I shared my thoughts time and again, about the TARP, PPIF and a lot that’s going on. You may wanna read this or this one on Banks’ windfall to review where is the interest of Tax Payers? Is the “creative accounting” meant to fulfill self-interest only?
Here are key points I would like to bring to your attention-
- UK is on negative watch and may lose AAA. Click here to see if you think US is in any better shape than UK.
- The reserve (currency) status is already being challenged, currency swaps other than USD are already taking place especially when the dealings are with China.
- This probably would have been unimaginable few years back i.e. east advising US on how to manage their finances (typically it is the other way round, remember the Asian Financial crisis?). Now china thinks that US plan won’t work. Or things like “Don’t be complacent about debt“.
- Bill Gross, founder of Pacific Investment Management Co., advised holders of U.S. dollars to diversify before central banks and sovereign wealth funds ultimately do the same amid concern about surging deficits.
- Federal Reserve Chairman Ben S. Bernanke said large U.S. budget deficits threaten financial stability and the government can’t continue indefinitely to borrow at the current rate to finance the shortfall. Just a few days back The Drudge Report quoted President Obama saying we are out of the money.
Economic Data– We are receiving all the wonderful data that convince, in general, that the “rate of decline is slowing” and it is, generally, perceived as “growth” otherwise what else could really justify such a quick turn in “confidence” also reflected via sharp market runs particularly in the emerging markets where stock markets have almost gone ballistic; over 50% in many cases. (Check out- “O-Benti trio might be winning” ). Step back for second and think of it- If, even after trillions of dollars we can’t see “green shoots’ then the whole world is very serious trouble. We will see jumps in economic activities driven by massive spending. The question is, is it sustainable? Is it really improving the fundamentals or just replacing spending via printing press? has the private borrowings jumped, etc.?
We get the data, and a lot get revised downward the next month; but by that time who really cares. April Personal Spending -0.1% vs -0.2% consensus; prior revised to -0.3% from -0.2% (that’s by the way 50% downward revision); Factory orders for April rose 0.7% on a seasonally adjusted basis versus a consensus estimate that called for 0.9% increase. The prior month, meanwhile, saw a big downward revisions with orders off -1.9% versus an originally reported decline of -0.9%!!! New orders for manufactured durable goods increased 1.7% in April, which was down slightly from the previously published increase of 1.9%. New orders for manufactured nondurable goods slipped -0.1%. Overall shipments decreased -0.2%, marking the ninth straight decline. Unfilled orders fell -1.2%, which was the seventh straight decline for that category. Inventories were off -1.0%, which was the eighth straight drop there.
An interesting insight on commodity surge, hopes and reality. And the data is out Crude up 2.87Mb, the Oil is coming in, is it going out? As of this writing Crude futures are down almost $3.
I don’t participate in dooms day kind of theories and I sincerely wish for healthy economic recovery sooner than later, and I wish all the efforts that governments around the world have put in works out wonderfully. I, however, worry for the retail investor who might be trapped in bear rally, if it turns out to be (which so far I think is, but I may very well be wrong as “this time may be different”).
Be careful though, the larger the rise, harder the fall. So keep your parachutes ready for just in case. I hope “Green shoots” or call it “light at the end of tunnel” is not another locomotive.
One can’t buy his prosperity through printing press only. Take care and trade carefully, we shall not be offered a “bail-out” should something goes against our portfolios or hard earned trading capital..
Profitable Trading, OP