Jul 11 Investment Advisor Take on Europe

The news hasn't been very good the past couple of days.

First we had horrible jobs numbers last Friday (see the Investment Advisor Take on Jobs). Over the weekend, talks between Obama and Congress about the Debt Ceiling didn't go as planned and today Italian Debt is in the cross-hairs of the bond market.

Brace yourself for a rocky ride as we sort out all of these issues. My statements from last Friday still hold true - now would be an excellent time to understand the risks to which you are exposed and take some of those risks off the table if you can.

European Crisis

Today, Italy is being eyed as the next problem in Europe as interest rates on Italian loans are shooting up quickly. When interest rates go up, the sale price of the asset must go down.

This is the market's way of saying that there are still big problems in Europe.

Want a sobering view of the pending financial crisis in Europe? Check out this forcast from Gary Jenkins on Bloomberg TV ... and he's completely correct. Europe and the ECB have done nothing to fix the Greece problem. It won't go away and it will carry to all the other countries in the European Union until they take drastic (and politically unacceptable) measures.

What does THIS mean to you? - As the European crisis unfolds (and we're only in the second inning of a best-of-seven world series conflict), financial, bond and equity markets throughout the world (including here in the U.S.) will act wilder and you will likely see substantial and deep losses. If you have worked hard to save in retirement and investment accounts, that wealth is at serious risk.

Trimming that exposure would be a good thing to do. At the very least, a good investment strategy will include becoming aware of the risks to which you are exposed (especially in equity and bond holdings) so you can make mature, non-emotional choices about how to deal with those risks as they happen rather than reacting to them (which never works).

What You Can Do?

I'm sure this sounds like a broken record - but there is no time better than the present to completely understand the risks to which your hard-earned savings are exposed. Right now, we believe those risks are much higher than usual.

We also know that only the rarest of investment advisors will reveal the true risks of their investment portfolio. Doing so would scare most people out of the market. Unfortunately, it is also the rare investment advisor who knows how to use simple tools to protect the portfolio from much of that risk.

If you haven't done so already, register for my weekly investment advisor emails and you will receive a free report on the basic risks with traditional equity portfolios and simple ways you can manage those risks.

John