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As of yesterday the FTSE looks very ugly. It is either the bottom of a small correction or the beginning of a big post US election drop.
Now that he has been re-elected the next Obama-drama is the fiscal cliff.
Whilst it’s actually a ceiling and not a cliff, the problem will be the inability for the US government to borrow money if it keeps spending a $1 trillion more than it taxes/earns.
Only in America is this fight actually going to be real. In the other parts of the West it has simply been lost to the public sector.
The fight is between private and public sector, the state versus the people.
The states of the West are going to keep on spending until the world stops lending. In the process end up with a lien on their citizens current and their future assets, indebting their citizens and then yoking them.
However that’s a way off and for investors the process will give them an opportunity to make good money, because private investors are such a small group they aren’t really worth bothering with.
Meanwhile make the most of the Sipps and ISA’s.
If this is a drop we have started we could easily lose 5%. Not something to get excited about.
In fact we should buy the corrections. At some point, if we avoid the unknown unknowns of disaster, the market will scream off to 7,000 and we will mint it for a time.
The long term trend says we should be at 8,000 so there is plenty of upside, especially as the point will come when inflation will begin to ramp in earnest.
I see this soon happening soon so that means it will come in a few years’ time, as I know things I think should take weeks take months in reality so I adjust accordingly!
Whilst I wouldn’t say I’m a great predictor of politics but I think Obama will be desperate to see his last four years end in prosperity, even if the fall out will be harsh. As such, I’m looking out for Obama with his pedal to the metal on stimulus.
This will determinate the shape of the next four years of market action should he go this route and all you need to know is the general direction to make fat profits.
