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

Stocks Watch the Shores of Tripoli

- Buy the dip or finally the correction

Investors are nervous this morning as they eye the escalating violence in Libya. Although , Tunisia, Egypt or Bahrain were first, Libya’s a major oil/gas producing nation unlike the others. This has heightened concerns about oil supplies and pushed European and Mideast benchmark prices over $110 per barrel. Luckily at home, the West Texas Intermediate benchmark price is “only” about $93. The concern here is that higher oil prices can do three things:

  1. Drive up worldwide inflation
  2. Threatens political stability in neighboring countries….and Wisconsin
  3. Bring another global recession which it did last time when it went to $160 a barrel

 

Other news was not much friendlier for the markets:

–       Moody’s lowered Japan’s sovereign debt outlook from stable to negative.  Moody’s said that if Japan’s public debt continues to increase and fiscal reforms are not adopted it will cut the rating. This followed the recent downgrade which lowered Japan’s rating from AA to AA-.  Right now, Japan’s outstanding public debt is over 200% of GDP, which is the highest among developed nations.  By comparison, US public debt is around 70% of GDP.  Although this seems like Japan is much worse off than the U.S., Bernanke had better be wary of continually adding to the deficit.

–       Home prices dropped again in this morning’s CaseShiller report, declining -0.41%, the sixth straight month in which the index has dropped.  The index is now approaching the lows hit in early 2009, when the recession was at its worst.  The year over year decline in the index (December 2009 to December 2010) was -2.38% and over the past three years, the index is off -22%.  This is a big concern because it not only shows no life in the housing market which is critical for a sustained economic recovery, but that there is absolutely no asset inflation and only food inflation in our economy. This means the federal reserve actions are causing only higher costs without the benefit of increased wealth.

I suspect this will prove to be another buy the dips opportunity and not a reason to sell. However, once the Quantitative Easing program finally ends, stocks will be in for a rude awakening. The bubble continues, so ride the wave but beware of the incoming Tsunami.

Regards – Keith Springer

Springer Financial Advisors ("Advisor") is a federally registered investment adviser located in Sacramento, California. Advisor and its representatives are in compliance with the current filing requirements imposed upon registered investment advisers by the Securities and Exchange Commission and the State of California. Advisor's web site and its emails of general distribution are limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of Advisor's web site on the Internet or dissemination of informational emails should not be construed by any consumer and/or prospective client as Advisor's solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet. A copy of Advisor's current written disclosure statement discussing Advisor's business operations, services, and fees is available from Advisor upon written request. You may also obtain publicly available information about Advisor through the SEC website as follows: http://www.adviserinfo.sec.gov/IAPD/Content/Search/iapd_OrgSearch.aspx. Advisor does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Advisor's web site or incorporated in an email, and takes no responsibility therefore. All such information is believed to be reliable and authoritative but does not constitute sufficient information to be the sole basis for sound investment decisions and all users thereof should be guided accordingly. Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended or undertaken by Advisor) made reference to directly or indirectly by Advisor in its web site, email, or indirectly via a link to an unaffiliated third party web site, will be profitable or equal the corresponding indicated performance level(s). Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client or prospective client's investment portfolio. Certain portions of Advisor's web site (i.e. articles, commentaries, etc.) may contain a discussion of, and/or provide access to, Advisor's (and those of other investment and non-investment professionals) positions and/or recommendations as of a specific prior date. Due to various factors, including changing market conditions, such discussion may no longer be reflective of current position(s) and/or recommendation(s). Moreover, no client or prospective client should assume that any such discussion serves as the receipt of, or a substitute for, personalized advice from Advisor, or from any other investment professional. The information is of a general nature and should not be applied indiscriminately to particular situations wherein it may not be completely applicable. Advisor is neither an attorney nor an accountant, and no portion of the content should be interpreted as legal, accounting or tax advice.