What a Big-time Investor Has to Say

I am really glad that fourth-quarter and year-end earnings are starting to pour in. Even if some of the numbers aren’t great, at least we’re achieving some certainty about it.

The current equity market is likely to remain fragile for quite some time and every economic report will be very closely scrutinized by investors and individuals alike.

In my mind, there’s been a lot of panic in global equity markets and a lot of it is overdone. The fact of the matter is that the U.S. economy was doing just fine with a burgeoning housing market. As the bull market in real estate prices came to an end, so did general economic growth. This isn’t a surprising development and there was a bubble in real estate prices. It is therefore not unreasonable for the economy to experience either zero growth or a little negative growth while the system takes the time to correct itself.

Stock markets plunging five percent in one day is clearly a sign of fear-based trading, a lack of buyers in the market, not just stronger selling pressure, and that the world’s financial markets are becoming ever more interdependent.

I really put a lot of stock (no pun intended) in what Jim Rogers is saying about the current state of things. This famous investor is in the process of moving to Asia, and is not bullish about the U.S. economy.

He is saying that the Federal Reserve is acting in the wrong manner by reducing interest rates so quickly to appease equity markets. Rogers fears that significant inflationary pressure will develop over the coming years and that interest rates could rise substantially.

He is also so fascinated with the economic opportunities in China that when Chinese equity markets experience a significant correction, he plans to be a major buyer for the long term. Moving his family there from New York is clearly a strong sign of how serious he is about the opportunities in China, and the prospects for the U.S. securities going forward.