The PIIGS are Portugal, Ireland, Italy, Greece and Spain.  All of them are in debt up to their eyeballs like California and a bunch of other states.  Other countries not far behind are Austria, Singapore (city state), Dubai, the United Kingdom to name a few.   Greece has been the flash point.  The Greeks want the EU and largely Germany to bail them out.  The EU Monetary Union and the Euro currency hang in the balance.  The Germans and EU have told Greece they will not do anything unless Greece takes austerity measures.  The Greek government workers unions and other unions are saying no.

The problem for the United States is the ten biggest banks in the USA, the usual suspects, have exposure to this debt. The same things have been going on with “bailouts” in the United States.  A lot of TARP money went to states to bail them out and government workers unions plus the UAW at Chrysler and GM.  Much of this pain is globalization resetting wages between the West and the East.  The West’s solution has been to go into debt to keep the standard of living up.  This can only last so long.

The United States has gone through this in the 1900s or long before 1929 and every country has gone through it before. The Bible even warns of the risks of debt. Americans have been doing this for years. We warned members back before 2000 to not spend their gains in the markets by thinking they were rich when the market boomed.  We said they should not view their 401K statement as evidence they can go out and spend money they do not have.  We said it again before the housing bust to avoid using their home equity as an ATM machine.  We said it again before 2007 to get out of any adjustable rate mortgages and pay down debt. 

One member who runs a bank took our advice and they clamped down on their loan portfolio at the bank.  This helped them survive the downturn.  The housing situation is not getting better. The government is sucking up all the capital to spend more which takes capital away from businesses that create jobs.  Think of places like California, New Jersey and a few others that tax and regulate business to the point where they leave along with productive citizens.

We think we may see the Dow down to 9,260 before the end of the month.  We closed on 10,127 this week.  We are also not bullish on commodities including gold, silver and energy.  As with all downturns, there will be relief rallies that will most likely fail.   More information is listed under the Special Reports for members on our web site. 

Investors Alliance provides financial research and education including fundamental analysis and technical analysis software for investing.  The software covers stocks, mutual funds and exchange traded funds (ETFs).  If you would like to join, see the ORDER button on the top right hand corner.

www.powerinvestor.com