The Roller Coaster Financial Markets

The markets continue to be a roller coaster, although not as much as we have seen in the past and not as much as we are likely to see in the future.  Yesterday, the stock market was down significantly.  Today, it rebounded.

There were actually a lot of things that went down yesterday.  Aside from the stock market, gold, silver, and oil were all down.  The U.S. dollar was up.  This was attributed to news that there are still problems in Greece.  No kidding.  I have already written on this topic several times, saying that a full Greek default is inevitable, along with a departure from the European Union.

Tuesday was a good test on the Greece news.  While it hasn't seemed to affect the U.S. economy much, the latest news indicated that more announcements of major problems in Greece may lead to a strengthening dollar.  This means that the stock market and precious metals are likely to go down.

The U.S. economy is quite unpredictable at this point.  We may be in a mini-boom cycle, courtesy of the Fed.  This mini-boom is not a good thing because it is not based on real savings.  It is because of a loose monetary policy from the Fed.

However, there are a lot of variables out there that could drive velocity down further and cause another deep recession.  There is Iran and Syria.  There is the price of gasoline.  There is Greece, as was just discussed.  There is also the rest of Europe.  Any big event could easily cause a sharp downturn in the U.S. economy.  The downturn is inevitable because of all of the previous malinvestment, but a big event might speed up the downturn.

I continue to recommend that you put the majority of your investments in a setup like the permanent portfolio as described by Harry Browne in his little book Fail Safe Investing.  For your speculation money (if you want to speculate), I recommend that you buy gold related investments and a much smaller position in shorting the stock market.  Of course, aside from this, I am also a fan of investment real estate (single family homes) if you live in the right area and it is something you have the means and will to do.

Expect a continuing roller coaster ride with the U.S. economy and invest accordingly.