Monday, Jun. 9, 2014

Thoughts at the beginning of summer;

The European monetary authorities need to continue to stimulate their economies with low interest rates. The news on the growth and employment front is still dismal.

Anyone who trust any economic statistic about the Chinese economy does so at their own risk. The Chinese government seems perfectly capable of producing any stat that is needed on demand.

Wall Street  likes to come up with new products. Most of these products start out as wonderful ideas like credit default swaps or CMO's. The problems occur when the demand grows and Wall Street keeps expanding the product until it becomes highly speculative and risky. The flavor of the month in this area are  Exchange Traded Funds or ETFs. ETFs are an innovative investment product with very interesting features to help average investors manage risk in their portfolio. Investors need to be careful as more of these products are built on the less liquid or obscure parts of the market, nobody can predict what will happen in times of market stress.