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In Like a Lion - March 2008

If you watch the news or follow the financial markets, March may get a bit scary.  If not, you may not notice the fallout from March for a few months.  Because the mood configuration for March signals a likely severe stock market decline I strongly encourage you to consider moving funds in IRAs or 401(K)s from growth funds to guaranteed income funds.  However, even this is not a sure thing in the current environment.  The best investment is cash or U.S. Treasury bonds, regardless of how little interest that pays.  The worst investment is almost anything else.

As far as later fallout, the Fed chairman Bernanke testified today that the economy is in serious trouble, that unemployment is likely to rise, and that some banks are likely to fail at some point.  Some of this is likely to happen sooner than later.  It is not hard to imagine people wondering whether the Great Depression II is upon us by the end of next month.  There is little to do financially to prepare at this point.  The best thing to do is to invest in mutually supportive relationships.  When times are tough, independence is not an asset, it is a liability.  Spirituality may be a source of strength for those who have such an understanding.  Cherish each happy moment.  Our basic values will be challenged in the next few years.  We may have to reassess what the most important things in life really are.

The following excerpts are from A New Story's March MoodCompass

Geopolitical Tensions Escalate -- US Stock Market Crashes
The defining shift in mood for February was seen in the extreme change in the way that United States society views the rest of the world. Previously, the world was seen as a relatively stable place to transact business. Although there had been concerns about a slowdown in the U.S. economy, there was an assumption that growth in the rest of the world would well be able to compensate. The shift in February from high Directing to high Manic saw the view of the non-U.S. world change from a growth focus to one of uncertainty, chaos, and fragmentation. Geopolitical uncertainty propelled crude oil to new records in spite of the undue stress such high prices are placing on already fragile economies. In March, this theme of an unsafe world is continued. In such an uncertain geopolitical context, what else can global investors do, but make a massive move to "take money off the table?" Thus the global sell-off ensues. U.S. markets may lose in excess of 15% at the lowest points this month. 

March News Highlights

The following is based on a combination of recent events, global trends, and the March oscillations of social mood

Following on increasing geopolitical crises from last month, tensions in Israel reach a high pitch, with violence in Gaza and a new war looming with Hezbollah in Lebanon. Peace negotiations brokered by the US forestall major Israeli retaliation, but tensions remain high all month, punctuated with increasing outbreaks of violence. Both Hamas and Hezbollah are increasingly vocal throughout the month, taunting and threatening Israel. Israeli forces and embassies remain on high alert. Syria may take up sides this round, and Iran reiterates its firm backing of Syria should Israel attack. Israel's PM Ehud Olmert continues to assert that Iran is conducting secret efforts to develop a nuclear warhead, in increasingly hostile tones.

The situation in the Darfur region of Sudan will have become critical early in March. The United Nations gives repeated warnings of a full-scale war spanning the entire region, encompassing neighboring Somalia, Eritrea, and Chad, perhaps spreading into DRC and/or the northern part of Kenya. Widespread starvation will reach critical levels, as food aid deliveries are intercepted before they can reach distribution points. Fragile Kenyan peace negotiations may break down as a result.

The United States will continue to have difficulty in reviving the waning interest of countries assisting its efforts in Afghanistan, even as Taliban resurgence advances on positions long secured by coalition forces. Continued post-election instability in neighboring Pakistan will further stretch the American forces, and may lead to a crisis near month's end. India may make a statement of caution toward the Musharraf government if the instability is not quelled.

Economic conditions worldwide deteriorate through March, resulting in a rapid decline in US stock prices across all sectors (estimated losses 15-20%). There may be scattered news and rumors of renegotiating global currencies agreements, resulting in several sharp drops in the USD. Continued high prices in crude oil will be driven by Middle East instability, tempered by recession indicators in the US, and coupled with record-high reserve levels. OPEC negotiations may be strained as various elements renew their push for a general acceptance of a "basket of currencies," heavily weighted with Euros and Yuan.

http://anewstory.org/markets/March_MoodCompass.pdf

(subscription required to view; reprinted with permission)

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