The Biggest Stock Market Risk Nobody Is Talking About

World stock markets have continued on their 2011 roller coaster ride. Stock markets seem to be pre-occupied with the Euro zone melt down, and for good reason. It is center stage on nightly newscasts and every financial news channel in the cable universe. So much of tax planning has to do with capital gains tax planning, but unfortunately over the course of the last decade it has had more to do with capital loss tax planning. This year seems to be handing out more in the latter category than the previous.

I mentioned to a client in the spring that I thought the stock market was over valued and due for a correction. He agreed with me that it would be better to sell and buy back at a lower price than to hold his stocks through another market downturn. Unfortunately for him, he did not act on this advice.

While the Euro zone debt crisis has been the driving force behind market volatility in the second half of the year, I think it could pale in comparison to what’s next. There is so much scrutiny of the Euro zone crisis, which is enough to ensure the continuation of the on going recession. But why there is coverage of Occupy Wall Street and bogus allegations of sexual misconduct by Presidential candidates being so thoroughly covered is just plain sad.

Unfortunately, what is not being given the prominence it should be getting by media outlets is going to make the Euro zone volatility seem calm in comparison to what is coming. Israel is going to strike Iran’s nuclear facilities. This is going to have dramatic repercussions on world stock markets. This will cause Iran to try to cut off the Strait of Hormuz, choking off the world’s largest oil supply.

This has the potential to draw just about every military in the world into a conflict. Oil could hit it’s high of $147 a barrel or even higher. We have been in a recession since 2008, but this could cement depression status.

The most surprising aspect about the turn of events is that the stock market seems oblivious. The stock market is historically a predictor of future returns or so the experts would have you believe. Clearly, the stock market and it’s experts can be blind sided by events. There were not a lot of economists who predicted the meltdown caused by the collapse of the mortgage market.

Israel striking Iran is blatantly obvious. This has been telegraphed in interviews with Israeli prime ministers for years. Iran’s president, Ahmadinejad, has made no bones about wanting to wipe Israel off the face of the earth. The International Atomic Energy Agency released it’s latest report on the Iranian nuclear program stating it is much further advanced then expected and it is definitely geared towards producing nuclear warheads capable of not only striking Israel but also Europe. This has guaranteed military action from Israel. The only question left unanswered is when.

Since this is going to happen, what will you do with your investments? What is your investment advisor’s plan for dealing with this scenario of events? Are you going to make money or get run over like a deer in the headlights?


About this Author 

John Beidle is an enrolled agent who specializes in helping entrepreneurs, small business owners and real estate investors pay the least amount of tax as legally possible.

About The Author

John Beidle

John Beidle is an enrolled agent who specializes in helping entrepreneurs, small business owners and real estate investors pay the least amount of tax as legally possible.

Comments are closed.