Commentary for Financial week Aug 8-12

Wall Street's gut-wrenching turbulence in the last six trading days has sent many investors into a state of paralysis, watching helplessly as the Dow Jones industrial average free fall 520 points one day only to soar 430 the next. Baron Rothschild, an 18th century British nobleman, once said "Buy when there's blood in the streets, even if the blood is your own." Rothschild made a fortune buying in the panic that followed the Battle of Waterloo against Napoleon.  And there is no further shortage of contrarian investing advice out there. One of my investment idols, Warren Buffet once said “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful” and being one of the richest men in the world, his returns show no lack of proof of his financial abilities.

So with fear running rampant on Wall Street this week, is this the time to buy? Well that depends on which camp you are in. Double dip or sale, if you believe that we are going in a double dip though unlikely then I say cash and safe havens such as gold, blue chip stocks and fixed income is the way but if you think this is the sale before the next leg of this bull market then take Cramer’s advice and buy on the panic sell offs.

Now I don’t believe we are staring down the barrel of another recession but I just don’t see any major catalyst to kick start the next leg of the rally. This puts Wall Street in a sort of financial limbo, where traders don't know whether to buy or sell  into the insane volatility seen this week. Equity bottoms tend not to occur when there is still a glimmer of optimism, in    Rothschild’s terms there still isn’t enough blood on the street but with over 4 Trillion dollars leaving the markets since the start of this “crash”, the falling knife is only a couple sessions away from hitting the floor. 

 The bottom line is the market is trying to discount all of the worst negative scenarios which have yet to occur, We need to see the European Central Bank and US Government take firm leadership and provide some substance to alleviate the fear  factor...and I think that's coming.