I am now back from my summer holiday – which was fabulous. I took my family on a “holiday of a lifetime” to California, doing a fly drive from San Francisco to Los Angeles and then home to London via a 4 day stay in New York.
It was certainly an interesting visit, I took the opportunity to visit Wall Street and kept up to date with local and international news. Sadly, the current turmoil in the market is based upon some very real concerns. I saw nothing that convinced me that America is any better at managing an economy than anyone else. The problems that Obama is having to get through the necessary changes is widely reported. It seems that American politicians are now as loathed as our own and whilst some agreement has been achieved, frankly little real substance is behind the deal, hence the downgrading of the US from AAA to AA.
All this is of no comfort to investors who have been nursing losses for some years and despite the reality of where problems are located, all parts of the world are dragged into panic selling. As you may know, we reduced US holdings dramatically a few weeks ago, but this is of little real benefit when everything else gets sucked down.
My observation is that America is still very much in denial of the significance of the problems caused by the credit crisis. As yet, little has altered in terms of how Investment Banks behave or how they are regulated. Economic denial of reality can be lethal. Politicians must put the right measures in place and those that won’t should not be in positions of power that impact us all. It is said that we get the politicians we deserve, I sincerely hope that this is not correct.
As for the moment, sit tight. Markets are in a spin and investors must consider the long-term nature of investing, which is not easy when all around you are loosing their heads.