It’s nothing new, as we’ve seen this for the last couple of years. Recently, it seems to be evolving faster than ever before and it’s getting to a point where we have to be very careful. The EU banks have recently elected to help meet the pending bond defaults, but in reality they are “kicking the can down the road”.
During the Greece Elections, citizens went to the polls and voted for the New Democracy Party, which favors the country meeting their international debt obligations. They have formed a coalition that will address the debt crisis and meet qualifications for the EU bank bailout. How long before Greece will need another bailout if they do not tackle their debt problems?
In addition to Greece, Spain adds another warning contributing to the perfect storm. A $125 billion bailout was taken by Spain from the euro zone. This was not because they were in debt, but because their banks were in significant trouble. That is a major problem because we will have to see what those banks are going to do going forward and how they will be able to handle their issues. France, who also voted in favor of the Socialist party a few months ago, reduced the country’s retirement age from 62 to 60 for eligible workers. Reducing the retirement age could be problematic for France as it will cost them approximately $1 billion extra per year.
Furthermore, there are the issues we face here in the United States, including poor unemployment numbers in May, the economy not doing well, and recession looming. Our debt level is at $16 trillion. All of these things are coming to the surface, especially the issues about the bond vigilantes who look at the American debt and say you have to pay more for us to borrow. This could be a major problem for us. All in all, there are a lot of problems but our corporations are doing very well. Some last minute tips: don’t bail out of equities, be careful of bonds in your 401k, and stay asset allocated. If you follow these tips you’ll do OK through these tough times. As the news gets more troublesome make sure you keep to your investment plan. You will weather any storm inside or outside the United States.
For more information on investing or your portfolio, contact DLG Wealth Management near Saratoga Springs regarding your financial planning.