Tuesday, October 11, 2011

Morning Call Topic - Oct. 12, 2011

The following is the topic which we will be discussing on October 12, 2011 at 7:30AM:

What US Stocks Follow More Than Anything Else

US Investors Can't Escape Europe's Prolonged Debt Crisis

“Right now, the S&P 500 Index, the benchmark for U.S. stocks, is closely tied to movements in the euro, underscoring the need for a sweeping recapitalization of European banks—and the latest sign that every twist and turn in the crisis is dominating the markets.”

“It seems that every time some incremental piece of news comes out of the crisis—be it positive or negative—it creates a cascading level of reaction that has made investing in US markets a death trap for investors who have anything resembling a long-term horizon.”

Obviously, currently the U.S. market is almost dominated by the news from Europe, or we may say that U.S. investing climate is substantially affected by Europe. What is your opinion/comment with this phenomenon? Do you think if this situation is normal for a mature economy like the U.S.?

“Ironically, many market advisors are telling clients to ignore the daily gyrations and stick with a long-term view. But when that horizon is so blurred by European debt clouds, the strategy is a hard sell.”

Do you agree with this statement? Do you think even a long-horizon investment strategy would not work this time? Why? Why not?

“So even if the U.S. economy does avoid recession—Karl foresees a "very mild recession" while Flam says a stalemate in Europe likely will cause a recession here—it may not matter anyway if Europe isn't fixed.”
Do you agree?

"The U.S. economy is especially vulnerable to adverse events in Europe and China," says Steve Blitz, senior economist at ITG Investment Research.

Why is the U.S. economy so vulnerable to events overseas on earth?

Lorena LI

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