With all of the hysteria regarding Standard & Poor’s downgrade of U.S. government debt, and the blame game going on by the talking heads (Democrats), let us remember that it was the president and Democrats who spoke about the government defaulting, not the tea party. And we must not forget that there was absolutely no chance for default, so the reaction of S&P was in response to the Democrats themselves. Personally, I follow Weiss Ratings, which downgraded Treasuries about two months ago. I started following Weiss Ratings, which boasts the most conservative rankings, about 20 years ago, when the major insurance firm Executive Life failed. All the rating agencies had Executive Life at an A (or higher) the day it filed for bankruptcy – except Weiss, which had Executive Life at the lowest ratings. Since then, I have monitored Weiss’ ratings, and they have been very helpful.
It is unbelievable that the markets have reacted as badly as they have. We should be seeing a rally very soon, and it should test S&P’s 1250. If we surpass that benchmark, then we should see 1350 to 1400 on the S&P. Gold has risen past $1,700, and it probably will correct from here, as should silver. Oil has dropped well below $85. We will need to watch trading action for a while to assess where oil is headed. It could very well be that oil has reached its high. The dollar has been hit, but is still above its lows, so we need to watch the dollar as well. Interest rates have dropped dramatically for the 30-year Treasury, even in the face of the S&P downgrade. The Federal Reserve will probably discuss a likely QE3 (or quantitative easing #3), which should drive the stock market higher and interest rates higher, too. The real estate market is still falling, and the economy – except for the latest jobs numbers – continues to be extremely weak, except for the upper 2 percent income bracket.
Recently, I had the misfortune of watching “Morning Joe,” and New York City Mayor Michael Bloomberg was advocating for a 10-year, $200 billion infrastructure investment by the federal government. That’s a $2 trillion expense over 10 years. Well, it was a great idea, but nobody asked the obvious question: Where will the money come from?
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