Archive - Oct 2009 - Blog entry

What we do know is this: compressed prices can lead to explosive moves in either direction.

Fed Economist Says American Banks Went Bankrupt in 1982, The Fed Hid Their Insolvency, Supported Mexican Dictator, and Nursed Banks on "Fat Spread" . . .

Project Mayhem reviews the most important financial and geopolitical news of the past week and takes a look at the week ahead.

Senators Schumer and Cornyn made it clear they support a big tax credit for home buyers. There is no stopping this train with these two on board. What might it mean?

Brazilian stocks rallied, along with the nation's currency, as investment prospects brighten on the news that Rio de Janeiro will host the 2016 Summer Olympics, making the Bovespa the world's best-performing major index last Friday.
Rising commodity prices this year have led investors to buy emerging market assets where the economies tend to be more commodity-dependent. Both emerging markets and industrial metals group are outperforming U.S. equities so far this year.

The news hasn't changed, but maybe the reaction to the news has. In the end, it is the same story as "the trend is your friend until it ends".

Keep an eye on what is going on in modern Greece, because I can assure you that it's a reflection of what is going on across the world. The level of angst is unprecedented and politicians better quit the rhetoric and start putting citizens first.

Experts say that the economy will not recover until trust is restored.

So how do we restore trust?

How well has the Federal Reserve performed?

Let's take a look...

Reports from FHFA show they are rolling over tons of dead mortgages. What's the objective? To buy some time.

Back in early March, Steve Leuthold told investors to "buy stocks now or you'll regret it". He was absolutely right then and I think he's right now. Forget retesting the March lows, the stock market is heading higher. He is now calling for the Standard & Poor’s 500 Index to jump to 1,350 next year as the economy recovers from the worst contraction since the Great Depression.

For the first time since March, the stock market actually showed a little reaction to reality based information. As it turns out, even removing any hint of stimulus will cause the market to retreat. We already expected the cash for clunkers program was largely a gimmick with auto sales dropping like a stone in the last reading. Home sales are being artificially juiced by the $8,000 tax credit and the Federal Reserve keeping 30 year mortgages near historical lows. You can expect that if the Fed and the tax credit were removed we would see a similar reaction as the cash for clunkers program in the housing market. It is amazing that so much energy and focus is being put on bailouts, gimmicks, and transient market forces all the while ignoring one major component. Jobs.

Want to know why the giant, insolvent banks aren't being broken up?

Here's why...

Inflation or deflation? Round 1 goes to ... deflation.

Back in August, CPP Investment Board (CPPIB) announced that it has entered into a joint venture with Cyrela Commercial Properties S.A. Empreendimentos e Participações, GIC Real Estate, the real estate investment arm of the Government of Singapore Investment Corporation, to invest up to US$250 million for the development, acquisition and management of institutional-quality commercial properties in Brazil. That appears to have been a very wise decision.