Making Money Alert: Don’t Fall For Europe Fatigue

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Are you tired of hearing that Europe is about to implode? Most investors have heard enough about the fiscal troubles brewing in the Old World, and that has caused way too much complacency as to just how precarious the situation has become. It’s almost as if investors are turning a deaf ear to what can only be described as a pending debt and recessionary disaster — not just for the European Union (EU), but for the entire global economy.

In preparation for today’s Alert, I read a great post from the very sharp guys over at the website Zero Hedge. The article basically was a review of the opinions of Bob Janjuah, former RBS Strategist and now Nomura Fixed Income Contributing Strategist. Janjuah makes the convincing case that comports with my thesis that the global economy is exceptionally weak, and that it is deteriorating pretty much everywhere. He also thinks that the market consensus is far too optimistic when it comes to policy expectations such as a move from the Federal Reserve to juice the money supply.
Perhaps the boldest conclusion Janjuah draws is that stocks currently are trading way too high. He argues that during the next four months, global equity markets could fall 20-25% from current levels. That plunge would put the S&P 500 Index around between 1,100 and 1,000 by Election Day.

So far, the markets have held up well in the face of the European debt crisis. That resiliency is one reason for the complacency of investors. But I am here to warn you that you shouldn’t fall into this complacency trap. There are real dangers out there in Europe, not the least of which is a complete meltdown in Spain’s economy and, even worse, a meltdown in Italy’s economy. If Italy falls, so will the rest of Europe — and perhaps even the entire global economy.

Now, on the home front, we received word that the darling of the investing world, Apple (AAPL), had its first earnings miss in a very long time. Although the tech bellwether’s revenue grew 23% to $35 billion in its fiscal third quarter, that number fell short of analysts’ expectations. The company also fell short on its earnings per share expectations.

The rare earnings miss by the hands-down market leader of the past several years does not bode well for stocks going forward. And while I doubt Apple is facing hard times ahead, the slowdown in international sales supports my thesis that the global economic slippage is worse than many suspect.

Finally, there has been a distinct decoupling of U.S. stocks from global equities, particularly during the past year. That situation could change soon, if the aforementioned global breakdown takes place. My friend James Kostohryz makes a great case for the end of what he calls the dramatic decoupling of the United States from global equities. If you’re at all worried about your money, I highly suggest you give this article a read.

The bottom line here is DO NOT become complacent. Don’t let yourself fall into Europe fatigue. The minute you do, you are putting your money at risk.

The Wisdom of Will Rogers

“Even if you’re on the right track, you’ll get run over if you just sit there.”

–Will Rogers

The iconic American cowboy/actor/social commentator was a virtual quote machine during his storied lifetime. The above quote is one of my favorite Will Rogers’ gems, as it tells us that to make things happen, you have to take action. It’s not enough to merely hold the right ideas. In order to achieve, you must act. That’s a lesson for every aspect of our lives, including investing.

Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow Alert readers, send it to me, along with any comments, questions and suggestions you have about my audio podcast, newsletters, seminars or anything else. Click here to ask Doug.

To the best within us,

Doug Fabian

P.S. Today’s challenging market conditions require even more knowledge than ever for investors and traders like you to keep pace with the latest market intelligence to safeguard your portfolio and to profit from opportunities that only may be available for short periods of time. Join me at this year’s MoneyShow San Francisco, August 24-26, at the San Francisco Marriott Marquis to hear recommendations and advice about how best to profit in 2012 and beyond! Register FREE today by clicking here, going to DougFabian.sanfranciscomoneyshow.com or by calling 1-800/970-4355 and mentioning priority code 027879.