Demoting the Euro Crisis

We decided to demote the Euro crisis from “crisis” status to “status quo.” Let’s face it: Greece has been in slow motion destruction for three years now. Spain and Italy have been grinding along on the edge for nearly as long. Ireland’s “crisis” is so boring we never hear about it any more, and Portugal, while quiet also, amounts to unexploded ordinance in the field. It might be found, and it might not.

Emotionally, it just doesn’t feel crisis-like any longer. It feels like chronic flu with occasional good days when randomly delivered medicine kicks in, like today’s announcement provided. Maybe it’s time we accept that for the foreseeable future, this is the way it’s going to be. Maybe, in fact, it’s time to ignore Europe.

The implications of acceptance are many-fold: first, we quit rushing to the Wall St. Journal every morning wondering if something finally happened overnight to bring things back from the brink. Instead, we assume there will be no miracles, no bursting forth of stock market valuations, for the time being. Buying good value during the times when the market gives you the opportunity to do so is the prescription. Rely on the fact that the market will tank periodically, and use that moment to flow money into stocks. Likewise, during the bull phases, take a little of the table.

Second, income stays important. If we’re going to be in a series of bull phases and bear phases that cycle over and over, a bird in the hand (dividends and interest) is worth a lot more than two in the bush (capital appreciation). If your portfolio generates $10,000 per year in income and you don’t take it out, then over three years, you will have reinvested at least $30,000 without lifting a finger. That’s a nice, reliable source of growth, no matter what Europe does.

Third, economic growth stays slow, but sane. That’s not an entirely bad thing. We don’t have any business borrowing tons of money against our homes to buy boats, RVs and vacations. Our grandparents didn’t act like that. We need to live more like our grandparents, and this economy is helping us do so, by injecting a dose of reality and caution into family budgets. And, as in the old days, some market sectors will benefit from this new sanity.

There’s a way to make money in every market environment; creative people can find it.