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European Debt Concerns Rock Global Markets

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    Author James Glassman discusses the economic impact of the volatile market.

  • Duration 5:33
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Good evening everybody welcome to this special scoreboard report we are live on another historic night above market selloff fund was claimant -- for -- announcement.

Look them straight to the overseas markets right now they just opened in the past -- yes more losses once again we're sorry to half -- value.

The Nikkei 225 down one point 4% in Japan South Korea started.

Just about an hour ago down 4% sell off those lows but still down one point 3%.

And in Australia a full percentage point loss there at the all ordinaries index here are our stock futures though telling a different story.

Dow Jones industrials futures giving us an indication of how the markets might open up 89 points S&P futures up nine we have the NASDAQ up fifteen.

All this after the Dow plunged to an eleven month low fears over Europe's debt contagion combined with the pretty gloomy outlook from the Fed yesterday.

Helping force the -- to throw in the towel.

Three and a half trillion dollars in market value wiped out in the last two and a half weeks alone -- that puts it into perspective for you.

What does it all means Arafat and -- view.

James Glassman is the author of safety net the strategy for -- risking your investments in a time of turbulence.

Is it too late to the risk investments -- No live there's not do a and what I argue in the book which came out in January which would have been a good time for be able to -- -- risked their investments.

Is that you really need to own more bonds.

To protect yourself on the downside and that's basically what we've seen.

That as stocks have gone down bond prices.

Have gone up and the protection on the -- -- that's what.

That's what investors want -- so what my book argues is that you can give up a little bit on the upside.

For protection on the downside and it's rest easier at night if you had applied to the strategy.

That I have a kid in the book -- be ahead for the year a little -- five or 6% but you wouldn't be down 10%.

Down to knock down 10% all right so we'll -- allocation that your recommend is 505050 bonds that the Japanese no cash.

Yes and that that's -- -- that that's that that's the that's the simple minded the easy.

The easy formula I also -- in the book you know have to do this but I also advocated hedges such as owning bear funds which of course go up when the market goes down.

But the easy thing is that for investors who were -- let's say 8020.

Or even a 100%.

In stocks for their retirement even if they're not gonna retire for twenty or thirty years what I have a -- is 5050.

You will give up some thing on the upside no doubt about that if thing straightened out.

But -- to protect yourself in the -- and what about younger folks who say I'm okay it'd take a little more risk why should they be 5050.

Because I think the world has changed that's the that's what I'm saying in the book two things have happened one is.

That the United States is no longer the be all and end all of the global economy now that could change we get our political act.

In order and things could change -- right now.

We are facing some very slow growth in the United States on the order of 2% rather than the three and a half percent that we had since World War II now I'm and in my other life as the executive director the bush -- I am pushing for 4% growth but I think we need to be realistic about this.

-- guess that's one thing the second thing is.

That these shocks.

Which have a big effect on markets.

Very quick effect on markets are gonna -- com.

More more frequent so something like the S&P downgrade.

I think you know.

These things are just gonna happen more more often and they're gonna have more of an effect on markets.

So I think people are gonna be willing to trade potential upside.

For protection on the downside.

I really hope people are listening to you because you're speaking so a plainly and so smartly about what people should be doing especially in in I guess -- you could call James this.

New normal where you can no longer just.

Sit there and leave your portfolio and figure it'll be fine one way or another.

There are these gigantic global shocks but that said what about currencies how does an average investor who doesn't know that the Thai -- from.

-- -- that you want to do about currency should they have some exposure in their portfolios.

Well I think that's.

Long that the US economy in other words they're betting on.

The success of the US economy and there along the dollar they get paid in dollars if the economy does well.

They gonna keep their job but they have no hedge they're not protected on the downside He can't short your house right.

So the only place you're gonna have a hedge is in your financial life so what I have a -- in this book is.

Hedge your stock holdings but also if you can and it's it's actually much easier than it ever has been.

Hedge -- dollar holdings as well and it's not hard for example own exchange traded funds.

That themselves.

Own currencies.

I think developing market currencies I also think some of the very well managed currencies such as the Canadian dollar the Australian dollar.

Those kinds -- it's not hard to hedge yourself I'm -- -- go overboard but media hedge.

James I think you're right on all of that it's important for people to understand that there is this new normal.

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