1) F Fund is in a bubble – We know momentum continues to push the fund higher, we know it will eventually end badly, but we don’t have any idea when.
2) The CBO release a new report stating that our federal budget deficit for 2010 will exceed a mind boggling $1.3 trillion. This is the second largest shortfall in the past 65 years. So while Wall Street is aware the party is over, Washington keeps on partying like its 1999 with an orgy of spending.
3) The market got hammered over bad news that everyone knew was coming, but acted surprised anyways.
Now there seem to be two camps out there. The 1st camp says last week was the wheels starting to come off, a prelude to a coming drop because the economy continues to deteriorate. The 2nd camp says that last week was the impact of the economy hitting the bottom, and was normal indicators of bottoming out. I'm not sure which it is, but the bears have control right now, so the news will remain bad. The truth probably is somewhere in between. If we are at the bottom we will probably drag across it for a while. I fully expect unemployment to go above 10% soon. The political rhetoric continues to heat up as the fall election draws near.
So what's my short-term angle? It is relatively simple. The current set up shows we are still trading sideways in a well defined range of 1135 to 1060 on the S&P 500.
The S&P 500 is currently at the lower end (bottom) of that range at 1171.69. I am a bit uneasy but will stay with the trade as long as we stay above the bottom of that line of support. A break down from there and I will probably take my losses as it would become too painful to hold on. All the other funds will move in relation to this. If the S&P 500 goes up, the S and I probably will too. If the S&P 500 goes down, they will follow.
Stuff I’m watching:
This article hits the overall idea pretty well……..
1) America Won the Cold War But Now Is Turning Into the USSR, Gerald Celente Says – I believe the title sums it up pretty well. We spend decades trying to defeat socialism, and we were gong the same direction all along. Soon the government will be running everything and taking care of everyone, unless we go bankrupt. All other communist states have or will, eventually, and America is no different. American CANNOT pay off all the debt it woes. It is literally impossible. If you think we can, let me hear you plan.
2) 401K selling – Workers withdrawing funds from retirement accounts, 401Ks in record numbers
In the wake of news about a spike in new applications for unemployment benefits comes another potentially troubling sign: A record number of workers made hardship withdrawals from their retirement accounts in the second quarter. What's more, the number of workers borrowing from their accounts reached a 10-year high.
This is concerning because this money will be spent and will not be available for future investments and retirement. This is a troubling sign.
3) Union Bailouts – I was hoping we were done with the bailouts. Union Pension Bailouts Are Coming
This just goes to prove how desperate our political leaders are to stay in power. Look, we are either a free market, or we are not. If we are not, then what are we? In a free market economy there are risks that have to be taken, and you can lose. But in our current environment you take even more risk and not worry about it because no one loses. Who is going pay? We all are, because this is exacerbating an already lethal problem, and is merely kicking the can down the road. If treasuries are in a bubble, then when they pop, more pension funds will be asking for another bailout because they are currently piling into treasuries at record rates.
I’ve got more stuff I will be looking at, but this is all for now.