August 8, 2011
Weekly Market Outlook
By Keith Schneider
Don't panic! It's only a small fire.
The story goes that Nero. Emperor of Rome fiddled while Rome burned, ushering in the fall of the Roman Empire. There are many theories of why Rome, the world's super-power fell into decline. For most historians, the burning of Rome marked the beginning of its descent.
The origins (depending on who one studies) of Rome's descent ranges from over-reaching military objectives, to debasing of coins (by failing to put enough gold, bronze or silver in their coins) , arbitrary tax codes, financial mismanagement, disease and a decline in the education system. Sound familiar?
Although the sovereign debt downgrade of the US was small, the change in trend is an historic event for sure. How far and deep this correction will go is not easy to predict. It certainly has been an ugly past two weeks. Interest rates and gold are sure to rise and the dollar should take a hit.
The 4 trillion dollar question remains, do we, as a nation, have the willpower (like Canada) to reverse this downgrade? It took Canada a record 9 years to restore its AAA rating. One thing is for sure, the US needs the will of Canada to make tough decisions to reverse this. They cut military spending, raised taxes, and reduced entitlements...in essence everything was on the table. It is ironic the agency that was completely comatose during the recent past (when we needed them the most to prevent this crises) makes this move now. I give S&sP a triple FFF rating. Still, however, it's an important wake up call. America, let's choose Ottawa, not Rome!
As of midnight Sunday night the SPY is down 2% but hanging onto Fridays low (a good sign if this holds), and Gold is up 2%.
As a result of the volatility, we will hold a special free webinar TODAY - Monday (8/8) after the close to review the current state of the markets, and help make sense of how you can trade these historic markets!
REGISTER for this special webinar here: Click here to register.
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