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Sunday, August 28, 2011

Stormy Markets Ahead

A Perfect Storm?

Stormy Markets Ahead

Stocks Sailing into Perfect Storm

Soon we will sail into the darkest months of the year. The possibility that both the economy and markets will not make it back to home port has never been greater. Human arrogance tests the limits of nature to unfortunate outcome. Welcome aboard!

Despite the sophisticated character of global markets, our instinctive behaviour still appears to be deeply tied to the rhythms of nature. Winter is coming, so mammals begin to prepare for the long dark days of the cold months ahead. Our instincts tell us to preserve, to protect, and to act with greater caution. This sets the stage for a fear-based panic, caused by a harvest of nuts that appears insufficient to survive the coming cold winter days. Our intelligence feeds an arrogance that we are above such primal rhythms. History suggests otherwise.

So with heads cleared of the giddy sultry summer days we revert back to the mean of our karma and revisit the cold facts. Starting with the most volatile August in recent memory, it reminds us of shore bound birds racing from the looming storm. This is a volatility no doubt tied to the debt of drunken economies that have eroded the possibility of prosperity by their very size. Still economists and policy makers continue to play parlour games with age-old ideas that have little to do with reality. So resources are dwindling. The earth is in overshoot. Shortages are growing. Hyperinflation is knocking. Social unrest is pandemic. Economic policies are trapped. So? 

Drifting back to those Gatsby summer days of 1929, the markets then too began to sense that stirring of a storm. The economy was headed for colder winter days, with few nuts to be found. The roaring debts of those care-free times; had consumed, what was meant to be stored. Welcome aboard!

T.A McNeil
First Financial Insights Inc
August 28, 2011

Shadows of Gatsby's Sultry Summer