After a long winter break, and missing much of the action in the States, I have now returned...
As schools is back into full swing, when I get a chance I will write a full review on conditions in Vietnam and where it may be heading...
As for domestic news, as my micro theory teacher professes, "We are on the cusps of recession,"
I would like to point out the key word "cusps," For sometime now we have been slowly edging close and closer to "recession." Although I have been a big proponent for the resilience of the US economy and the vigilance of the Feds, I have become more bearish upon my return to the States. The problem is stemming to of a more global issue that will weigh everyone down as the affects are seen across the board (Asian European emerging markets etc...) The vigilance of the fed seems to have deteriorated into old men worrying about the reputations more than the actual economy, although not to minimize the difficulty of their decsions they must make. It would seem superficial political factors are affecting monetary policy, if not affecting giving the Fed's some excuse to act in a more nonchalant manor. But, if anything, this would be the most critical time for the Feds in their decisions that may set the tone for the rest of the year. Any economic plan offered by some politician whether it be rebates or tax cuts is ridiculous as by the time they are instated to presidency this perceived recession to come will have passed already. Most interestingly the bond markets experienced a substantial rally in my absence, with the ten year being around 4.12 when i left to it currently being around 3.71. Perhaps again we are seeing exuberance in the bond markets as many people are pricing in a 50 basis point cut. I would like to remind everyone that yes it maybe possible that inflation maybe decelerating as indicated by the cpi and ppi, but wholly not benign. As shown with the first 50 basis point, solved no problems, with the feds constantly pumping liquidity into the market, I feel another 25 basis point cut will suffice, as the financial and economic problems the US markets and economies are facing are long term. 25 basis point cut allows enough liquidity in the short term for problems to continue to sort themselves out while keeping inflation in check. 50 basis point cut may lead to superficial bullishness in the markets which will lead to unwanted volatility, in prices. Stability being one of the key factors the Fed's must maintain. Although in this volatile environment, predicting what the Fed will do is harder due to political external influences with sentiment being the Fed is now "focused on growth." I expect a 25 basis point cut, but will not be surprised if the Feds opt for a 50 basis point cut, as a show of "being there" for the markets (since markets may cause further problems for the economy).
On a technical stand point, support lines are being broken through on many equity indexes, with many indicators point towards a bearish outlook into the first quarter.
I expected bearish performance to continue all the way through the first quarter. Support at 1374 as been priced and closed under at 1373, which indicates the next level of long term support at 1222-1236. Currently we are around the same levels of the second quarter of last year. On a technical standpoint, shorting S&P500 futures contract would be beneficial as technicals point to further downward movement.
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