PANIC – 1987, 1929, Or Different ??? – 08/08/11 © ™

  • Short Term
  • July 7, 2011 – Present
  • Step 2 Down Underway 
  • Action Status – Sold

In 1987 and 1929, every day was worst than the preceding day. Today we are following in the same direction.  After hours tonight the SP500 futures are down 28 points (00:15 Tuesday EDT).  That makes me think that tomorrow is going to be worse than today.  Climatically speaking, we could be heading towards a 1,000+ point down day. If a day like that isn’t a climax, we could be in real trouble (as if we aren’t in trouble).

The problem is not with the downgrading of the debt of the USA.  It’s Europe and our banks.  Beyond CDS in our banking system, I’m unsure what’s bothering our banks.  They don’t own a significant amount of debt from the defaulting countries, so that’s not the problem.  But the problems in Europe are akin to our terrible problems of 2008.  To make matters worse Europe doesn’t have a Federal Reserve System that has the power to rescue financial markets.  The ECB is structured totally different and is actually powerless to save the day.  The market collapse seems to go far beyond the fact that Europe will be slowing down economically.  There are things going on behind the scenes and the story usually surfaces close to the end.

The FED meets tomorrow and if they don’t have an ace up their sleeve, things are going to get uglier.  Today President Obama held a news conference and the markets were expecting something of substance.  There was no substance, disappointment set in and the markets spun further out of control.

At this moment, those in cash should sit by and wait.  It’s the old Wall Street axiom to not catch a falling knife.  There should be bottoming action before you would recommit money to the market.  Those who continue to own stocks have a terrible decision, continue to hold or sell near the bottom.  I’m glad I’m not in that situation because I like to sleep at night.  Every seasoned investor has had to make those ugly decisions at some point.  It’s not something you want to repeat.

Gold continues to surge higher, up over $40 tonight and on its way to $1800.  It has become a refuge for fear.  Investors don’t know how the problems will work out, so they retreat to gold.  It was about $100 lower just a couple of days ago.

Today’s figures were on par with the plunge into March 2009 but not as bad as October 2008.  Since Monday was not climactic enough, Tuesday will have to fill the bill.   If not, things could get worse.

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