Who Do You Trust?

This country’s worst environmental disaster with the gushing blown out oil well off the coast of Louisiana continues with no definite date that it will be contained. The chairman of BP says that his company did nothing wrong, the company that supplied the rig said the same as did all the other officers of companies who provided equipment to drill one mile deep into the Gulf. It was either ‘it-wasn’t-our-fault- or-they-did-something-wrong’ finger pointing by some of the highest paid professionals in the oil business. In the meantime no one can tell us when this nightmare will end or the cost to clean it up.

To think that a major off shore driller had no contingency plan in case of an accident simple boggles the mind. Anyone who has been at sea or on the water understands the dangers and the need for a plan if something bad happens. These fools simply ignored basic safety rules. It may take a hundred years to get back what they destroyed.

A few weeks earlier it was America’s bankers on the hot seat doing the same song and dance as they testified before a Congressional subcommittee. Bankers knowingly and admittedly  sold ‘crap’ to investors while using credit default swaps to profit from their own created toxic investments. When asked if they did not think to warn or explain the products they were selling as being in the best interest of the client only one in four said that they did feel it was their duty.

Even the venerated money manager Warren Buffett said that if the client was so stupid that they didn’t know what they were buying – too bad.  

The average registered representative has an obligation to explain an investment to client. Bankers, it seems, do not.

Now we are involved in a global economic free for all. Certain countries, members of the European Union, ignored any budget restraints and the EU did not provide oversight to ensure these quasi-capitalist socialist countries stayed on track and managed their finances. Spying weakness certain hedge funds were reported to get together and ‘raid’ the euro, or drive it down and profit from such an action. A March, 2010 WSJ article reported such a Department of Justice investigation along with the tag, ‘It’s pretty tough to prove.’

The article went on to state that the argument for collusion is weak and to believe there is a conspiracy to undermine a currency is flimsy at best. This week Germany’s ban on short selling along with the euro falling to its lowest level against the dollar in four years has caused turmoil globally. (What do you think?)

Technical writer Michael Kahn. writing for Barrons, warns that the Bears have it and the charts look bad for stocks. On the other side is Jimmy Cramer who said on his television show on Wednesday that it is a fault of perception and our domestic fundamentals are just fine.

There are some that believe that this is the beginning of the end for the euro. Some advocate that either the Europeans cut costs so drastically that they throw themselves into a depression or a few of the ‘southern’ countries who are in the EU will simply walk away. No one has said it but Germany will lead that parade. In either case it will spell a disaster.

In the meantime China is having its own problems and being particularly inscrutable flung verbal hand grenades at the American banking system, which Beijing believes has tossed a monkey wrench into the Chinese global growth machine.

Unless something happens to clean up the economic mess and/or perception quickly investors will be best served if they put some of their assets into cash or bonds and wait this out until the fall. It seems sell in May has just been confirmed.

If you have questions call Paul at 877 783 7080 or write pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.