repost an old message
Everybody, be cautious of this market
All
indices have or close to hit their 200 MA and yet the bullish sentiment
has been inching higher and higher everyday. Media is painting a very
rosy picture for the economy. Do I trust this rally? Not at all. This
bear rally is slowly turning into a suckers rally and it's very unwise
to chase this rally at this stage. It's very rare for all indices to
hit the 200 MA resistance without pulling back and I do not think this
rally will be an exception.
While we should not be too
persimistic about the economy, it would be very unwise to be blindly
optimistic. From the earning reports of Mastercard and Visa, one would
assume that the economy is doing very well. Why? The consumer credit
card spending is up about 10% so far this year. However, looking deep
down in the number, you will see that, American consumers are putting
more and more their daily expenses onto their credit card loans. That
implies that the consumers are very stretched out. To prove this fact,
look no further than American Express. Unlike Mastercard and Visa,
which are simply card issuers that charge transaction fees, American
Express is a card issuer that also carries the credit card debts.
American Express just announced that, they will add another 800 million
dollars into their reserve to prepare for the credit default. That's an
indication that the next round of financial crisis, the credit defaults
is on the horizon. Consumer spending accounts for two third of the US
economy and as long as the consumers are stretching out, the fuel for
economy recovery will be lacking.
What the Fed has done so far
has helped to stabilize the U.S. financial system and lower the
immediate damage to the economy. However, the money that was injected
by the Fed will not, as people expected, get back to the housing market
or be used to pump up the consumer spending. Instead, it's very likely
that, those money will be used to generate another bubble, most likely
a commodity bubble. Unfortunately, a commodity bubble will be very
counter productive to the US economy and in turn, will drag down the
stock market.
Before there is strong evidence indicating that
this is a soft landing, it's very important to preserve our capital.
That does not mean that we should not follow the trend and trade stocks
with the money that we can tolerate to lose. However, it's very
important to not be blindsided by the rosy economy and market portraits
painted by Wall Street.
By the way, it's very naive to trust
everything being illustrated by the Fed and it's especially dangerous
to count on the data from the Fed to make your investment decisions.
Always remember, it's all a game.
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发表于 2008-6-5 09:25 AM
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