Continued focus on Europe needed to move forward

Dubai: Same horse: Greece. Same race: portfolio performance. Different jockey: politics and not economics. If that's an accurate summary of the last month market tergiversations, then this week we should focus on what we should be doing about it.

First a recap: what are we going to do about what? What? is poor portfolio performance over the last two months. The horses at the front of the poor performance stakes are Greece and potential European disintegration (50 per cent chance, say HSBC's report to their high net work individuals or HNWIs), leading by a few furlongs. Lagging way off in second: fears that growth in emerging markets generally and China/India specifically are slowing. Against this back-drop risk assets have been on the wane. "Risk Off" as we have been saying for the last few weeks.

How does Greece matter? One thought doing the rounds from the economic viewpoint is that the Greek economy is the size of a plug hole in a full bathtub of European assets. By size it doesn't matter. The trouble is: what happens if the Greek plug is pulled? Will Spain and Italy follow? Then what for Europe? In other words, this is as much about politics as it is about econ-omics at the moment.

So what to do?

If markets are being spooked by sentiment and politics and not by basic value and fundamentals, today's values will have a lot to do with holding your nerve. At the suggestion of John Goodlad, Hartleys Stockbrokers in Australia, we should be looking at the very easy-to-read Motley Fool guide. Goodlad repeats their advice as four options:

Option 1: Do nothing. Ignore the market and it will eventually bounce. ‘It always does', says The Fool. Where ‘always does' means prices should revert to fair value in the short term, or reverting to the mean over longer periods.

Option 2: If you have new monies available, keep buying good companies. Currently markets are telling us that there are good assets out there being sold at significant lows.

Option 3: Only sell to buy something better. "Market selloffs provide good opportunity to upgrade a portfolio. Do not sell off!"

Option 4: Focus on value, not share prices, and see the value instead of the misery.

Valuations

For Goodlad there are three drivers to the forthcoming months of valuations: "Europe, Europe and Europe". The central point being made is that "just like last October, there is no doubt that the market turmoil will continue until some clarity emerges in terms of ECB action and whether Greece defaults or exits the euro. Whilst a lot is baked into global markets, there may be plenty more to go", says Goodlad.

The joint scenario of the "The Fool's" advice and that of Goodlad's view of the world leads to three types of interaction between his clients and himself:

1. "It always recovers, it always does .... buy more BHP at these levels". Remember Goodlad is mainly talking to Australians!

2. "There will be a rebound eventually. You may see it I won't". Meaning stay invested, timing the market is not an option.

3. Buy a beverage. Here I paraphrase. But it means "do nothing" and enjoy yourself.

The wrtier is Chairman of Mondial Financial Partners.