our politicians seem only concerned with how to continue doing this.
When looking at the Corporate Leverage Index 2012 is not going to be the best year for buying stocks. This index relates to the price you pay for stocks that are not tangible assets but premiums that are solely speculative. Equity equals ownership and usually if you own stocks it is common to think in terms of profit or loss.
The reality is that you become a part owner of a business when you purchase stock and tangible assets should represent part of the value of the stock you hold. Tangible assets in companies currently are so low they are off the scale which suggests that there is more risk in stock ownership than there has ever been. This doesn’t mean that you shouldn’t consider buying stocks but unless you are prepared to invest in the long term, you should not gamble with your money.
The Financial Markets are fluctuating with such highs and lows that it is difficult to predict exactly what is going to happen but without appropriate, achievable government policies this volatility is not going to end any time soon.
Most States are experiencing extreme financial problems with Illinois and California virtually bankrupt. Pension programs are at high risk in a lot of States where investment speculation is unlikely to ever achieve the results that were forecast. Our government doesn’t seem to be acknowledging that there is a problem of huge proportion but it is to be hoped that we will be better informed about such matters than the people of Greece and Ireland were, where one day everything seemed to be fine and the next the country fell apart.
Recovering from an economic crisis entails having a competent and consistent government in place in the long term; a lot of hard work and saving; scrutinising social benefit claimants so that only those that are really entitled receive them and lowering taxes so that investors and entrepreneurs are willing to take a risk on developing new businesses and employing personnel.
This is not happening in the USA or Europe and unless it does we will continue to see the volatility in the Financial Markets, and although there may be the occasional high our politicians will manage us into one financial crisis after another. Current investment in any of the markets should be to capitalize on the trends but to not take any high risks.
Many economists believe, based on the political mismanagement of the economy, that there will be another major disaster between 2016 and 2018.
The situation in Greece may appear to be over following the bail out from the International Monetary Fund and the EU but it is highly likely that the country will continue spending money in the same way as it always has which will magnify its problems. The USA is heading in the same direction. This message may seem overly pessimistic and it is certain that the USA will continue to function despite its problems however, the better times to come are unlikely to happen until after the next financial disaster by which time not only our government but those around the world will have learned how better to manage the economy.