Monkeys are running the zoo

Commentary by Jeff Burgar

One day, billionaire investor Warren Buffet is buying a big chunk of American investment bank Goldman Sachs. “It’s a bargain,’’ he says. A few weeks later, Goldman Sachs falls $45 a share, dumping a third of it’s value in two days. One day, prime minister Stephen Harper says, “There are some great buying opportunities out there.’’ The next day, American and Canadian stock indexes suffer their biggest decline in history. One day, Dragon’s Den investor and millionaire, Kevin O’Leary trumpeting over a market recovery, declares, “When else in history could you make 11 per cent return in one day? This is fantastic!’’ The next day, the markets shed 90 per cent of that return. Fact is, nobody knows which way the markets are heading. Up. Down. Sideways. It’s all very remarkable from day to day. Given all the advice that doesn’t seem to be much good, does anybody know what the future holds? Nope. Since that hasn’t stopped anybody else from passing on advice, here’s my own: First, the people who keep saying markets always start moving ahead of the economy are nuts. If markets knew what was going on, this crash would have happened a year or more ago, long before American banks got into trouble. The fact is, this crash was gaining momentum since 2006, the beginning of the American housing market collapse. Only a few stocks, homebuilders, started dropping back then. The rest partied on. Second, can financial institutions be a good bet? With new rules and regulations coming, will there be any risk in owning banks? With no risk, there is no reward. Might as well be in bonds and GIC’s. Third, American house prices are down as much as 30 per cent in some markets. So that leaves, oh, another ten per cent or more to fall before they are back to levels of four and five years ago, before they went cuckoo. Gee, should that be wrong? Fourth, you aren’t supposed to call market bottoms. But that is exactly what is happening with all the wild swings in the market. Investors, speculators and traders are scared witless they are going to miss out on the recovery - so, buy, buy, buy when it looks like everybody else is buying. Sheesh. Fifth, when Mad Money’s Jim Cramer, a wild and crazy guy in his own right says, “Stay out of stocks if you are going to need money for anything in the next five years,’’ well, that should tell everybody how wacky things are right now. Good luck out there.

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