Friday, May 22, 2009

Rates Surge

Rates surged yesterday to overbought levels. The move began as a result of the Federal Reserve's less than expected purchase of long-term securities. Further exacerbating the move was Standard and Poor's outlook that UK debt will lose it's AAA or highest quality status. Many expect that this will also happen with the US' debt.

When the financial crisis hit at the end of last year, the UK's debt to GDP level was at 44%. The US' debt to GDP level was 63%. S&P lowers it's credit rating when debt to GDP levels reach 100%. Major organizations such as the IMF expect the US' level of debt to exceed 100% of GDP before the UK.

Dollar Losses Continue

The US dollar has also suffered as a result of this "New" worry. Well, it's not really a new concern. It has been real and ongoing. The US cannot continue to borrow $100 billion each month and continue to bail out and absorb losing businesses. It cannot continue to print trillions of dollars without expecting that its currency will devalue. It's simple economics that anyone should be able to understand.

We have been short the dollar, the stock market and US bonds from the beginning of the year and long on oil, gold, and agriculture commodities. We feel that we are positioned well for the coming economic disaster that is sure to take place. While the stock market has been surging, it's no different than any other commodity. With trillions of new dollars being put into play, these dollars need to find a home. It's not new wealth being created, it's inflation. There is no real new value being created. If you disagree, please comment and tell me where I should be looking.

There could be one last gasp to the upside in stocks next week and then a new down trend may begin. This weekend, I am putting together a special report to Trendsetter subscribers identifying which stocks might present good trading opportunities. If you are not a subscriber, send me an e mail and I will put you on the free subscription list.

This could be a very important time not only in the market, but in the history of mankind. You owe it to yourself to get all of the information that you can so that you don't possibly lose all of your wealth. We saw how ugly it got during the last decline. Can you imagine the fear that will pervade the world if we break through to new lows? Can you understand that the government is already preparing for mass panic?

The market rally we have seen has all been engineered by the government. It's not a real thing. It's just perhaps giving them time to prepare for the meltdown that might occur.

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