Economic Turbulence in Curved Mirror of Stock Market
The world is changing rapidly. Moreover, it will never be the one we knew before the 2007 meltdown. Five years that passed since then changed the economic landscape so significantly, that no one can expect that the economic crisis will go and the world will be resurrected. And the stock market like a mirror reflects these changes. Sometimes in grotesque figures.
The picture of current turbulence drawn with just a several strokes consists of:
1. Unprecedented Quantitative Easing in the USA
2. Bernard Madoff ponzi scheme revelation
3. European sub-crisis happening around Greece
4. A tremendous amount of information leaked through Wikileaks, Switzerland, BVI offshore companies
5. Cyprus money expropriation
6. Money printing by Switzerland, and now by Japan also, to avoid their currencies zenithing
I'm not insisting that this is a fully detailed picture. But this vanguard canvas could hardly be imagined 5 years ago, like no one had been able to imagine New York without WTC towers before 9/11. And this date, I believe, is the true opening date of the newest historical period. Of course, one can add more details and thus make this canvas look like cubist painting, or piece of impressionism, but no one is able to make it look realistic.
What idea is hidden in this canvas by the powerful painter? My belief is that the core idea is that old rules won't ever work in our world. The arachnids became too crowded in this glass, and they started eating each other. The peace that was possible when there were more place and more food for them is no longer reachable: they have to kill others or die themselves.
I believe, that the Earth is still enough to feed 4 or 5 new states-arachnids, with their monetary systems and all other paraphernalia. But no more. How will the current states integrate? Nobody knows. In now days we see more disintegrating processes, like potential leaving Euro zone by one country, lowering US credibility rating, issuing own money by a lot of countries and even territories.
One seems to be obvious. Humanity is rapidly losing its ability to reach understanding and mutual obligations, and fulfill them. Which is potentially possible to cause using all its arms by one or several states. Will it be fatal? It may. We need maybe 10 or 15 years to know that. Not that much.
Returning to the stock market. What will be happening with it during this time? I expect a lot of dramatic and unpredictable movements in both directions. The volatility will be overwhelming, as always happen when the underlying asset is changing like body temperature during fever. We might be able to see any market on historical highs or historical lows in the nearest years.
In case you are a professional investor you probably know how to mitigate risks in this scenario, and which assets to chose. All others should invest in common sense. Stock markets, to my opinion, are rapidly converting in a total casino, which is totally independent of fundamental factors.