After weeks of drama, what do you know, everything seems to have worked out just fine…in terms of the impact on stock markets anyway.
As for the longer term impact on the US and world economies, well, who knows. As the phrase ‘longer term’ implies, it may not be for a long time before the full impact becomes apparent.
Thinking about the long term is fine. That’s why we recommend owning gold. Gold is your long term insurance policy against the ultimate destruction of the paper-based monetary system.
But as we’ve explained in recent weeks, don’t forget the short term. And right now the short term outlook tells us not to miss out on this opportunity to buy stocks as the torrent of money continues to flow into the market…
We’ve taken and we continue to take a lot of stick for our stand on the stock market.
From the start of this mess we’ve told you not to panic. We told you not to sell your stocks.
In fact we told you to buy stocks.
Why? Because we knew that what happened overnight would happen. That politicians on either side of the aisle wouldn’t have the guts to go through with their threats if that meant the US government defaulting on its obligation to pay bond holders.
So yes, we’ll say it; we told you so…
To be honest we found much of it amusing. Even up until last night the mainstream drones really thought there was a chance the US government would default.
Bloomberg ran a story effectively saying a default was almost certain: ‘Treasury Paying $120 Billion in Bills Doubted as Fitch Warns‘.
When we read that, even we wavered in our conviction…for about 10 seconds, until we realised that news story was a bunch of junk.
The story claimed:
‘Investors holding $120 billion of Treasury bills coming due tomorrow are increasingly worried that they won’t get paid.
‘Rates on the bills, maturing the same day that Treasury Secretary Jacob J. Lew has said the U.S. will exhaust its borrowing capacity, rose as high as 0.37 percent yesterday before dropping to 0.13 percent today, according to Bloomberg Bond Trader prices. The securities, issued a year earlier, traded at a rate of negative 0.01 percent as recently as Sept. 26.‘
We don’t doubt the notion that investors were worried. The bond yields clearly showed that. It shows you that many investors preferred the certainty of getting back less than the bond’s face value rather than waiting a couple of days and facing the risk of holding an asset the government may not honour.
So for all urging that you shouldn’t sell and that you should even consider buying, when faced with news stories like that we get it if you didn’t have the confidence to stick with the investing gameplan.
But now that it’s over – at least for now – we’ve got another question for you: Now what’s stopping you from investing?
You may have seen us use the term ‘paralysis by macro-analysis’ before.
What we mean by that is some investors become so caught up in analysing the big picture that they become unable to make an investing decision.
No sooner with the debt ceiling drama be off their radar than they’ll find another drama to worry about. Another drama that will make them too petrified to invest.
As we’ve said before, we get it that the world economy is pretty hairy and volatile right now. Don’t for a second think we’ve got our head in the sand thinking everything is fine. If you’ve read Money Morning for long enough you’ll know that’s not our style.
We just worry that fear will paralyse some investors so much that in ten years they’ll wonder why their retirement nest egg is so tiny. Then look back at the hundreds if not thousands of missed opportunities.
And believe us, there are plenty of great investment opportunities on the stock markets today. Even as bullish as we are, we see missed opportunities all the time. There are stocks we know we should have spotted, but we didn’t.
But there are stocks we did catch. Such as the Aussie biotech stock that we recommended in Revolutionary Tech Investor in July this year. Already it’s up 41%…even though many investors fled the market for fear of a US government debt default.
Or there’s the groundbreaking US 3D printing company that’s gained 20% since we recommended it in June…again, despite the fears of a US debt default.
You see, this is an important lesson.
Just because the wheels stop turning in Washington DC it doesn’t mean the wheels stop turning on the broader economy.
If anything the private sector wheels should turn faster. There are fewer inspectors and bureaucrats and ‘jobsworths’ interfering and messing things up.
Just to repeat, we’re not saying there’s a clear path ahead for stocks. The deal in the US is only a brief reprieve until early January for the budget and early February for the debt ceiling.
But with Dr Janet L Yellen set to squeeze into the hotseat at US Federal Reserve chairman next year we’re certain of one thing. The last thing the doctor will do when she takes over is anything that will add more instability to the market.
That means more money printing and a higher market. It looks as though we’re on track for our year-end target of 6,000 points for the Australian market and 7,000 points in 2015.
This is no time for investors to sit on the sidelines as this bull market rally gathers pace.
Cheers,
Kris+
From the Port Phillip Publishing Library
Special Report: UNAVOIDABLE: Australia’s First Recession in 22 Years