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D&D Note

D&D Note (5-16-2012) ~ Fiscal Cliff 2.0

D&D Note (5-16-2012)

If the Federal Reserve is worried about Congress not being decisive, then so should every investor. The United States has never defaulted on its payments, but yet again like last year we have another fiscal cliff (call it 2.0) coming down the road in 2013 in regards to the federal budget.

Sadly politics in Washington is coming before the prosperity of the nation. Mainly, but not limited to, Republicans threatening to create grid lock over the budget just to harm Obama’s re-election campaign. SImply put, politics should not come before the US paying its bills.

According to the FOMC minutes, “several members indicated that additional monetary policy accommodation could be necessary if the economic recovery lost momentum or the downside risks to the forecast became great enough.”

To QE or to not QE.

Today the DOW fell 33 points to close at the lowest point since the middle of January. The S&P 500 fell 6 points and the Nasdaq fell 20 points, both indexes closing at their lowest levels since the beginning of February.

The latest housing report did show some optimism with an annual rate of 717,000 in April up from 699,000. Economists had expected a rate of 680,000. The new normal which we should meet by 2014 is around one million to 1.2 million.

Retailer JC Penny (JCP) was down 19.72% today after reporting a drop in sales and eliminated its dividend.

Oil and Gold continued the downward spiral. Oil fell $1.17 to close at $92.81 a barrel. Gold fell $20.50 to close at $1,536.60.

Gold is simply lost in the woods right now, and D&D would not be surprised to see further downside. However, soon it should settle and then resume its bull market trajectory – watch the charts and if you aren’t already in Gold soon we could have a good entry point to begin a position in the physical asset or in the ETFs GLD or IAU.

Apple (AAPL) continues to get sold off leading into the Facebook (FB) IPO this Friday as traders are raising cash to buy Facebook. Don’t be surprised to see this trade flip in the near future or a short squeeze.

 

About ddinvestments

Trading Partner for D&D Investments

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