Friends
As I am sure you aware by now, Standard and Poors downgraded U.S. Government debt from AAA to AA+ on Friday evening. This was not unexpected, but the emotional effect will be manifested in stock prices this morning. In Europe, the ECB is buying Spanish and Italian bonds but after an initial bounce in those markets, European stocks are trading lower.
The irony, is that investors will sell stocks this morning (U. S. Companies with great balance sheets and nice dividends) and buy the Treasury bonds that just got downgraded (rates are actually dropping this morning). Investors will deposit money in banks that a) will buy Treasuries with the deposits and b) are actually the most exposed to a weakening economy and European troubles. Scared investors will sell Apple with its 60 billion dollars in cash and put the money in banks that are the most susceptible to a financial dislocation. It doesn’t seem logical, but logic goes out the window when fear takes over.
Buckle up for a lot of volatility this week. There could be many twists and turns as news will come fast and furious. Fear is not an investment plan. We have prepared for a difficult summer and it is upon us. It is time to look for opportunity.
Have a nice day everyone. We’ll keep you informed.
