Is it 2008 all over again!?!

I am writing and the Us markets yet to close are in a complete meltdown, this time not because of their own banks but because of the mess in Europe sovereign debt and the poor financial positions Europeans banks are in, due to the exposure on the debt they have to countries as the likes of the PIIGS countries!


Also not helping is the lack of coordinated actions by the major central banks around the world, which finally last week made a coordinated intervention because of the long due shortness of US $ and the lack of access from some Europeans banks had to fund their US $ needs, so they announced a new start of swap line between the major CB and the FED.


Yesterday also the FED spooked the markets, with their lacklustre operation "twist" , which in the end is just a maturity transformation exercise and didn't announced any mew stimulus measures, which the market, ahead of it self had priced in, so once it was confirmed nothing more new was coming from the FED, the only rational reaction would be to correct expectations...

At this precise moments the SPX is trading at the major support and the 50% fibo retracement from the 2009 lows at 1120 if we closed below this level I believe is a cascade down to the next support which is at 1050!

Are we in recession??!!

Are we in a recession already?
According to the latest data it seems or we are already or very close, at least in the US, and if the US economy is in recession and still being the biggest in terms of nominal $ in the world, probably the world economy will follow suit, even as the EM economies are forecast to keep growing at healthy levels, but not enough to off set the weak US and European economic present state.


Let's look at this great chart (courtesy of John Mauldin and street talk advisor's):

As we can see in this chart the US economy is already or very close to recession, and even this being a new formed index, not just the creator have a great street credentials but also the components they used are leading indicators and highly correlated to predicting correctly recessions/growth!

At the same time we have the serious problems in Europe, where not just governments are cutting spending, to balance their overstretched finances plus the banking system there is insolvent, at least mostly of it, therefore will create more pressure in the GDP growth because banks are cutting the amount of money loaned to the broad economy, as a result we saw for i.e last week a lower then forecast German GDP, which is not just the powerhouse of Europe but also is the backer of the ESFS fund created to support the weaker peripheral economies as the case of the PIGS.

The last week, after a start with a relief rally, saw in the end, big losses in all major indexes, not just for the lack of conviction by investor in this market but also because August is a weak month anyway as many traders/investors are in holidays.

In my opinion we still didn't saw a low in this market, as the bond markets are telling us, because it keep going lower in terms of yields, which is a sign that worst times are to come, when investors are willing to accept rela negatives yields to park their money, this is normally a good sign and more we are not seeing an inverted yield, which means recession on the way or already present, because of the QE programs created by the FED which artificially maintains short term  yields low.

Resuming WE ARE GOING LOWER!!

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What a day...what a week!!

After almost two years of silence in my adventures of blogging I am back and what a week to be back, worst in a blog where I talk about how to make money in the markets, economic issues and anything I feel is pertinent!

Yesterdays we saw a sell off only equal to the dark days of the crisis of 2008, where we saw the Dow jones index (Index of the 30 largest industrial US companies) plunging over 530 points...Ouchhh!

Why you may ask, well several reasons, but mainly is the debt problems in Europe, which started with the peripheral countries, the so called PIGS (Portugal, Ireland, Greece and Spain), but now the problems are spread to the 3rd and 4th biggest European economies, Italy and Spain!
To add to this already complex problem, now we add as well the problems with US economy, with the anecdotal fight over the debt ceiling raise, where the both main parties try to use this event to score points with their electorates and extended the debate to include deficit reduction; not that this issue was not over due, but the moment and the event the utilise to raise this debate just created more uncertainty to the markets and in the end deliver little results for the "bang" it created!?!

So, this weeks sell off was just a reflex of the investor sentiment that it is out there, coupled with the increasing evidence that the  world economy is slowing down faster than previously thought, and as result OIL for example felt to $85 handle, price level not seen for a few long months, and oil normally is a leading indicator of things to come!!