No place to hide?
Commentary: Asset preservation is becoming harder
By Paul Erdman, CBS.MarketWatch.com
Last Update: 1:01 PM ET March 11, 2004
HEALDSBURG, Calif. (CBS.MW) -- The terrorist bombings in Madrid killed at least 180 and wounded well over 1, 000.
The shock effects on European financial markets were immediate and severe. Stock prices are well down in every exchange there, the mood is bleak.
What this horrific incident has brought home again is a very stark, disturbing fact: in the world of modern terrorism there is no place to hide.
It does not matter really whether these most recent killings were done by Basque separatists or Islamic terrorists out to teach the Spanish government a lesson for siding with the Bush administration on Iraq.
What does matter is that these murders were meticulously planned and executed in a country that was as alert as any on earth to the threat of terrorism, yet was helpless to prevent these vicious acts.
Although in the face of mass murders like these it may seem to many to be totally out of place to try to analyze the impact in financial terms, this, after all, is the principal reason why we are here.
What incidents like these are increasingly proving is that in this new world of suicidal terrorism there is really no place to hide your money with the assurance that it will remain safe.
However, when considered in terms of relative risk, I would suggest that the United States remains very high on the list of the best places on earth. Our record on deterring any major acts of terrorism on American soil since 9/11 is a strong indicator of that.
But relative "safety" is not just a function of geography. It also relates to asset class allocation. Although Warren Buffett did not cite this as one of the reasons for his holding on to $36 billion in cash, up from $12 billion a year ago, maybe he felt that it was better left unsaid.
Maybe this is also constantly in the back of the minds of international investors who stubbornly hold on to their U.S. government bills, notes, and bonds as well as high grade corporate fixed income securities in spite of the repeated warnings by the "experts" that all are greatly overpriced and doomed to collapse when dollar interest rates soar.
This may also be one of the reasons why, despite good domestic economic news, stock price continue to recede in the face of growing geopolitical uncertainties.
This week marks the fourth anniversary of the date that the Nasdaq peaked at over 5,000. The subsequent decline and fall began in earnest well before the new age of terrorism dawned upon us all.
If there is one lesson that should be learned from what has been happening to all of us in recent years it is that the concept of capital preservation is one that should not be scoffed at.
Economist and author Paul Erdman is a CBS.MarketWatch.com columnist. |
