Wednesday, June 10, 2009

Get Ready for Inflation and Higher Interest Rates

Rahm Emanuel was only giving voice to widespread political wisdom when he said that a crisis should never be "wasted." Crises enable vastly accelerated political agendas and initiatives scarcely conceivable under calmer circumstances. So it goes now.

Here we stand more than a year into a grave economic crisis with a projected budget deficit of 13% of GDP. That's more than twice the size of the next largest deficit since World War II. And this projected deficit is the culmination of a year when the federal government, at taxpayers' expense, acquired enormous stakes in the banking, auto, mortgage, health-care and insurance industries. (more)

Median home prices drop below 1989 levels in some parts of California

In parts of Southern California, the housing crash has upended a basic tenet of the American dream: that home values always increase over the long term.

Properties in several areas are selling for less than they did 20 years ago, and that's not even counting the effects of inflation. (more)

Smart Money, July 2009

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Crude Oil Top Not in, Still Opportunities for Bulls

Worries about inflation are heating up. Investors have been looking for inflation hedges and turning to commodities. A lot of that interest is directed at the energy markets, sending crude oil to new highs for the year at just above $70 a barrel. This market could be knocking at the door of last year’s record highs if some of the inflation forecasts prove correct. Natural gas has been lagging, but to me, looks like it could be forming a bottom. (more)

Shorter-term T-notes' yield soars on fears of Federal Reserve rate hike

Investors continued to bail out of Treasury securities Monday, particularly the shorter-term issues that Wall Street tends to regard as relatively safe plays.
But they aren't safe when the market begins to believe that the Federal Reserve will start tightening credit -- which is the way more bond traders suddenly are leaning.
The yield on the two-year T-note soared to 1.39%, up from 1.3% on Friday and 0.94% on Thursday. That's a massive move in the space of two trading sessions. (more)

Harley davidson: Buy/Sell/Hold?

Harley-Davidson, Inc. (HOG) has endured some very bitter comments from analysts in the past couple of trading sessions. On Friday it was a downgrade to “Sell” from a Citigroup (C) analyst that sent shares tumbling 7% on the day. On Tuesday a research note out of UBS (UBS) piled on the bad news, as they revised their earnings estimates downwards because second quarter sales results appear to be worse than anticipated. However, in contrast to the sell-off instigated by the Citi analyst, today the stock fell close to 10% in the morning and then battled back throughout the day to end nearly even for the trading session. The fact that HOG shares rebounded so strongly could be a signal that the bulls are taking control and the shares will be resilient to further weakness. (more)

Top 10 Things You Must Do

Stop listening to those who claim that "The Market is telling you the recession is ending/over." Baloney. What was the market telling you in October of 2007 when the SPX hit 1576? That everything was great and "subprime was contained", right? Any more questions on that piece of nonsense?

Get out of debt - NOW. Revolving debt in particular is murderous. If your credit line hasn't been cut back or your interest rate jacked, you're one of the few. It will happen. Going bankrupt due to increasing debt service requirements (with or without job loss) sucks. (more)

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