Let’s Call it the “C” Word

I don’t like to employ hyperbole when describing financial markets, but sometimes words once-considered hyperbolic are all-too accurate.

The word here that comes to mind is "Crash." This market "C" word is simply a reality now. I mean, what else do you call a 20% market drop in just over two weeks?

To see the severe damage that this crash has done to our financial markets — not only here in the United States, but also around the globe — all we need do is glance at a few charts.

The following four charts — the S&P 500, the iShares Japan, the EAFE index and the iShares Emerging Markets — tell the tale of a global market crash.

There’s no decoupling going on here, folks. In fact, the downward spiral looks virtually the same in nearly all corners of the globe.

Europe looks like it just got hit by World War III, as does Japan and the emerging markets. The S&P 500 chart looks even worse than it did in the weeks immediately following the 9/11 terrorist attacks.

There’s no doubt that if you are worried and scared about the future of the equity markets, your fear is indeed justified. And while I still am generally optimistic about the future of the world’s financial infrastructure, I am very worried about the short-term prospects for the global financial system. As wealth evaporates around the globe, faith in capital markets will continue to teeter on the brink of the abyss.

In terms of what to do now, I think you sell into any rally in this market. That’s assuming, of course, that you still own equities. The better strategy would be to already be completely out of stocks the way subscribers to my Successful Investing advisory service have been throughout the majority of this tough market year.

Want to find out more about how to survive this "C"-word market? Click here.