Wheee, this is fun!
Will our 7.5% lines hold? As I mentioned yesterday, we expected a test of our 7.5% lines at Dow 10,950, S&P 1,160, Nasdaq 2,400, NYSE 7,450 and Russell 690 and we remain TECHNICALLY bullish if we hold them. The Dollar was doing well until about 3am this morning but then turned down sharply – some sort of rumor is driving the market and, of course, heading into the G20 pretty much any comment made by any Central Banking official is blown way out of proportion.
China is likely to raise rates today, making a small concession to the US on their exchange rates but more so to cool off the massive property bubble that is forming in their cities. That may put some downward pressure on commodities without strengthening the dollar – an interesting combo, but one that illustrates how China is becoming more important in the Global marketplace than the US.
If China is raising their lending rate to 5.56% and their deposit rate to 2.5%, they risk attracting even more money, including a reverse carry-trade from the US, when money can be borrowed from the Fed at 0.25% and lent to China for 2.5% giving the trader a 2.25% profit for the year. 2.25% may not sound that sexy, but when it’s done by Investment Banks and other investors who can lever their money 10:1, that’s a 22.5% on their cash. This is how Japan has supported their economy for two decades but it’s hard to imagine what will happen if the US Dollar, which makes up 62% of all money on the planet, starts flowing out of the country in even faster quantities.
We were just discussing investing in foreign countries in Member chat and I warned that this may not be the best time to make that kind of move as the dollar is very possibly bottoming here and transferring US Dollars to another currency risks hitting a reversal that wipes out any interest gains and possibly even some the principal as the Dollar rebounds and you find yourself in the wrong currency at the wrong time.
I guess I should talk about AAPL although we’ve already discussed it in depth in Member Chat but they do seem to have had some kind of earnings and, although very nice – expectations were already a bit high so they seem to be pulling back…
