If Cadel Evans? win in the world?s greatest cycling race doesn?t inspire investors, nothing will, writes The Motley Fool.
We need some optimism in this country.
We admit we?ve been a little too gloomy ourselves, as recently as last week, when we said the Greek bailout is probably too good to be true, and anyway, it won?t be the last post-GFC bailout.
We might be right. In fact, world stock markets are currently on edge because the American politicians still haven?t resolved their troublesome $14.3 trillion debt-ceiling problem.
The pessimists will say the U.S. will default on its debt, stock markets will…
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If Cadel Evans’ win in the world’s greatest cycling race doesn’t inspire investors, nothing will, writes The Motley Fool.
We need some optimism in this country.
We admit we’ve been a little too gloomy ourselves, as recently as last week, when we said the Greek bailout is probably too good to be true, and anyway, it won’t be the last post-GFC bailout.
We might be right. In fact, world stock markets are currently on edge because the American politicians still haven’t resolved their troublesome $14.3 trillion debt-ceiling problem.
The pessimists will say the U.S. will default on its debt, stock markets will crash, and we’ll all be dragged into GFC Part II, but this time even worse.
The 40%+ top-to-bottom share price falls endured by the likes of Beach Energy (ASX: BPT), Australian Foundation Investment Company (ASX: AFI), REA Group (ASX: REA) and Atlas Iron (ASX: AGO) last time around would seem like a walk in the park by comparison.
Politicians you can trust?
It’s possible. Anything is possible when it comes to politicians, people who often put their own short-term demands ahead the nation’s long-term interests.
But do you really think U.S. politicians will allow the country to default on its debts? It simply isn’t going to happen.
The very worst case scenario would be they miss the August 2nd deadline to raise the debt-ceiling, stock market’s crash, and then politician’s come to their senses and lift the debt-ceiling anyway.
We’ve been here before, during the last GFC, when U.S. Congress initially voted down the $700 billion economic rescue plan. U.S. stock markets responded with their biggest ever point-fall, the Dow Jones Industrial Average plunging an astounding 777 points, or 7%, the Nasdaq falling 9%.
That got the politicians back to the drawing board, and fast. The same would happen again with the whole debt-ceiling debate. Within the blink of an eye, the ceiling would be raised, the world saved, and we’d all be able to move on, living happily ever after.
Pin back your ears
We’re long-term focused investors here at The Motley Fool. We’re optimistic, yet realistic.
If, by some small chance, stock markets did plunge because U.S. politicians dilly-dallied a couple of days too long, we’d be pinning back our ears and buying shares like there was no tomorrow. Who wouldn’t like to pick up the likes of CSL (ASX: CSL), QR National (ASX: QRN) and ResMed (ASX: RMD) at a 20%-off sale? Check out our free “Read This Before The Market Crashes” report for more advice.
Meanwhile, an investor’s life goes on. Without too much in the way of fanfare, the S&P/ASX 200 index quietly notched up its best week of the year, led higher by resources stocks like Alumina (ASX: AWC), and banks, with National Australia Bank (ASX: NAB) rising close to 8% and Westpac Banking Corp (ASX: WBC), up 5%, taking the week’s yellow jersey.
Over in the U.S., technology stocks jumped on great earnings reports from the likes of Apple, IBM and Microsoft, sending the Nasdaq-100 Index to a 10-year high.
But you won’t read about that on the front page of the newspaper. Instead, the Australian Financial Review goes with “Investors face tough profit season.” The Sydney Morning Herald says “Markets hold breath over impasse.”
Believe like Cadel
Doom and gloom sells. It also puts the brakes on the economy. Confidence goes a long way to helping things along. Cadel Evans, despite many doubters, both externally and internally, never lost that confidence.
“I always believed in me,” he said at the end of Le Tour de France.
Sure, the stock market goes down as well as up. The economy goes through tough patches, like the one it’s going through now.
But those times will pass. Humans, despite our in-built skepticism and often downright pessimism, are survivors. We will progress. Life will go on in the post carbon tax era. And the stock market will follow higher, over time. Just don’t let the doomsters spoil your party.
Of the companies mentioned, Bruce Jackson has an interest in AFI, NAB, Westpac, Apple and Microsoft. The Motley Fool’s purpose is to educate, amuse and enrich. It has confidence in its disclosure policy.