The future holds many possible scenarios; but, in my opinion, we need to discuss two. It is very difficult to predict the actions of European central bankers and politicians. Thus, I believe we should consider each of these scenarios as equally likely:

SCENARIO ONE: Because of insufficient action on the part of the Germans and the European Central Bank (the “ECB”), the Italian Government bond rates go higher and higher, making it impossible for Italian Government to honor 100% of its debts (repeat of the Greece story). This would be a big event. Probably, the majority of Italian banks would face failure. And, several of the large French banks would also. In a matter of days or weeks, the stock markets would spiral downward. Pressure would build again on the banking system; thus, creating a situation similar to the Lehman Brothers bankruptcy in September, 2008. Our stock market could drop substantially under this scenario.

SCENARIO TWO: The efforts initiated by worldwide central banks on November 30th and the subsequent announcement of a closer fiscal union are just the first two moves in a series whose end result is to build a lasting solution to the festering problem in Europe. Germany MUST play a big part in this scenario by placing its impressive cash reserves on the line. If Germany makes a clear commitment soon to do this, the U.S. stock market will be poised to propel stocks to a much higher level.

So, how do you invest in this time of high uncertainty? I recommend the following, depending upon which category fits your unique circumstance:

1. Aggressive investors, moderately aggressive investors, and investors who do not intend to touch their investments for 10 years or longer – invest (now) one-half of the money you had “parked” on the side-lines. Invest the other one-half gradually over the next 7 months as you continue to gather more information, and carefully watch to see if Scenario Two unfolds.

2. Investors who need to withdraw from the investment portfolio – continue to “park” any amounts you expect to withdraw within the next 5 years in a short/intermediate term bond fund.
 
3. Conservative, moderately conservative, preservation minded investors and investors who with start withdrawing from their portfolio in 5 to 10 years– gradually invest the money you had parked on the side-lines over the next 7 months as you continue to gather more information, and carefully watch to see if Scenario Two unfolds.