History may not repeat itself, but the run on European banks is beginning to look strikingly familiar. Remember toxic assets? Remember the subprime meltdown?
Back in 2008-2009, the U.S. stock market didn’t break free of the bear’s grip until “too-big-to-fail” institutions were bailed out by Congress. In fact, the panic didn’t cease until the Fed agreed to purchase both treasury bonds as well as mortgage-backed securities.
What’s different today? Toxic assets aren’t subprime mortgage bonds, but rather, they are the sovereign debts of the Eurozone. Lots of banks own country debts. And even though treasuries aren’t anywhere near as difficult to value as subprime paper, banks still have notes that are losing significant value; that kills the books of financial institutions.
It gets worse. In September of 2008, the SEC banned short-selling of financial companies. When the ban was lifted in October of 2008, things only got worse. Here in August of 2011, Europe just initiated a 15-day ban on short-selling of its banks. What might happen 15 days from now?
In truth, no panicky period is exactly the same. Nevertheless, we shouldn’t dismiss the nominal records in gold and the Swiss Franc, nor the record low yield for the 10-year treasury. And that’s with a downgrade!
Even with the worst consumer sentiment in 30 years, even with troubling economic data, nothing is ever as bad as it seems. What’s more, panic can burst, and markets can snap back like rubber-bands.
In this week’s podcast, I take a look at some surprisingly bullish stock ETFs throughout the crazy gyrations. I also look at ways to deal with volatility, from buying Dividend ETFs on the dips to employing Inverse ETFs to considering Volatility ETNs.
Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships.