Before panicking, it is important to know that it is important not to panic. Things are just getting really crazy out there. As a recent example, the Canadian statistics agency announced one day that the Canadian economy had done unexpectedly better at creating jobs and the Canadian government announced that it would buy $25 billion of good quality bank mortgages to encourage Canadian banks to lend more freely, not because the banks were weak. The market response at the time….. stocks down… $Cdn down….
Another example? Consider the experience of the maker of the Blackberry, Research in Motion. The company announces massive increases in sales and huge increases in profits, albeit slightly less than expected. Then in early October, they also announce yet another new and very cool product. The market reaction…. The stock is down 50% over the past month. That’s just crazy when you consider the company has $1.5 billion dollars in cash reserves. That means the company can have $100 million dollar losses (which aren’t going to happen) for 15 years and still not be bankrupt. Even Apple would be bankrupt if that happened. Now is not the time to judge based on what you see. Best advice… Sign up for meditation classes.. Take up jogging… Or just get drunk…. Check back in a month or so.
Everything you see in the markets and the subsequent reactions may not be a good way to judge where things will go in the end. The things that are clear are that Europe is going into recession and so is the USA. Understand the underlying fundamentals and stick with what you know. As for everything else, no one really knows for sure.
As a Canadian economist put it, making economic forecasts in this environment is like trying to estimate the value of your home when your kitchen is on fire. Who really knows?
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