The Meaning of Austerity…………..close enough at 1386.85
I talk a lot about the long term trend toward austerity which is basically about deficit reduction brought home to all of us personally. It is in Europe already and it is headed our way. So the debate should be more about the kind of austerity that is headed our way.
To me the biggest factor is the elimination of factors that have promoted speculation since the early 90’s and finally reached the man on the street in 2003 when the combination of the Fed and the Banking industry promoted higher home prices and equity draw down loans. Those repurcussions have still not played out.
Another aspect is how balanced the austerity (deficit reduction programs) will be, will they increase revenue by tax, medicare and social security reform or will they be skewed against the people without lobbying power. One kind of austerity will be a positive, another kind will be negative.
In any case, the mad money that pays too much for anything, stocks, gold, houses, gas, farmland, you name it, the speculative edge will go away.
Update at 1:30 PM CDT: The S&P high so far today of 1386.85 is close enough to the rally objective of 1387, so we added 20 percent to our short stock position.