Frank Trotter has a sense of humor about the current state of the market.  He said, “The title of the talk is 'Trying to Interpret the Chaos in the Markets.'  I was laughing with someone earlier that we might have to step out halfway through the talk to see what is going on.  Things are changing so quickly.  It is just a crazy time.”  Traditionally, analysts speak on the market in general terms.  Trotter said, “The focus is usually the US situation, then to talk about metals, and talk about the result.”  Trotter has a different take. He said, “Today we are going to talk about Europe to get people some real data that doesn't make it across the traditional news wires.  There are some broad brush articles that don't give you too much information.” 

With all of the issues in Europe, Trotter isn't sure how quickly Europe will recover.  He said, “They have the framework for a plan but I don't know if they are going to be able to do it. We have said for a long time that until they are able to control the fiscal policies of the various countries in the long run it will be very difficult to control.”  Much of the challenges are due to the Euro.  Said Trotter, “All of the peripheral countries got a free ride for the last ten years.  If you look at bond yields in Spain, Greece Portugal, Ireland and a lot of other places, twelve or thirteen years ago before the Euro, they were very high.  As soon as the Euro came into being, those spreads went to zero.   So they got a free ride for the last ten years to do all these government programs that they can't afford.”  Unfortunately, those bills still have to be paid.  Said Trotter, “The market now recognizes that it is up to the individual countries to pay this off and as we've seen, the spreads have rocketed out.  Greece is off the charts, Italy is high, Spain is higher and even Germany had a failed auction this week.”

Europe hasn't taken the same tact as the US who has printed more money.  Said Trotter, “In a way they have.  The European Central Bank is more of a central bank than the US Central Bank is.  They have been pretty steadfastly refusing to get into that business.  They have monetized some of the shortfall in the emergency fund on the order of $700 to $800 billion dollars.  They all have to agree on it collectively and therein lies the problem.”  Trotter likens it to trying to get our states to agree.  He said, “It would be like having a federal government here in the US and trying to get the states to agree to something.  California's not going to do anything for New York and New York isn't going to do anything for Illinois and Illinois isn't going to do anything for Texas – it would just be a mess.”  

Given that, Trotter has been advising investors to diversify.  He said, “What we have been focusing on is encouraging growth. We've always said diversify broadly and for three years we have been suggesting that people exit their Euro positions.  They've not done badly over that period of time.  They are still up 50% from nine years ago.  Even despite their troubles, they have had a little better run than the US.”  In addition, Trotter suggests moving into more than one currency.  He said, “We have moved into some of the more commodity based currencies – Norway, Canada, Australia, Singapore and China to get involved in the Asian sphere.  If you want to get involved in a little bit of a speculative run, Brazil is always out there. It probably won't perform well over the next year, but in the intermediate to long term they will come back around.”

For investors who are looking for opportunity in today's chaos, Trotter advises to look widely.  He said, “In the equity side, look at the broader market, the growth in the second and third world markets.  That's simple, everybody sees that, but a lot of people don't react to it.  We see a lot of advisers here in the United States saying, 'I'm going to get you international exposure.  I'm going to buy an international company here.'  We don't think that is good enough.  We think you have to be looking at the individual market:  China, India, Indonesia, Malaysia, and even some of the African countries to try to find some additional exposure for a portion of your investments.”  Even with good research, Trotter is cautious.  He said, “Moving some of your fixed income into these other currencies is a good idea and, of course, diversifying right into straight currencies – no.”

Trotter runs EverBank, which has some interesting opportunities for investors.  Said Trotter, “The easy stuff is checking and savings.  It is still one of the greatest values in the market.”  In addition to standard accounts, EverBank offers a World Market account as well.  Said Trotter, “Our World Markets accounts are CD and Money Market accounts in over 21
currencies where we offer a deposit denominated in that currency.  We pay interest at the local currency rate.  It allows you to benefit from an appreciating currency.  Of course, you can lose money if the currency goes down.”   In addition to accounts, EverBank offers a metals division that has unallocated gold, silver, and palladium.  Said Trotter, “[This] has been very popular over the last five or six years.”  More information on EverBank’s offerings can be found at www.everbank.com or by calling 888-882-EVER. 

Trotter is cautiously optimistic about the future, “This is going to be an enormously interesting time.  Things are moving fast.  We are pretty optimistic, but there is an opportunity for all of this to go very dark, but it is a real, double digit risk.  Control your risk.”