Today’s bounce, with the Dow adding 126 points, allows a brief respite from the woes of Europe, with U.S. markets buoyed by a glimmer of hope from Greece on the political front, as the conservative New Democracy party appears to be gaining a little ground on the socialists. U.S. investors are grasping at straws, using any tiny bit of positive information to justify buying, when the reality of the situation, to discount it drastically, is grim. As bad as things are in Greece, Spain, with an economy 5 times the size of Greece, is showing similar signs of bank failures, a real estate market collapse that rival that of the U.S. and the UK, and rising unemployment and unrest. “Spain is the new Greece” is how we have been describing Spain on my live radio spots for months now, and it appears that the weight of this situation is finally so cumbersome that the financial markets can no longer ignore it.
Yes, today financial markets are integrated. They are truly global. Even markets once considered backwaters, insignificant and downright foolish to invest in, like Russia, Brazil, India and China, are now some of the fastest growing and potentially most lucrative in the world. To ignore the importance of markets, even those as small as Greece and Spain, underscores the true inexperience of the small investor, and their desperate need for professional assistance. Ultimately the pain we are feeling from these troubled foreign markets will have a direct and significant negative impact on our markets here at home. We are going to be dragged down this path whether we like it or not, and whether we are willing to acknowledge that markets have forever changed – foreign markets do matter and will continue to matter in the future, forever.