A Chemical Reaction

I have been wondering how long we could go in the new year without an event in Europe upsetting the apple cart. It looks like the decision to tax depositors for the bailout in Cyprus is the first such event of the year. The event itself is not important, but whether it has any further ramifications for the rest of Europe is. My gut feeling is this will turn out to be a minor event. However, I believe it is the first of many bad tidings out of Europe this year. The Continent is in a continued contraction, and the situation in Greece, Portugal and Spain is close to or has exceeded the financial hardship last experienced in the Great Depression. In my own portfolio, I am underweight any sector or equity that gets a significant amount of revenue or profit from Europe. It is the key reason I do not have equity positions in Ford (F) and General Motors (GM), even though I am positive about their prospects in the U.S. and China.

On the bright side, maybe a selloff triggered by the latest news from Europe will provide buying opportunities for investors with cash on hand that have been waiting patiently for a pullback. As pessimistic as I am that Europe will contribute to growth in the near future, I could not be more positive on the prospects for continued expansion of U.S. domestic energy supplies. At current growth rates, the country will surpass Saudi Arabia before the end of the decade as the world's biggest oil producer. The U.S. already has the lowest natural gas prices in the developed industrial world. This is a tremendous cost advantage to manufacturers and other industries blessed with facilities close to these low-cost energy sources....313 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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