This week Jerry discusses the results of the third quarter. He analyzes the winners and losers as well as outlines his views looking forward. Find out more “Next Week on Wall Street.”
Click on this link to listen to this week's market comments: http://yourmoneytalks.podbean.com/2011/09/30/tough-quarter/
The economic news is becoming more dismal every day. This morning’s jobs report showed that was no new jobs were created last month. Unemployment remained at 9.1% because they only count the people who are actively looking for work. When jobs are not being created many stop their search. All this just before the Labor Day Holiday – enjoy your weekend!
The overall data suggests that the economy is stalling. News from Europe is actually much worse than it is over here. Germany is slowing and Greece may be done with austerity as their leaders have had enough with their economy contracting over 5% this year.
The bond market is rallying and Pimco’s Bill Gross capitulated early this week stating that he should have owned more US Treasury Bonds. The Fed is doing battle internally as the recently released minutes of the last FOMC meeting demonstrated. Some voting members called for immediate action to restart the bond repurchase program (QE3), while others felt that even the promise to keep interest rates low until mid-2013 was too aggressive.
The fact that the first two rounds of quantitative easing did not help the "real" economy is beside the point. The Fed’s job is to protect the banking system and apparently the stock market. The Fed seems likely to use today’s weak jobs report as a reason to launch another round of easing. At least initially the bullish crowd will be happy.
The Fed appears to be running out of tools to battle today’s issues. Europe is a powder keg with potentially dangerous results coming from the mix of bad economic news and debt problems. Avoiding too much stock exposure, at least temporarily, is most likely a good idea. September and October have a history of being rather cruel to investors.
The prospects for more money printing operations coming from our Fed increases the chance for gold to continue its ascent to new all time highs. Many feel it is too late to join the gold bandwagon, but one look at the current economy and the Fed’s most likely response to it and investors have to ask – what is the Fed going to do? Nothing? Highly unlikely!
Helicopter Ben (as his nickname goes from an article he wrote years ago) has been and will remain true to his moniker. Dollar devaluation in an attempt to create inflation is his goal. Gold will likely continue to rise in such an environment.
The SPDR Gold Trust (GLD) is a good way to invest in today’s volatile environment. Fear begs for safety. Closing at $183.23 today GLD could cross $200 in short order. Use $165.75 as protection should things turn around for the economy.
Click on this link to listen to this week's market comments: http://yourmoneytalks.podbean.com/2011/09/02/no-jobs-for-labor-day/
Click on this link to listen to this week's market comments: http://yourmoneytalks.podbean.com/2011/07/29/rough-week-on-wall-street/
Fed Chair Ben Bernanke is pumping an enormous amount of liquidity into the money supply system. Since the Quantitative Easing Program ended at the end of June, Bernanke has come up with more creative methods of putting money into our economy. He is doing his part to keep the bubble from bursting.
Treasury Secretary Tim Geithner is rumored to want to retire soon. He is furiously making the rounds attempting to push Congress to act urgently before we run short on money in 11 days. This is his one and done moment. He only needs Congress to cooperate.
The markets are not panicked. Stocks are flirting with recovery highs and the bond market is stable. Treasuries are not acting like interest rates are about to go up sharply.
Technically, stocks are at resistance and are poised to break higher should the House, Senate, and the President all agree on a comprise in time. Corporate earnings and even some of the recent economic releases have been quite positive. The trouble is other issues have been dominating center stage.
Europe may finally move out of the forefront with their Greek solution and the tempering of the problems facing other Euro zone nations. If only our leaders could agree that more immediate debt is a good solution, then we too could push our troubles off to sometime in the future.
Markets would most likely go on a tear for the second half of the year. That would coincide with what typically happens during the third year of a Presidents term. If the S&P 500 clears 1370 from it Friday’s close of 1347 – it would target 1483 or even go all the way back to the 2007 all time high of 1576.
NASDAQ is also poised to take off. It closed at 2862. There is major resistance here to 2887. Should it clear that level, the NASDAQ would target 3175 as its next objective. That would get the NASDAQ all the way back to its December 2000 levels.
Like it or not the government will raise the debt limit. If they get it done sooner the markets are poised to go higher. If they wait until after August 2nd, and a downgrade of our credit rating, then this will be a resistance point that forces stock prices lower. We will have a much better picture in a week.
