Near 400 point drops tend to rattle most investors and traders nerves. I took the day to do some other activities and came back after the market closed. Not to act like I never worry, but when I got up this morning and surveyed the scene I could almost sense this drop coming. Investors are concerned with good reason that Italy is in trouble. Frankly if Italian bonds stay above 7% they really are in trouble. Not only will that make it harder for Italy to sell government bonds, it will make it much much harder to pay the interest on those bonds. Above 7% Italy frankly does not have the cash flow to make it work, yes it is that tight budget wise there. Europe is putting off the day of reckoning and no one knows what to do to protect assets if you have interests on the continent. Note that we are seeing what will happen in the US in a few years if we do not get our house in order too. Anyway I frankly do not know what is going to happen in any of these countries other than Greece will sooner rather than later default and that will happen in my opinion before Christmas. For the other peas in this sorry pod Spain and Portugal will likely default too, but Italy is the biggie on the count right now. Add in that France is next up to bat and that is what makes markets go down 400 points in one day.
I have a post coming soon about the US economy, in which I will opine some positives. However if Italy gets in real trouble here all bets are off. Smart investors now are looking for safe yielding investments and I again give you two. One, look for US states that have solid AAA ratings and have shown some understanding in getting their house in order. Two, there are many rock solid corporations in this country that pay good dividends and will survive most any problems in Europe. Example I would gladly trade any US treasury measly less than 1% yield for McDonalds 3% rock solid yield. Almost every stock I own in the hedge fund was off less than 75 cents today and that is why I tell you US blue chip companies are safe havens.
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