I don't care about chatter in CNBC and Bloomberg on doomsday scenarios. Fed is not going to announce QE3 anytime soon. Bernanke is going to play safe and announce that they are going to hold to their treasury purchases for foreseeable future. As I explained in my article on Option ARMs, the U.S. housing market can't stand any outside pressure. Unfortunately it is going to experience the second waive of foreclosures by August 2011. Any increase in interest rates would be suicidal for fragile housing market. therefore Bernanke is going to keep the Fed Funds Rate at 0.25% until late spring of 2012.
If last year someone would tell me an European country is going to pay +25% interest to borrow money for the next 2 years. I would fall of chair, but if you live long enough you would see that anything is possible. Greece 2 year government bonds yield hit +25% a couple days ago; yes! it yields more than junk bonds. European union members have to get their act together and do something about Greece, Portugal and Ireland. What makes me worry the most is Spain situation. Spain 10 year government bond yield hit 5.596% recently. If it breaks above 5.90% it would be very problematic.
As you should know by now, I'm a bear but I'm going to put on my bull mask ! I think big institutions are going to squeeze the shorts. I think the most we could go lower would be 1313 level in S&P500. obviously in past 3 weeks there are some damage done to the rally but I'm going to stick to my gun, "S&P500 is going to hit 1430 this year" we shall see what is going to play out.
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I do my best not to use complex economics terms and make this blog useful for everyone in any level of investment. The main focus will be on technical analysis, but macroeconomics & microeconomics will be covered as well.
If you recently become my reader, I highly recommend reading "Popular Articles". Just scroll down, you can find it in this column.
If you recently become my reader, I highly recommend reading "Popular Articles". Just scroll down, you can find it in this column.
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Popular Articles
- Option ARMs Tsunami Is On The Way http://the-us-microeconomics.blogspot.com/2009/08/option-arm-tsunami-is-on-way.html
- QE2 positive and negative effects on the economy http://the-us-microeconomics.blogspot.com/2010/11/qe2-positive-and-negative-effects-on.html
- Japan Started The Second Rounds Of Quantitative easing http://the-us-microeconomics.blogspot.com/2010/10/japan-started-second-rounds-of.html
- The End of Mark-to-market Accounting Rules End of Transparency Era http://the-us-microeconomics.blogspot.com/2009/04/mark-to-market-accounting-rolls-end-of.html
- Why weak dollar is not good for U.S. economy? http://the-us-microeconomics.blogspot.com/2009/10/why-weak-dollar-is-not-good-for-us.html
- Bullish scenario, Inverted Head and Shoulders Pattern http://the-us-microeconomics.blogspot.com/2009/07/inverted-head-ans-shoulders-pattern.html
- Why Did LIBOR & TED Spread Drop? http://the-us-microeconomics.blogspot.com/2009/05/why-did-libor-ted-spread-drop.html
- Job lost & GDP Outlook http://the-us-microeconomics.blogspot.com/2009/05/job-lost-gdp.html
- Why Public-Private Investment Program(P-PIP) Will be a Failure? http://the-us-microeconomics.blogspot.com/2009/04/why-public-private-investment-program.html
About Me
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- I’m a financial analyst. I'm a bear. I use fundamentals and technical analysis in my investments. I’m a big supporter of the Austrian School of economic thought, but at the time of crisis I believe Keynesians get it right. I always have an eye on macro & microeconomics, I’m a contrarian analyst. Be advised that the views and opinions expressed here are subject to change based on market, economic and other conditions. They are the illustrations of broader economic themes and in no way guarantees your profitability by trading Securities mentioned. I do not claim or guarantee that you will profit from the information provided. I will not be held responsible for any investment actions that you take as a result of Securities mentioned. I’m neither your investment adviser nor your financial broker. Consult with your broker before start to trade any securities. Futures and options on futures trading involve substantial risk and is not a suitable investment for all type of investors. The information given is intended to be an aid to your own investment process, and your investment actions should solely be based upon your own decisions and research.
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