Friday, June 4, 2010

RECOVERY

There is a lot of talk about the European financial crisis and how it could become a contagion and end up causing trouble to the US financial structure. But with the US economy continuing to improve, I am one who believes that the financial crisis in Europe will not have a contagion effect on the US economy.

There are examples of times where financial crisis in other parts of the world had a minimal effect on the US financial system. For example, Russia's currency problems in 1998 devastated a hedge fund named Long Term Capital Management. But the rest of the system was able to circle the wagons and get back to growth. Also, the Asian financial crisis in 1997 was able to be handled by the financial community and the International Monetary Fund.

This is not to say that the US should not be prudent in its analysis of the current problems. They had many more bullets in the chamber than they do now to help. So the financial industry has to be very focused right now. It will take the best financial minds to be at their best to get us through these problems. But there are many indicators showing that the US financial health will still survive the problems in Europe.

3 comments:

Joseph said...

Nice piece Mike. The only positive here is anyone planning a trip to Europe as the Euro is about to cost less than $1.20. I still find it hard to believe that there is enough foreign investments in Greece and Spain to have such an negative effect on American markets. Are the baby boomers fearful of another 30% drop in the Dow and ultimately their retirement fund? It seems to me that people are making fickle excuses to get out of this market, just when we are seeing signs of consistent improvements, notably in the housing market. Maybe some of these baby boomers will retire and give us recent grads a chance to enter the job market. I'll remain fully invested until I see a significant reason to get out, i.e. a drop in GDP over any of the next 4 quarters.

Joseph said...

I just read something on Hungary helping the markets move lower today. I can't even name one Hungarian company, and I have no idea if Hungary even has a stock market. Looks like I got some research to do...

QUALITY STOCKS UNDER 5 DOLLARS said...

Their is no economic recovery.