Well, today’s news has lifted me out of a self-imposed sabbatical, one that had been designed to reduce my blood pressure and build more patience with the Obama administration. Just look at this chart!
Anyone with eyes to see will note the tremendous volume at (after?) the close, to bring the number back above that precious 10,000 level. It appears that the low of the day was 9998.03, according to Yahoo Finance. Isn’t that extraordinary?
Looking ahead, the questions are many:
How many times can the PPT play this game?
When does Bernanke run out of paper to manufacture Geithner’s dollars?
When will interest rates begin to rise, to start mopping up the excess?
What happens to price levels when those rates rise?
What effect will Ben’s 2nd mop-up tool, increased reserve levels, have on bank lending?
Will increased interest rates, coupled with less dollars to lend, bring stagflation?
What will the US manufacture for export to bring about a trade balance with China?
When does the ratio of Government employees to private become excessive?
There are enough there for a final MBA exam! I will not try to answer them, but I think you can see where it is leading. The world markets are facing an historic level of uncertainty - - - from the Middle East to 1600 Pennsylvania Avenue, where the new occupant appears a bit more undressed with each public utterance, (and they certainly have been frequent).
But there is hope with that latest gift from Massachusetts. However, much still remains in doubt, and the future appears cloudy at best until we, and the world, get the results of the November elections. Meanwhile, what is a diligent investor to do?
If you do not have an anchor to windward (such as SDS) in your portfolio, it is not too late to add one. Expectations here are for a continuing slide ( think ping pong ball bouncing down a stairwell). The momentum is down, and the immediate floor is somewhere around 9,000. Keeping in mind all those questions above, there could be several more 4-digit floors, all the way to 7,000 – 7,500.
As for growth, we like any ETF(or CEF at discount to NAV) that represents the economies of India, China, Brazil. These come immediately to mind:
IIF, IFN, PIN, GXC, FCHI, BZL, EWZ
Those investors seeking regular income should be looking at some of the MLPs that are down in price tonight, but have fairly steady dividend records such as CPNO, LINE, MWE, TCLP. And for the longer term, a foundation of some TIPS should enhance future results.
It will not be smooth sailing from here on. Don your foul weather gear, strap on your life-line, and prepare to ride out the storm.
Disclosure: Looking :IIF, IFN, PIN, GXC, FCHI, BZL, EWZ. Holding:CPNO, LINE, MWE, TCLP
Disclosure: Long:CPNO, LINE,MWE,TCLP