"Political gridlock in Washington D.C. has to be resolved within the next 60 days. The debt ceiling must be raised and government agencies need to have funding authorized through a Continuing Resolution by mid-October, or the U.S. government will be effectively shut down. The last time this situation arose was the summer of 2011. During that time, the Dow Jones shed 2,000 points in just 30 days. It would be prudent to anticipate a similar result from another round of government gridlock. " "Finally, the Fed still believes the size of its balance sheet determines interest rate levels. Therefore, it may start to gradually bring down the level of its monthly asset purchases toward zero beginning next month. However, the mere threat of tapering bond purchases has already caused long-term rates to spike over 100 basis points. The 10-Year, which is now yielding 2.77%, helped send business spending and home sales crashing. Durable goods dropped 7.3%, and capital spending fell 3.3% in July, while new home sales plunged 13.4% in the same month. A significant reduction in the Fed’s asset purchases will send the benchmark 10-Year Note towards 4%, which will cause the economy to fall back into recession. Investors must realize that any one of the number of factors listed above could send this over-valued stock market much lower. Nevertheless, Wall Street continues to promote the fantasy of a second-half economic rebound, and is currently pounding the table on stocks and saying, ‘stocks are headed higher.’ In sharp contrast, I recommend going into cash and owning physical gold and silver as insurance against the imminent turmoil and chaos which is going to take place in global markets."
Posted on: Sun, 01 Sep 2013 07:41:44 +0000