Don't Panic Over Europe
By Jeff Miller: I feel no panic about Europe.This is a typical test. Every long-term investor considers the question of risk tolerance and understands that markets will fluctuate for mysterious reasons. So far, so good.Then, when the event actually happens, it is accompanied by a cacophony of fear mongers -- all claiming that this is "the big one."How can the average person tell the difference?
Knowing What to Ask
The first step in critical thinking about a problem is asking the right questions. How about these?
- Is there systemic risk? By this I am asking whether we have another "Lehman event" where there is a lot of unknown counter-party risk and the credit system freezing up.
- How big is the problem? Let us suppose that Greece defaults on debt. Or leaves the Eurozone. What is the worst case?
- How do political events affect the prognosis? We have election results where