Austerity….Good or Bad ?

The easy answer, it depends what the basis of your life is…is it wealth or is it something more.  Wealth in terms of inflated assets is about to take a hit and the two most vulnerable sectors are precious metals and farmland.  Real estate, stocks, and commodities have already taken a little hit are are due for more eventually but the real action is now going to be in the areas mentioned.  

 Today in early trade the 1218 support area on the S&P is being tested.  Will the market go down through the 1070 October low, I think not now.  What really needs to happen between now and the end of the year is a breakaway of precious metals from stocks and the Euro, the breakaway from the dollar is already well in place.  Since August we have been warning that this will happen.  In a sense it really hasn’t yet, just a slow fadeaway of gold losing to stocks.  Some of the commodity pundits, have started sounding warnings over the past couple of days but the plug has yet to be pulled.  If the S&P drops through the 1218 support area and declines to 1100, we should see gold hit the $ 1266 area we mentioned earlier this week, a drop of 2:1 versus stocks. 

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