Folks, as I write this, the yield on the 10-year is 1.7%, and the reason is because there is a ton of confusion out there in the marketplace. So much, in fact, that people are willing to go into a net-negative interest rate situation (at least for the short term) because of the uncertainty with equities. Every portfolio manager I’ve talked to in the last couple of days—whether they’re sitting on cash or not—is scared.
As I said on CNBC yesterday, I think there’s a chance that the 10-year yield could work its way down to 1.5% before this is over, but I don’t see it going much lower than that. If it drops to 1%, we’re in big trouble. At that point, we could see the S&P break 200 or 300 points—a quick, hard selloff that clips another 10% off the market. I don’t think it would be long-lived, but either way, that’s why I preach protection. No matter how bullish you are, these momentum events boil down to people’s confidence in the markets—make sure you’re positioned to take advantage of a potential downside move like this.
I’m paying very close attention to gold right now. As much as I wanted to sell up around 1850, I want to buy below 1650. That’s right around the area we were in near the beginning of August.
The stabilization of gold is the key right now. Keep in mind people are selling it not necessarily because they want to, but because they have to. They want to sell Greek bonds, but they can’t—and when you need to raise capital, you sell what you can.
I came across an article in the Wall Street Journal that talked about how more young adults are living with their parents than ever before. According to the Census Bureau, 14.2% of 25-to-34 year olds lived with their parents in 2011, up from 4.7 million before the recession. I have to tell you, folks, as the father of two kids right around that age, that concerns me.
When I finished college, I was 22. I immediately got a job. Two years later, I was married. A year after that, I had my first child. That was the way it was done in those days, but people today can’t afford to get married and start a family at that age. How can you settle down without a job?
Not only is this administration creating an environment that’s hostile to business and job creation, he’s creating an environment that’s hostile to the American family unit. The ancillary effect of the terrible policy that’s come from the liberal elite in Washington ancillary is a new lost generation—a generation that’s spinning its wheels, deprived of the basic human experience of settling down, creating a loving, nurturing home and starting a family.
Quickly before I go, Alan Rohrbach, president and lead analyst of Rohr International, called into the show today. Alan correctly predicted this break in equities earlier this week, so I’m paying close attention to his opinion. Alan says 1090 is the key support level in the December S&P 500 futures contract. If it doesn’t fall below that, it could snap back. He also says that with all this volatility, it’s prudent to stick to major levels—don’t try to dance in between.