LTG GoldRock Insider Report Review

LTG GoldRock Insider REVIEWS

The below is a sneak peek into one of the topics discussed in the GoldRock Insider Report for October 9th 2013

Self interest hangs the Global Economy by a thread?
 
 If you can believe it Wall Street and senior economists and analysts are no longer talking about a 1 in a million chance of the US defaulting on its debts, they are now talking about how long the debt default may last and how best to ensure markets are protected from any major fall out.

The Dow Jones again closed down 150+ points dragging back down risk assets and the US Dollar slid back lower against the JPY and CHF as the USA stepped one day closer to either a last minute deal or a complete default. What traders fear the most is that if a default happens, markets will lose all confidence US Treasury market which is the largest bond market in the world. If the US Treasury Department can't pay its bills on time then financial markets are going to go into a tail spin.

Boehner from the Republicans says the President’s position is untenable refusing to negotiate on the US Budget and Obama Care. Obama says he is unwilling to hold talks and negotiate while the Republicans use Obama Care and the budget as a means of leveraging an outcome for the betterment of the Tea Party and a minority group. So the stale mate continues.

But will really happen? What are the real odds of a US Default? A week ago everyone was saying it was a one in a million. Well, I still think it’s a one in a million chance, but that's still a chance and people win the Lotto on worse odds than one in a million and the mere fact they have defaulted 3 times previously, albeit for only a few days back in 1979 means it could and it might just happen.

Self interest is what is at play here. The leader of the Republicans is the Speaker of the House and if he backs down from his stance on Obama Care he'll look weak and with Senate elections next year the Republicans are not wanting to lose  seats in a House they control by backing down now on something that is not particularly popular with the American people.

Obama will look weak if he backs down and frankly I don't blame him for holding his ground. He ran for President last year on the Obama Care bill, was voted overwhelmingly back into office by the people, the bill was passed by both the Senate and the House and it was signed into law by the President. Now the Republicans want to say America can't afford it after voting for it. Its "open for business" on the new health care program and "closed for business" on the economy and government. Gosh, this looks like an old golf club committee gone mad.

As I am a betting man (every currency trader is) I think they will do a last minute deal but I mean "last minute" and it won't happen until we are just hours away from resurrecting the GFC from the grave and giving it another run. Markets will remain nervous as hell and currencies and commodity markets will be volatile and its times like this experience and a process driven approach pays dividends in the long run.

As Gary likes to say, "you don't get your pants too wet" if you play a straight bat. Swing too hard and you'll end up with egg on your face and very wet pants.

Australia plans to sell $60 billion dollars worth of its own bonds (debt) in the coming 12 months and recently there has been a distinct lack of interest in the market to buy Aussie Bonds at Auction and a preference to buy US debt. That might change if the market loses faith in the US Treasuries and with interest rates at 2.5% in Australia and a relatively stable economy and government the Aussie Dollar would be the benefactor long term if markets abandoned US Treasuries on fear they won't pay up in future. This would only make the RBA's job even harder to try and get the Aussie Dollar down and economy back on track.

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