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Actions in Euro land will backfire while US still far off from recovery

I could not believe that Germany is banning short trade on Euro.  Read this link: www.bloomberg.com/apps/news?pid=20601087...
Euro is supposed to be a hard currency correct?  Although I do not do short term trading, I do believe the capitalist markets depend on trades both ways to keep the markets liquid.  Such moves will strengthen the belief that something is very fishy about the Euro.  Short term it may help, but long term markets will punish the Euro.

We are entering a very uncertain phase:

1) US stock markets are over extended.  The US stock market has been rising not because of fundamentals, but because people have been driven to it due to zero percent short term rates.  If you must invest, do so with very long term expectations for positive returns, say 20 year horizon.  Vanguard and Fidelity have anonunced ETF trades with zero commissions.  For those seeking to build very long term portfolios this is a good low cost way to dollar cost average in.

2) Fixed income rates from Treasuries are dropping.  The 30 yr. bond was yielding 4.80% on June 13, 2008, before the big stock market crash, but today only at 4.25%.  This is because there is a rush to buy treasuries.  Despite all the hue and cry about the dollar's demise, China now owns more US debt than before the 2008 crash!  These drops in interest rates indicate deflation, not inflation.  For those seeking fixed incomes, if you have been locking 10 year CD's in a ladder, you should be having a CD portfolio well above 5% average returns.  10 year CD's were returning over 5% in 2008 although now only about 3.6%.  A 10 year CD ladder belongs to the safest portion of the portfolio.  Unbelievably, some bond bears changed their tune this week, reversed course and became pro US dollar: www.bloomberg.com/apps/news?pid=newsarch...; Strange how so called experts change their economic prediction such drastically.  Their poor clients must be constantly chasing a mirage while losing money.

3) Gold hit nearly $1250/oz recently on the Euro crises, before backing off as the dollar strengthened.  Since gold is priced in dollars, dollar strength is causing this weakness in gold.  Gold belongs in every portflio, and dollar cost averaging is still the best way to own Gold, platinum and mining stocks.

4) Real Estate is propped up, and prices will come down further.  The government is propping up Fannie and Freddie with bail out dollars.  Fannie and Freddie continue to make loans that will be unpayable.  The winners are the banks who carry no risk.  Al the risk is with the US tax payers.  Result?  These moves will ensure the real estate market will never reflect true supply and demand.  Stay away from new purchases of any real estate unless say it is your primary home and if you plan to keep it for at least 10 years.

5) Unemployment is not solved, no matter what the politicians say.  It is running closer to 20% if you count discouraged job seekers and under employed.  Food stamp use is running at a record high.  Read this: www.katu.com/news/93988244.html. 

What's next:  As I wrote earlier, unless there are major breakthroughs, I do not know how unemployment problem can be solved.  The manufacturing jobs gone from the US are really gone forever.  I'd like to think of a way to end this article on a positive note.  The massive bailouts in 2008 did prevent the banks from going bust, and in the short term may have prevented social chaos in the US.  But this kicking of the can down the road needs to stop.  Somehow our younger generation will very soon create new distruptive technologies and products that will put us on a growth path, on a road to new revenues and make the US a world leader again.  That is really the only way out of this mess.

Disclosure: I hold all the recommendations made in this article: CD's, Gold, mining shares.  I may be taking new positions in Vanguard and Fidelity bond and stock ETF's



Disclosure: Long CD's, Gold, Precious metal and mining shares