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12 Steps to an US Economic Meltdown

Published on February 26, 2008

12 Steps to an US Economic Meltdown

February 26, 2008

Amidst all the bullish action of the market, check out Martin Wolf’s (Financial Times) article presenting bearish views of Prof Nouriel Roubini of New York University’s Stern School of Business, founder of RGE monitor. Check out “12 Steps to Financial Disaster” scenario and his follow-up piece on why the Fed and financial policy makers may not be able to prevent this systemic financial risk episode. This is one of the most thought provoking articles I read past week.

OPNewsletter grew little less than 1% in a choppy market last week. We didn’t do any significant adjustments to the portfolio and are enjoying the gains. I expect our portfolio gains to accelerate starting this week. So far, so good and expecting 10th positive month in a row.

Yesterday’s bounce was impressive one and I think this will be 3rd attempt of Dow to cross the 12,750 area. Let’s see if it can hold. The trainnies have been acting little too wild recently. MBIA (MBI) and Ambac (ABK) both were able to keep their top credit ratings from S&P. I wonder if there is a real basis for keeping the strong ratings or is it under pressure from influential bodies to avoid them going into deep losses which will have wider implications. Whatever it is, the tone is cautious so don’t get too excited. They still need to get their act together.

In the week ahead, a lot of economic data will be released and almost every indicator has potential to move markets in either direction. We’ll see US home sales for January, Consumer confidence, PPI/CPI, Durable goods orders, Q4 GDP revision, Consumer sentiment, Consumer spending.

A lot of companies are to announce results this week as well and if you like the game, choose the worst in the the worst performing sectors. Chance of being right on the bad are better than chances of being right on the good one.

Have fun trading, profitable trading, Op

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