Smart Money with Keith Springer Saturdays at 1PM and Sundays at 6AM on NewsRadio KFBK 93.1 FM and 1530 AM

Critical Economic and Market Commentary 07/07/10

 Market Update

  • The next downturn will be much worse than expected. This is a market of extremes. The simple expected “double dip” scenario is much too sanguine.
  • Bad news is now the trend, and news are like cockroaches…it keeps popping up everywhere and worse than before!
  • The wheels are coming off of the recovery, and deflation is on its way. The Fed tried to create growth and failed. Their ability to deal with deflation is limited. They have pumped massive amounts of liquidity into the system, driven short term rates to near 0%, supported the fixed income markets and propped up the financial sector. Unfortunately, bulk of this liquidity is still sitting idle while banks deal with any number of economic and regulatory issues, including the necessity of raising more capital.
  • Unemployment is going the wrong way. The country doesn’t need more workers, period. It needs demand, and that will not happen until the Boomers have long since retired and the Echo-Boomers start spending some of their inheritance.


 

  • Short term, the market is very oversold and way over due for a rally. Sentiment is way too negative. A strong rally here on good volume could be very substantial and make people forget about the dangers. Don’t worry, we won’t!
  • Investors should sell into rallies and be out of stocks or market neutral before the GDP release date on July 27th, which is likely to come in much lower than expected, and will completely unhinge the stock market.
  • Corporate bonds and dividend paying stocks are still attractive.
  • We remain open minded, participating while preparing. The market has a way of surprising.

 Regards – Keith Springer

Smart Money

 

 

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