On a day that found little good in the news, Standard & Poors delivered the biggest blow by downgrading Italy’s sovereign debt, citing “weak economic growth” and a “fragile government.” Add to this the troubles in Greece, Spain, and Portugal – not to mention France and a frustrated Germany. Europe is in big trouble right now. Investors take serious note.

The Dow closed down to 11,401 today. That’s slightly above the action zone’s midpoint, with long term indication pointing directly at recession. Prepare for it. And remember, it’s never too late to act.

These are times when you must be comfortable with your investments, your asset allocations, and the condition of the market you are investing in. Pare down. Take profits. And when there is a currency crisis, protect your money with gold, reduce your exposure to financial stocks, and keep your eyes open.

Too much debt is driving Europe into bankruptcy and the US government seems hell-bent on following them off the cliff. Today, President Obama announced a plan that promises to cut the deficit by $3.6 trillion over ten years (that’s $360 billion per year.) He also promised to veto any bill that cuts Medicare without increasing taxes on corporations and wealthy individuals. Even though several of Mr. Obama’s prior promises have fallen short, I have just these two points to make.

  1. $360 billion in savings doesn’t turnaround a trillion dollar problem. A budget surplus is required to pay down debt. In order for that to occur, the US government must cut $1.5 trillion from this year’s budget – and more than $1.1 trillion from next year’s. President Obama is thinking too small here.
  2. And let me get this straight, the President will cut Medicare “only” if he gets “more revenue.”

Huh? Are we actually going to cut benefits to seniors only if our government raises taxes? Why would Americans ever agree to another tax hike again? Heck, they lead to worse benefits – when you need them most!

Listen, this government has spent $6 trillion to right the economic ship and it hasn’t worked out. They want another $500 billion this year, to raise taxes, and to cut Medicare in exchange.

No thank you.

These are not good investment times…


PS: Almost 100 million Americans own mutual funds. Raise capital gains taxes on Warren Buffet and you will also raise taxes on another 100 million Americans. Is it worth it?

I say no.