If you were to go out and buy a car right now would it be a Toyota? General Motors and Ford are still making cars. Or how about a Hyundai, Nissan or even a Porsche? Or have you sworn off cars all together? Will you ever place yourself in a car again especially in a Toyota after the safety troubles that they encountered earlier this Spring? The reason that I bring this up is because it seems that equities are in a similar position that Toyota was a few months back.
It was just a few years back in 2007/08 that equity markets lost approximately half their value. Most experts failed to forecast the swift move lower except for the ‘perma-bears’. Retail investors were the ones most hurt as by the time the markets were building a bottom they were switching their investments out of equities and into cash. You almost can’t blame them though as fear and panic were driving the markets back then.
Of course if you swore off equities back then you missed out on a mighty rebound. The negatives of the credit crises gave way to the positives of the underlying economy which led us back to Dow Jones 10,000, once again.
This leads us to today’s market. As everyone is asking where should I put my money right now? With the equity exchanges acting more like casinos investors will surely mount their cash on the sidelines again. In the long run there are two problems with this. First with your investments in cash you are earning approximately 0% in nominal return (except if you live in Australia). Second your real return is in the neighborhood of -2% to -6% depending on inflation levels. Thus it is in our interest for the exchanges to regain our confidence and for you to earn a return on your money.
Back to our original question, have you regained confidence in Toyota or have you gone to a different dealership? Your investments demand the same question and when the dust finally settles and new regulations are in place to better protect investors you will have to reinvest. One way to follow individual sentiment on the markets is to watch the EURUSD positioning on Currensee. EURUSD enjoys being the most highly traded instrument and currency traders do not have a ‘home’ bias but are forced to look at global economic developments. Looking at the current positioning on Currensee traders are Short by net positions but are Long by volume. You can certainly debate on which is better to utilize, net positioning or by volume, but for now it looks as if currency traders are still unsure of whether or not to believe in these exchanges.
That sentiment will change. For an indication of when to get back into these markets please watch how traders on Currensee are positioned on these markets.
This report is for your information only and does not constitute investment or business advice or an offer to buy or sell securities.
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