The economic news keeps coming in flat or declining. Consumer
spending was flat in August.
MarketWatch (http://www.marketwatch.com/story/worst-of-both-worlds-high-prices-stagnant-growth-2011-09-15?siteid=yhoof)
noted, “The U.S. economy remains perilously close to the cliff’s edge. On
Thursday, we were hit with reports showing prices rising more than expected,
layoffs rising more than expected, and regional manufacturing surveys in the
Northeast deteriorating more than expected.”
That gave us a 1.7% gain on the S&P 500. I wonder
what would have happened if we had gotten good news?
The press won’t stop talking about Greece and now they
are reporting it as good news, (Europe will bail them out, although it is not certain how), but as John Mauldin
states below, Greece’s problems are far worse than most acknowledge. Here are a few excerpts from
John Mauldin’s view on the credit crisis in his “Thoughts from the Frontline”
weekly newsletter...
“Was anyone surprised that the Greeks announced a state fiscal
deficit of €15.5 billion for the first six months of 2011, vs. €12.5 billion
during the same period last year? What else would you expect from increased
austerity? If you reduce GDP by as much as Greece attempted to do, OF COURSE
you get less GDP and thus lower tax revenues. You can’t do it at 5% a year, as
I have pointed out time and time again. These are the consequences of allowing
debt to get too high. It is the Endgame....they are being asked to further cut
their deficit by 4% or so every year for the next 3-4 years. That ...means
lower revenues and higher deficits, even at the reduced budget levels, which
means they get further away from their goal, no matter how fast they run.
They are now in a debt death spiral.”
My comment: Here in the U.S., Senator Rand Paul is supporting the
“Penny Plan” - cut 1 penny (1%) of spending every year to rein in the US
spending. For that he is branded a
radical.
By the way...the title of Mauldin’s column was “Prepare Now, This
Could Easily be 2008 All Over Again.”
I sold on the 27 July sell signal at S&P 500 1301 and I am
defensively positioned with only a small amount of my portfolio invested in
stocks. (Zero stocks in the 401k.) I am
near 100% short in the trading portfolio.
The
S&P has “round-tripped” back to the level that I established short
positions. I’ve been a little surprised
by the strength of the rally. Unless
tomorrow is a huge up day, I’ll sell those short ETF’s and buy different short
ETF’s later when it looks like we’ve topped out. In that way I can take the tax loss (if I do
have a loss) and still be short. The
IRS “wash rule” says that if you sell a stock, you cannot take a loss unless
you wait 30-days before you buy it back.
I
have not changed my opinion that we will have to retest the 1119 level on the
S&P 500. Greece is only one worry;
the other is the US economy.
The
Navigate the Stock Market analysis remains HOLD. (See the page “How to Use the NTSM System” –
the link is on the right side of this page).
