Telegraph Article by Dominic Rossi of Fidelity (CIO of European Equities at Fidelity) -
"Markets have reacted badly to the Fed's policy statement and European sovereign debt issues continue to rumble on.
At times like these, it can be difficult for investors to know what to do.
We should expect news over the next few weeks to deteriorate further. As we go into the earnings season shortly, there will be more missed forecasts and guidance from companies will be uncertain and gloomy. For investors, valuations will come in to play at some stage. Yields will be well covered because balance sheets are strong.
It is clear now that the Fed cannot bail equity markets out any more and any interest rate cuts by the ECB may not have much of an impact on markets. The solution on the fiscal front will be either Greek default or Germany accepting that it has to fund debt restructuring and so reduce the quantity of debt in Greece. This will be a prototype for other European countries.
At times like these, investors should remember the strong get stronger. We will see M&A pick up in Europe. There is little capital around and so the threat for companies from new competition is disappearing.
Markets will have to consolidate so that oligopolies or duopolies are created and the remaining companies have strong cash flow and don’t have to rely on the debt markets. This is a carbon copy of what happened in emerging markets 15 years ago. Equity will shrink as well-financed companies grow by acquiring others and buy back their own equity. In time, this will stabilise equities. "
No argument here. We seem to have a little stabilization today with a few rumors that the G20 would ensure stability and that everything would be just fine. Hopefully we get some more confidence here and we move up to my targets that I outlined yesterday in CLOSED FOREVER. Let's go back to my chart on GLD. If you desire to look back at the August 31st post where I suggested that $162.50 on GLD would be the target for a retest. http://goatmug.blogspot.com/2011/08/charts-to-watch.html. I've updated that same chart with the recent day's action and you'll see that we are right there. Personally, I am willing to take a shot here and go long, but those with bearish leanings might press their bets and hold out for a possible $153 to either cover or begin buying.
I've been an advocate of physical gold for some time and one of my SOH mentors, Market Sniper, has conditioned me to know that drops in gold are opportunities for purchases as the final result of this fiat scheme will highly benefit the shiny stuff. I've called my gold guy and he sounds very depressed and I am adding a few ounces today. Those physical positions get bought and never see the light of day, so as much as I trade around GLD and SLV know that I really have two different perspectives regarding timing and purchases, plus selling physical gold and silver is a total hassle so it tends to stay in the portfolio forever.
As of 9:45 CST gold is getting smacked around and SLV is getting smashed. I am buying GLD here with a short term target of $170. My stop will be $160.
Be Careful cause the weekend will be full of emergency meetings for the financial heavy hitters as they attempt to save the world (again.).
Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/