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Market outlook 2010, shut up and listen

                Get your mothers tampons out of your ear and perk up those bad boys for some real economic outlook.  What I’m about to tell you no one else in the game will.  If you are one of the few to happen to get lucky and read this economic epiphany, better thank your lucky stars.  This is not a prediction, but a common sense outlook for the global economy and US equity markets.

                The fact is that the US Dollar has become the new carry trade.  Everyone and their mother will start to borrow dollars and invest abroad for the higher returns.  There isn’t a single economist that predicts the US economy will grow faster than those overseas.  In fact, Bernanke himself has said time and time again that rates will remain extremely low in the US for years to come.  Meanwhile, overseas, you can get a higher return both in interest rates and real investment.  For over 10 years, Japan went through a period of time called “the lost decade”.  The devaluation of the Yen and artificially low rates kept the Japanese exports affordable to the rest of the world and commodities inflation in check.  This torch has now been passed to the USA; the devaluation of the dollar will be a key component in stabilizing the global economy.

                This however does not mean that the stock market will yield high returns quarter after quarter or that commodities will all fly up in price for decades.  There will be corrections and changes in policies that CAN and WILL push and pull the market.  The key is to be quick to react to Fed, US Government and foreign reaction to those policies changes.

                20 Years from now, you will be reading about how this recession that is supposedly over was actually indeed a depression.  We in the US will experience years of job losses, steady increase in interest rates starting 2 years from now and sub global GDP growth.  If you aren’t diversifying your investments, you could find yourself in a soup kitchen line.

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