Author: Gary Harloff

Covestor model: Opportunistic ETF

The sky is falling! But no double dip!

The banking/Greek/European sovereign debt crisis hit the U.S. again in August. Reuters on August 24th reported that Greek two-year government bond yields rose to 42% (“Greek 2-year bond yields hit euro-era highs” Reuters, 8/24/11 http://www.reuters.com/article/2011/08/24/markets-bonds-euro-idUSL5E7JO1BC20110824) Meanwhile in the U.S., 10-year bond rates fell hard from the end of July to end of August 2011 as equity money flowed to “risk-off” safety. And the S&P500 simply collapsed during this period.

Sound like a triple bottom?

This all happened after the Washington game-of-chicken raised the debt ceiling at the last minute, and after Standard & Poor’s lowered the U.S. debt rating, even with a $2 trillion accountancy error. Government ire may extinguish S&P - similar to Arthur Andersen’s demise.

Our believe is that a recession isn’t probable until short-term rates exceed 10-year rates. Thus we don’t see a double-dip recession at this time.

While gold is one of the few assets in our assessment with positive momentum, our analysis does indicate to us that the market has bottomed, though some of our indicators are not consistent with that equity recovery hypothesis.

This is a fast moving market. Because the markets can turn quickly, be ready. May the market be with you!