Investors are irrational right now because they’re trading on irrational monetary and fiscal policies, says Dick Bove, a banking analyst at Rochdale Securities.
Regulators are also hamstringing banks in already uncertain times, and the Federal Reserve has kept monetary policy so loose that the dollar continues to weaken.
“In the past few weeks holders of funds may be judged as acting somewhat irrationally,” Bove says, according to CNBC.
(Rochdale file photo)
“When they heard that Treasury securities had been downgraded, they bought Treasury securities. When they decided that bank stocks were bad investments, they sold these stocks and took the money they received and deposited it in the banks.”
The problem with investing in stocks is that the global financial crisis of 2008 has not been resolved as yet, Bove says.
“The flare up in the United States has been brought under temporary control but the problems in Europe have not.”
Meanwhile, more and more investors are fleeing to gold, commodities and in currencies in commodity nations where financial systems are still stable.
“There is a frantic need to find a safe haven for funds and traditional pockets are being used.”
One investment icon, however, says the time to buy is now.
"The lower things go, the more I buy,” Warren Buffett tells Fortune.
“We are in the business of buying."
For now, the economy isn’t doing that poorly, Buffett tells the magazine.
"Up until right now, all of our businesses have been coming back — even Europe isn't doing that badly — except for businesses relating to home construction, which is on its rear end."
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