In my previous post I said that the worst of the convulsion was behind us. That means that the rate of change will not be as severe (IMHO) for the next quarter or 2. After that... my crystal ball is in the shop.
That DOES NOT mean that I believe the smoke is clearing and it is time once again to man the parapits, far from it.
It is my opinion that the media will be rife with stories that the recession has ended - and officially, considering the way we calculate these things - and that may be "true". Don't believe them, at least as far as the markets go.
I repeat, this is a trader's market. You can trade it, just don't believe it.
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The Long Bond continues to get worked over, with the 10 year back to 3.75%, which means a 30 year mortgage of 5.5% for conforming, and 8%+ for jumbos.
Along with Oil prices near $70, I don't see much hope of a recovery gettin going. These 2 forces, higher rates and higher oil are anathema to the U.S. equity markets.
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The US$ is not cooperating. If we had another rush to the US$, the Treasury could fund their deficits for a few more years - at the expense of the equity market getting crushed.
The US$ should turn HERE, but if it doesn't... it doesn't.
Libertariananimal at gmail (d0t) com
3 comments:
Please make sure you mention past history when you're commenting on the interest rates and such, as markets jump all over the place all the time. The dollar today is at 1 Euro = $1.4211, and has recently been rising (losing value) a few cents over the last two weeks. But a year ago, during the "convulsions," it was as bad as 1 Euro = $1.60 almost. So it has been a lot worse. Same with 10-year yields, today at $3.73, which is a recent "rise," but it was over 4% just last year (my "401k" now depends a lot on the 10-year yield, so I watch it every day). So, I would just ask for some recent history on any market figures you use, cause as I say above, a fall in one week may be nothing compared to the rise or fall over one year.
I use the Dollar Index, a much broader measure... At its WORST was 72.30 and is now 78.70...
I expect it to rally, and it better rally.
The long bond is down over 25% since 1/1/09...how much worse can it get?
The recession has 'ended' in England too (???), and company results are getting better.
But if you look beneath the gloss, the profitability of companies has improved because they've moved fast to slash costs, mostly by drastically cutting payroll, in advance of income falling.
So presumably they expect future income to fall (because they don't have the staff anymore) and all those unemployed won't be buying anything. In other words, further contraction.
So where is the future market going?
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