Global Financial Crisis 2.0?

There are many commentators saying that the European debt and banking crisis could be the second round of the Global Financial Crisis. The usual doom and gloom merchants have come and told their listeners that stock markets around the world could sell off a further 20%. You know the usual "world coming to end" stuff. Well, these are the same people who said the US$ would never recover from the crisis in 2008 and the Euro would become the world's reserve currency. Oops! These guys were 100% wrong about the US$, US economy, and stock markets in 2008, why would you believe them now?

You shouldn't.

The current crisis that centres on Greece and hasn't spread further, despite a lot of hysterical reports trying to involve all of Europe, is a drop in the ocean compared to what happened in the US in 2008/9. I see the sovereign debt problems as more an after-shock after the GFC earthquake rather than a whole new crisis. This is definitely not a GFC 2.0. Sure it will restrain GDP growth in the EU a little, but it won't go much further than that.

For all their bickering the EU will get the current situation under control in coming weeks I'm quite sure and the markets will respond accordingly.

When markets "tank" they throw up great opportunities.

Some of my very favourite stocks have now come back into my buying range. In fact, two of them I would classify as two of the very best stocks you could ever own. Both companies have sales and profits at record levels and have predicted more to come in the coming year. Every time they report they beat expectations by a wide margin. The analysts can't keep up with their growth. Right now, investors have a fabulous opportunity to buy these companies at "panic selling" levels.

Last night's rally from a poor start on Wall Street is an indication that bargain hunting professional investors have entered the market, as they did back in March 2009 when the world was again coming to an end. This time it may be a mini rerun of the same situation.

The market in Australia is down over 12% for 2010 and the US market is also in negative territory for the year. As I predicted six months ago, 2010 would be a difficult and challenging year as the economic recovery gathered traction. However, I feel the bottom of the current correction is very close if not already passed - it's always hard to say exactly, until after it has definitely passed.

As investors we should try and cut out as much market noise as possible and concentrate on the fundamentals of individual investments and make sound decisions based on facts rather than speculation. Unfortunately, so many people get caught up in the emotion of the situation and forget that "this shall soon pass" as all crises do leaving the smart investor with profits.

By buying when everyone else is selling (and panicking), I have consistently beaten the markets year after year without making a loss even in 2008. This year will be no different. To make money at a time like this, you have to remain calm, look at the longer term situation, weigh up the facts rather than the speculation, ignore emotive opinion and ensure you buy the very best stocks at the right price and at the right time and have trading strategies that will protect you from the "unknown factor".

It's a fact of life that investors have to take the good with the bad. The problem for so many, is that they make the "bad" worse by not making "good" decisions. The majority make losses or mediocre returns, why is that? How do the small minority always seem to come out on top? The secret is the successful minority do the opposite to the mediocre majority. They see opportunity when others see disaster.

Bad situations always end up being great opportunites in hindsight. How will you handle this "opportunity"?