The ongoing European debt crisis keeps going on and on as bogus claims by supposed experts that the crisis is being solved keep being proved wrong. This uncertainty is keeping the stock market on a roller coaster as today it swung downward.
Former Prime Minister of England Tony Blair warned this past weekend of "catastrophic" results if the Euro collapses.
Europe Turmoil Puts Money Managers in Bind: Hold Stocks and Hope, or Sell and Maybe Miss Wins?
Here are the top financial stories of the day:
1) Wall St. ends lower amid euro zone fears-From Reuters
Stocks ended lower on Monday as rising bond yields in Italy and other euro zone countries reminded investors that despite changes in governments, the region's debt crisis could still spin out of control.
Based on the latest available data, the Dow Jones industrial average was down 74.39 points, or 0.61 percent, at 12,079.29. The Standard & Poor's 500 Index was down 11.90 points, or 0.94 percent, at 1,251.95. The Nasdaq Composite Index was down 21.59 points, or 0.81 percent, at 2,657.16.
2) Blair warns of 'catastrophe' if euro collapses-From Breibart
Former British prime minister Tony Blair warned on Sunday that the collapse of the euro would be "catastrophic" and urged Europe to move fast to support the currency.
Blair said European leaders faced "very difficult and painful" choices and a "long-term framework of credibility" was needed to see off the crisis.
Speaking following the resignation of Italian Prime Minister Silvio Berlusconi on Saturday, Blair said there had "never been a tougher time to be a leader than right now".
But he said the "whole weight" of European institutions -- including the European Central Bank -- must get behind the euro if it was to survive.
He told BBC TV that economies had to align and that "the myth that the Italian and German economies were the same -- that 10-year myth has now evaporated".
Measures required to bring stability to the euro would be painful, he warned, but added: "If the single currency broke up, it would be catastrophic."
Blair, who was premier for a decade until 2007, was also asked if his former finance minister Gordon Brown had been right to push hard for Britain to stay out of the euro when Labour was in power.
"He was right, although I would also say by the way, I was never in favour of doing it unless the economics were right," Blair replied.
British Prime Minister David Cameron will meet German Chancellor Angela Merkel in Berlin on Friday for talks on the euro's difficulties and the economy.
Cameron said on Friday there was still "a big question mark" over the future of the eurozone and stressed it was not in Britain's interests for the single currency to break up but the government is "preparing for every eventuality".
3) Tough Times Mean Tough Choices-From The Wall Street Journal
The continuing stock volatility brought on by Europe's debt mess is forcing investors to make almost impossible choices.
They are trying to navigate a market that pushed the Dow Jones Industrial Average down 389 points on Wednesday amid fears of Italian debt default, only to drive it back up almost the same amount in the next two days once Italy took steps to form a new government.
That late-week swing was just the latest installment in weeks of volatility sparked by the European debt crisis. With year-end approaching, many investors fear the market could be in for a significant lurch in the next few weeks. The problem is predicting whether it will be up or down, which depends heavily on how Europe deals with its debt. Investors must prepare for either world, and it isn't easy.
Jeff Schappe and his colleagues at Sterling Capital Management, which oversees about $34 billion in North Carolina, cut their recommended stock holdings to 55% from 59% for certain clients who own a mix of stocks and bonds. They put the extra money in cash.
A frustrated Mr. Schappe says trying to make bets based on European politics is beyond the pale. "I can't predict what my wife is going to do, much less politicians here and in Europe," said Mr. Schappe. He says he could well decide to put that money right back into stocks.
"Depending on what the market does and on our belief on what the economy will do, there could be an opportunity to put the money to work," says Mr. Schappe, who is chief investment officer at Sterling, an investment arm of BB&T Corp.
As volatility becomes the market norm, big, conservative investment institutions that hate to make sudden market moves are being forced to adapt.
Large short-term moves in and out of stocks used to be unusual events for traditional money managers. Such tactics are becoming more common. What has long been the norm for hedge funds and high-frequency trading firms is becoming harder for big firms to avoid.
Bruce McCain, who helps oversee $20 billion as chief investment strategist at Cleveland's Key Private Bank, a subsidiary of KeyCorp, says his firm's investment-policy meetings have gotten more contentious lately, as likely political scenarios become a focus of discussions. Some think Germany will be forced to rescue Italy. Some think the U.S. Federal Reserve will step in again to help the U.S. economy. Others are skeptical. It leads to disagreement about whether to sell stocks or hold them.
"There is probably a deeper divide between those who want to cut exposure quickly and those who want to ride the rally a little longer before we sell it down," says Mr. McCain, who like Mr. Schappe, sees a serious risk of U.S. recession ahead.
In a series of moves this year, Mr. McCain's firm has cut its stock exposure, especially for European stocks, moving to 50% stocks from 60% and putting the extra money in cash. It is prepared to make more moves in the coming weeks, cutting exposure in developing countries and in the U.S. if the economic outlook worsens. If the Fed shows signs of stepping in, however, Key could increase its stock holdings.
The mix of political uncertainty with the threat of recession, both in the U.S. and Europe, leaves investors in a terrible position, says Ethan Harris, co-head of global economics at Bank of America Merrill Lynch. Investors can park cash in Treasury bonds or money markets and get feeble returns, or they can go for the potentially higher returns of stocks and take the risk of a sudden plunge in stock prices.
"There aren't good options out there" for investors, he says. His economists are forecasting at least a mild recession in Europe next year. He figures there is a one in three chance Europe's woes, together with continuing congressional gridlock in the U.S., throw the U.S. into recession next year, as well.
"Investors have to understand that this is an environment where there is no high-return, low-risk investment," Mr. Harris says. For a high return, you must make a risky bet on European and U.S. politics. To avoid that risk, you need to accept bond or money-market yields that often don't even offset inflation.
A particular source of uncertainty has been the recent stream of better-than-expected U.S. economic news. Manufacturing and service-sector activity show the economy expanding, while unemployment data have been better than feared. Third-quarter corporate earnings exceeded analyst forecasts. Even the latest consumer survey was upbeat.
Many economists warn that the strong numbers won't last and that the economy will slow next year.
Investors have to decide who to believe.
"There is not much suggesting a U.S. contraction now," says Don Rissmiller, chief economist at Strategas Research Partners in New York. "But it is hard to see how you avoid a significant risk of a downturn with Europe's core getting in trouble.
"Parts of Europe are in recession right now, almost certainly," he adds. "If I had to guess, the risk of the core of Europe going into recession would be 50-50, and the odds are rising every day."
One immediate risk for investors is that Europe could announce yet another flawed plan to deal with its debt crisis. While many investors would be skeptical, Mr. Rissmiller says, the market might take another lurch higher.
The end of the year is a dangerous time for many money managers, whose bonuses depend on full-year performance. They can't afford to be out of the market if it surges higher, and they also can't afford to take a big loss right before year-end.
Some are shifting money away from Europe but boosting exposure to the U.S. They are betting that the U.S. will weather Europe's crises and become a magnet for investment dollars from those who are abandoning foreign stocks.
"Creditors worry that any high-profile failure abroad will reverberate through the U.S. banking system," Jack Ablin, chief investment officer at Harris Private Bank in Chicago, a subsidiary of Harris Trust, told clients in a message Thursday. "While the possibility exists, it's unlikely this time."
Some are looking for a compromise, Mr. Rissmiller says, buying stocks they think will ride out a storm. Those include stocks of companies with a long history of rising dividends, whose quarterly payments partly offset the risk of price declines. Others are looking for growth stories: companies with special products such as hot new drugs or technological innovations. Investors hope the hot products will keep those companies' stocks rising even if the broader market tumbles.
Quote of the Day from Dave Ramsey.com:
Are you bored with life? Then throw yourself into some work you believe in with all your heart, live for it, die for it, and you will find happiness that you had thought could never be yours. — Dale Carnegie
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