All I know from my past life in the stock market is when the world and his wife is worried about the problem, presidents, breakfast TV hosts and people on message boards like this are talking about it, it’s time to “fill your boots”.
Volatility in the global stock and commodities markets with indexes gyrating up and down in the last one month or so, the rush to consolidate to US Treasuries or to gold, reflect the expectation of many investors of an impending global economic/financial crisis leading to a double dip recession verses others who are more optimistic.
“Good news is bad and bad news is good” is how one trader described it. It is surreal.
Fiscally, the US government is dysfunctional with the Republicans and Democrats bashing each others’ proposals. Unemployment remains very high at 9.1%, with fragile growth and companies neither investing nor hiring because there is no visibility and/or low demand. The housing market is still in the doldrums. The banks are still holding vast sub prime loans in their balance sheets. The Fed. is impotent, with no effective monetary bullets left besides QE3 to create more money. OTOH, QE is not a magic bullet, it has implications wrt credibility, inflation and is equivalent to devaluation.
The US (0.25%), UK(0.5%) and Japan(0.1%) are all caught in a liquidity trap.
In Europe, (without fiscal union) the Eurozone have unsolvable systemic problems wrt the Euro, and Greece with their huge sovereign debts (growth is -5%), on the brink of default, Spain and Italy are at risk as well, France and Germany (only nominal growth in the last quarter) with their banks vulnerable to a possible 50% haircut on their holdings of Greek bonds. There are also their Spanish and Italian bonds as well. The issues of the Euro and sovereign debts is an unfathomable conundrum which will take many years to resolve. There is no quick solution.
China is caught in the dollar trap (70% of their reserves are invested in the US) with relatively high 6% domestic inflation as well. The Chinese, with their factories running on wafer thin profits geared to full production for export are damned worried. Any substantial drop in demand will spell instant bankruptcy for many of them.
In general, all of Asia is caught in the middle. If the US and Europe slip into recession, Asia will be badly affected as well because Asia mainly export their products to them.
It is an interdependent world and it is not a pretty picture now, more gloom than bloom.
If, “fill your boots” means to “take full advantage”, then consider consolidating to cash by selling some of your investments in stocks/mutual funds etc. (if you have any). In a recession/depression, cash is king.
However, please don’t blame me if it turns out not to be so bad after all.