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Howard Gold's No-Nonsense Investing
March 25, 2011, 12:01 a.m. EDT
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Japan's "?random' events are no shock
First Take "º
Goldman's pedestrian streak lingers
By Howard Gold
NEW YORK (MarketWatch) "” If you blinked, you may have missed the latest correction.
After its recent peak of 1,343 on Feb. 18, the Standard & Poor's 500 index /quotes/comstock/21z!i1:in\x (SPX 1,316, +6.15, +0.47%) plunged when the popular uprisings that swept Egypt and Tunisia spread to oil-producing Libya, driving prices of Brent crude oil near $120 a barrel.
Then came the giant earthquake and tsunami in Japan, which caused an accident at the Fukushima Daiichi nuclear power plant 140 miles northeast of Tokyo "” a situation that is still unsettled nearly two weeks after the disaster took place.
Now, the U.S., the U.K., France, and other western powers have installed a United Nations-authorized "no-fly" zone in Libya, ostensibly to keep Moammar Gadhafi from slaughtering rebels in the eastern city of Benghazi.
Saudi Arabia is pumping extra oil to cover Libya's shortfall, and its government is trying to remove neighboring Yemen's unpopular ruler while simultaneously crushing a Shia-dominated revolt in Bahrain.
Meanwhile, Tokyo Electric Power has made some progress in containing the second-worst nuclear accident after Chernobyl, amid warnings of higher radioactivity levels in Tokyo's drinking water. Read about Tokyo's warning on drinking water in The Wall Street Journal.
The S&P, which fell 6.4% from its peak at one point, is now roughly 3% off its February highs. The VIX index /quotes/comstock/20m!i:vix (VIX 18.03, +0.03, +0.17%) , the market's fear barometer, which spiked above 30 recently, was back under 20 Wednesday.
The market may tumble again tomorrow or next week "” and the fall of Portugal's government brings the European debt crisis front and center again. But the current mini-crisis may well be over. Read "Portugal vote highlights another EU debt-plan flaw."
Regardless, it follows a pattern we've seen many times: The market has a big run, investors get complacent, then unexpected events throw everyone for a loop, and fear takes over.
WSJ economics editor David Wessel reports recent events in Japan and the Middle East could set up higher inflation in the U.S.
It happened with Greece last year. Several months later, the market took off and kept rising until the latest panic began.
James Paulsen, chief investment strategist at Wells Capital Management, dubbed the phenomenon "Armageddon hypochondria," fear that the end of the world "” or at least another market crash "” is nigh.
Investors were traumatized by the bear market and financial crisis of 2007-2009, he explained to me in an interview. "All we've been doing for the past two years is looking around and trying to see what will be the next crisis," he said.
That has led people to blow small or medium-sized crises into full-fledged global catastrophes, with the assistance of the 24/7 media (including this humble commentator). Investors become paralyzed, can't decide whether to buy, hold, or sell, and so throw up their hands and do nothing.
That's too bad, because if you really looked closely, the recent events, while significant, were not enough to derail what is shaping up as at least a normal cyclical recovery and bull market, and maybe even more.
Goldman Sachs has always been able to count on M&A advisory for revenue and bragging rights, but it's being challenged in 2011.
10:15 a.m. Today10:15 a.m. March 25, 2011
"Canadian government gets a no-confidence vote: reports http://on.mktw.net/eEEXWt" 1:31 p.m. EDT, March 25, 2011 from MarketWatch
"$ORCL shares rise as results beat views http://stk.ly/gOyJIB" 1:21 p.m. EDT, March 25, 2011 from MarketWatch
"RT @mktwcrum: #Rex_On_Techs video. The real March Madness comes from the latest mud-slinging between #Oracle and H-P. http://bit.ly/iaxGz0" 12:45 p.m. EDT, March 25, 2011 from MarketWatch
"U.S. real gross domestic product increased at a 3.1% annualized rate in the fourth quarter http://bit.ly/h4Hx17" 12:15 p.m. EDT, March 25, 2011 from MarketWatch
"#RIM shares drop as forecast disappoints http://bit.ly/dPVpI4" 11:47 a.m. EDT, March 25, 2011 from MarketWatch
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