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The Euro zone roller coaster continues. After last week's rising optimism by traders that a crisis will be averted, today Moody's squashed immediate hopes that the situation will turn around critical. Moodys did two things today that put the markets in near free fall: They announced they will be doing a credit review of all European nations and, Made a statement that: the summit last week of European leaders produced "few new measures" and that Europe remains in a "critical and volatile stage. The region remains "prone to further shocks and the cohesion of the euro under continued threat." Moody's said. As a result, the agency will review the credit worthiness of all European countries in the first three months of 2012
The United States was not unscathed by the European news. The Euro zone and all the overall European markets were held responsible for a mid day loss for the DOW of well over 200 points. Asian economies are also fearful of the impact of the Euro zone crisis on their own economies. South Korea has significantly lowered its growth estimates for 2011 and 2012, tying these lowered estimates directly to problems in Europe. South Korean Finance Minister Bahk Jae-wan indicated that he expects the economy to grow 3.8% this year and 3.7% in 2012, down sharply from 4.5% growth tipped for both years previously. The government also raised its 2012 inflation outlook slightly to 3.2% from 3.0% previously. He said: "We won't deny that downside growth risks are greater than [inflation risks]But we don't expect a global economic hard-landing."
As pressure continues to mount on the Euro zone and other European nations, the trickle over into the United States could be a tsunami. Already US retirees are continually seeing their retirement funds decimated, and most look for deals on just about everything. Groupon, Social Living and Everleaf as well as other coupon sites are more popular than ever and its likely that retirees are as likely to be using these sites as young couples wanting to extend their consumer reach. Fortunately, the United States government is giving a small increase to Social Security recipients in 2012 of around 3.5 percent. A move that is counter to the austerity measures that fixed income recipients in the Euro zone are living under. However, continued negative pressure from the Euro zone crisis could very well erode even this small gain for the retired folks in the short term. Some financial advisers are telling clients with long-term strategies that now is a good time to be shopping for European based stocks. Prices are low and countries that are multi-national and do business in markets other than Europe good be considered bottom fruit. In his column today, analyst Joe Schaffer wrote: “The bargains are definitely there for the buying. Between the last week of April and the last week of November, the MSCI EMU Index (which follows the performance of major eurozone markets) gave up nearly 35% of its value. As always, the Good Kids (in this case, those which derive a huge portion of their revenues in nations outside Europe) got pummeled the same as the bad kids."
At present this appears to be a minority view with most advisers steering clear of European stocks, they feel the Eurozone and related stock markets are just too unsettled.
Used to be roller coasters were fun, we knew that the “scare factor” was contrived. If you are riding today it is just bone-chilling.
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