| Not a Big Deal |
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| Written by Jeff Hybiak | |||
| Tuesday, 19 April 2011 05:00 | |||
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Yesterday's announcement by S&P that they downgraded their outlook for US Treasury Debt caused quite a bit of anguish yesterday. The stock market posted a big loss, although it closed well off the lows for the day. This was the top story throughout the day. This lead to an unusually high number of phone calls and emails to our office asking what we thought about the news and if this would be the catalyst for a large correction in the market. Since I've been quite vocal about our country's fiscal situation for many years, my answer may surprise you.
In my view this is actually a positive development. I've been quite vocal that the debt financed "stimulus" has cost much more than it has been worth. Consider:
This warning from S&P will hopefully get the stupid people in Washington to stop fighting over the bar tab and begin focusing on changing the direction of the ship. The more Americans are aware of our debt problems, the sooner we can get out from under them. (I am concerned that the Obama Administration is only talking about reducing the budget deficit and not about actually balancing the budget. Perhaps they have forgotten that in the late 1990's our country actually survived on a balanced budget.) There are plenty of things to be concerned about, but a warning from a ratings agency that completely missed the housing collapse isn't one of them. Yesterday, I highlighted 5 things we need to remember as we move into summer. Those 5 things will be a big deal at some point, which will be a problem for buy & hold investors. Investors are obviously on edge this year. Yesterday was the 6th time this year the market lost more than 1.5% in a single day. For now, the market got rid of some weak holders yesterday, tested the support area around 1295-1300 and continues to work on a potentially bullish breakout (click here for chart). The comments and posts published in the SEM Trader's Blog ARE NOT investment recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk. Investing in the stock or bond markets involves risk and may not be suitable for all investors. Before making any investment decisions you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with your investments and seek advice from an independent financial advisor if you have any doubts. All investments involve risk including those managed by Strategic Equity Management. Opinions expressed at www.stratequity.com are those of the individual authors and do not necessarily represent the opinion of Strategic Equity Management or its management. Any opinions, news, research, analysis, prices or other information contained on this website, by Strategic Equity Management, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. Strategic Equity Management will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. The use of this website constitutes acceptance of our user agreement. Past performance is NOT indicative of future results.
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