Time for a status! Where are we in this crises

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Where are we? Have we hit the bottom? This week gave a 9% down for NASDAQ and a 7% down for S&P500. I have 4 points i want to point out.

1) Global banking has turned a corner, but we have still not seen the bottom. We might still need more government money to secure the market.

2) USA, Europe and Japan is i recession, but China and parts of Asia is still growing GDP even that i might not be 2 digit. China is the new world leader in the global economy.

3) Market is dominated by balance deprecations. Random events or incidents creates strange phenomenons. Caution must be taken.

4) SP500 has a support level at 800 to 850. This week ended at 876. If we break through current support level we may expect the SP500 to reach the next support level at around 600.


What has been to secure the markets? Well the US has injected 700 bn$ to the market. But it is not near the amount that Europe has injected to the market. Europe has Injected 2000 bn$ into the markets which shows the commitment from Europe to secure the economy. Some may say that 700 bn$ is not near enough to buy distressed assets in the US Market.

Today USA only counts for 4,7% of the worlds population. This means that when USA will stop spending the US market will not be as interresting as it used to be. Asia on the other hand will start to spend and will create a whole new market, as we count about 45% of the worlds population in Asia. And this region has been saving for the last 10 years.

Why is the USD then going up? Well their is a good explanation for that. As most big investors are leveraging their investments today, they have to deleverage every time the equity gets devalued. This means when a European investor hos has bought sub prime bonds in the US leveraged in USD needs to repay his loans in USD to balance his depreciation of equities. This means that he has to exchange EURO to USD, and this means that more liquidity goes into USD and the USD goes up. But it may not continue, as less consumers will have money to buy products as they can´t borrow anywhere.

Lets see what the following weeks will bring.


The Doc