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Market Gyrating. Whats next..... Update May 28, 2010
Marc's Notes:
The markets are now reset at a lower low of 10,200 DOW.
This is appearing to be a lower low, lower high scenario where the new direction is down. The BEAR market never really died, we just saw a Bear market rally as it ran from 6,500 DOW to 11,250.
The Euro currency crisis has set the Bear running now and we may be looking at a new DOWN phase. The old adage is SELL IN MAY AND GO AWAY. This may ring truer still.
The Euro crisis was kicked down the road for now with the European Bank deciding to trash the credibility of the EURO by going against its initial rules which stated the Central bank would:
1) Never buy a countries debt outright nor offer direct support of this kind.
2) Never buy a countries bonds directly or loan taking them as collateral.
3) Allow a country to exceed deficit spending more then 3 % of GDP.
All 3 rules are now broken only 10 years into the currency. Now the crisis is quiet for now but it is all up to the bond traders as to when they will start to stir the pot again.
I expect a down draft both in the EURO and the stock market to resume very soon. Many issues may be the catalyst. The confidence could just wane in Greece’s ability to cut spending, the Korean situation, the oil spill, or another event or bad economic numbers in the days or weeks to come.
These reprieves are your gifts to prepare and make changes to your portfolio if you haven’t already done so. Make the changes now. Remember the 1000 point crash just 2 weeks ago and the weakness we have seen since then. These things can happen fast so don’t wait. See past newsletters for positions to take or our Dream Portfolio on the website left hand menu.
Congress is getting long in the tooth as far as what they can spend for many reasons. Rating agencies are threatening to cut the US rating. Americans are getting fed up with all this spending and bailouts. The results from 3 or 4 trillion in money spent by our Government seems to be having only a limited effect, and I will add myself it won’t be enough. Government spending only robs needed capital from the private sector and increases debt. The more they spend, the more they have to take from you. Increasing costs to the US small business base from all this spending is crippling and will continue to cripple small business and is putting us further into the hole. Additionally as the spending stops, the economy slows back down (what we are seeing now) and then more spending is needed, further increasing the debt. In the end, the economy will slow again but then we will have even more debt to boot. Yet unbelievably they will try even more spending when it slows again, saying the problem was they didn’t spend enough.
Didn’t spend enough??!!
It will never be enough because they very premise of government spending spurring a recovery is flawed!
Government spending cannot and will not right an economy. If that was the case, you would never see a bad economy as governments could just spend money to fix it. But you do see bad economies throughout history, the very proof it doesn’t work.
It has been tried many times, true, but it has never worked. NEVER.
We drive closer to the abyss, with the same people that caused the problem trying to fix the problem by using more of the same poison that WAS the problem. Over spending and too much credit.
Anyone see anything wrong with this?
Our Government will not stop this attempt of spending to fix things until either:
a) Congress says no more spending which won’t happen as they all believe the same thing.
b) US citizens say no more spending which won’t happen because there are too many people getting free lunches and they outnumber the ones paying for them.
c) The bond markets and foreign investor says no more and interest rates start to spike (more likely).
d) Inflation appears forcing the FEDS to raise interest rates (more likely) and this will also signal to the government their spending spree has ended as it causes inflation.
We will see which appears but my guess is c or d, most likely c and d simultaneously.
Again, see past newsletters for recommended holdings.
We have also added consulting appointment times for the month of June and July. These allow you to meet with me to look at what you have, ask your situation and make some suggestions as to where you should be. Takes about 3 hours and you only need me once.
We did not participate in the KVMR pledge drive so we have some time in between vacations in the next 2 months. Email JEN here if interested.
All for now.
Be careful. Danger is lurking in this RED ALERT market.
Marc
