Italian Debt Problems: Is Another Market
Wipeout Coming?
The Dynamic Wealth Report
November 10, 2011
by Justin Bennett, Editor
October was surprisingly good for the markets…
Signs of a resolution to the Greek debt crisis sent stocks surging last
month. In fact, the Dow is up a sweet 15% from the lows of October
4th. Hopefully you took advantage of the opportunity to pick up
undervalued stocks like I suggested in this
article last month.
And now it’s November which, along with December and April, is one of
the markets seasonally strongest periods.
-------------Sponsor-------------
Where Can You Turn $300 Into $1.3 Million Right Now?
Our own small-company specialist, Robert Morris, has found a
way to 'sniff out' tiny penny stocks on the verge of a major breakout. And
the timing for this has never been better.
You see, the system takes advantage of an obscure SEC regulation that
sends penny stock prices through the roof.
We've seen some stocks gain 852%... 5,450%... even 17,496% in no time
flat.
Click here
for the details...
-----------------------------------
In fact, according to Bespoke Investment Group, the Dow has gained
an average of 1.22% in November over the last 50 years. And over the
past 20 years, the results are even better with the Dow up an
average of 1.7%.
On a seasonal basis, it’s a great time to be invested in stocks.
Historical odds are in your favor to catch nice returns as 2011 draws to
a close.
But don’t load your portfolio with stocks just yet!
Unlike years past, there are some decidedly ugly economic issues the
market has to deal with.
For example…
Now that Greece appears to be taken care of, Italy’s debt problems are
coming into focus. In fact, the Dow plunged 3% Wednesday on news of
Italian bond yields surging above 7%.
That’s really bad news.
Why?
Yields at those levels mean Italy may not be able to roll over its debt
at affordable prices. And that means Italy’s economy (Europe’s third
largest behind Germany and France) may need a bailout, just like Greece.
But there’s one big problem…
There’s simply not enough money in Europe to do it. Italy is simply too
big to bailout…
Remember the problems Greece caused for the markets this summer?
Investors knew Greece could be bailed out if it came to it (which it
did) and it still caused huge market dislocations.
With Italy, there’s no such luxury…
If Italian bond yields continue running higher, you can forget about a
year-end rally in the US stock market. In fact, with Italian 10 year
bond yields surging above 7%, there’s a distinct possibility of another
market rout- a wipeout just like we saw earlier this year.
So what should you do?
If you caught the rally from the early October lows, just sit tight.
It’s still possible the market can work through Italy’s debt issues
without losing too much ground.
There’s even a chance of a market-favorable solution to Italy’s
problems. In which case, stocks are highly likely to rally into
year-end. At that point, you can add to stock positions you bought in
early October. Then you’ll be positioned nicely rolling into 2012.
On the other hand, if things get worse in Italy, be prepared for another
big market downdraft…
Now I know that may sound scary, but whatever you do, don’t freak out.
Panicking when markets drop is for amateurs. Pros look at uncertain
times like these from an opportunistic viewpoint.
Just make sure your downside risk is in check and get your shopping
list ready. You could get another chance to pick up deeply undervalued
stocks in coming months.
Bottom line…
No matter what happens, you can expect plenty of gut-churning volatility
as 2011 draws to a close. And even though we’re heading into a
seasonally strong time of year, Europe’s debt situation will take center
stage.
Share This Story:
Print
Page
Bookmark Us
Home | Whitelist Us |
Terms of Use |
Privacy Policy |
Contact Us | Security |
Site Map