The recent day’s extreme market volatility has brought about some questions to the mind of investors. What is the root of such evil? What can I expect in the months ahead? Our opinion at Colgan Capital is that most of yesterday’s volatility was essential due to a human error. Apparently a “fat fingered” trader who was selling choose “b” for billions instead of “m” for millions. This caused a selling frenzy and by 3:10 p.m. the Dow Jones dropped nearly 1,000 points. Then, once people figured out that this was a mistake buyers jumped back in and the markets came roaring back to trim the day’s losses.

Aside from the technical glitch, an important issue in Europe is still prevalent. The debt crisis, particularly in Greece, has rightfully spooked investors. While this type of problem in the U.S. is not terribly difficult to resolve the fact is that Europe faces different dynamics. With multiple countries and cultures sharing the same currency, the European Central Bank (ECB) must appease many conflicting desires. Unfortunately the ECB cannot do what the Fed did in 2008 and 2009 here in the U.S.  As you might recall the Fed engaged in “Quantitative Easing” by stepping in to buy treasuries.  This stabilized the debt crisis. The reason the ECB can’t take this approach is that Germany is not fond of this approach, particularly because they have historically suffered from inflation challenges and quantitative easing often leads to inflation. The bottom line is that while we believe Europe will work things out it might just take longer than it did here in the U.S.

We are confident that the portfolio strategies we employ are addressing such challenges and opportunities appropriately. So, for most people no changes are necessary at this time…and if a change was needed we would contact you. Nonetheless, if you have any questions, you are always welcome to contact Susie or myself.

Personal Update

First and foremost, to all you mothers out there – HAPPY MOTHERS DAY! Susie and I wish you the best this weekend. 

Below are some recent pictures from our trip to Sanibel Island. We all had lots of fun. Hopefully Rochester will soon be a recipient of the beautiful warm weather!