market news and articles @ firstadopter.com

-entering very difficult territory
-money managers fully invested because they have no choice due to severe career risk
-main driver of the economy is fiscal policy. It has been extremely stimulative, now turning negative, more restrictive. Europe – more austerity programs USA – early this year net negative. Disappointing economic trends due with that. Fiscal policy can’t become more stimulative onward. U.S., Japan, and Europe economies will disappoint into 2012
-80% of consumers are under-water and “spent out”. End of the month has nothing left. Can’t continue to accumulate debt
-at some point authorities will respond and try to stimulate again due to employment situation, may help stocks, maybe during election year
-another 5 years of a bear market for stocks
-fiat currency system, no discipline anchor, we do not reach low valuation extremes in 1930s. Even in 1970s, 1980s, trading 90% of book value. Book value is SP500 500, still a possibility, but don’t expect it to happen in next 2 years, more the middle of this decade
-next 2-3 years authorities will come with stimulus, SP500 1000-1100 downside, authorities will intervene to provide support, monetary ammunition. Very frustrating years 1000-1500 range in SP500. Lots of mine-fields. 2014-2016 major disaster coming and another wash-out
-defensive positions, trade medium term bull/bear side. no long-term investment policy. risk-free return is below inflation rate
-most of the decline in housing market behind us, but not to previous degree, so deleveraging won’t spiral down as before. Just very choppy, sloppy economy. Inflationary depression
-true consumer price inflation is 5-6%, shrinking economy in real-terms
-there will be more fiscal stimulus, only be able to do it in crisis environment. stock, asset, housing prices have to come down
-long-run not good for bonds, push interest rates up (but swing for 2 years), equities will beat bonds, but hang around in range for 2-3 years 1000-1500 swinging widely, middle of decade will get to close to lows in March 2009
-commodities are a China play. China is slowing down. Anecdotal evidence China is slowing down more than people think. Early next year they may have lee-way to support economy
-Gold is the one currency that reflects all these problems. Authorities will continue to do dumb things. Spiraling debasing of our fiat currency.  Emerging market will out-perform as inflation moderates in late or early next year
-QE2 was not necessary and counter-productive to the real economy. Created more inflation and higher prices of food and energy. Ate deeply into average consumer and will slow down economy further. Because of this, we won’t see QE3 quickly, but eventually see it because authorities will get desperate. They are looking for painless solution, but there is none. European austerity will fail and lead to recession
-We’ll see higher taxes for wealthy, cut some entitlements. Lower prosperity to average Western citizen, less spending power/consumption, less investment
-Good currencies: competitive economy, runs structural current account surpluses on continuing basis. Switzerland is a good example. Force out low-value add industries and go up the ladder to higher value-add. That’s how you create winners. Germany, Singapore same thing. Singapore, Norway, Swiss
-We all know Greece, Portugal, Ireland will default. Most likely Spain and possibly even Italy and Belgium will default. Longer they stay in union, most likely default will be, austerity = shrinking economy and rising debt, “cocktail for disaster”, some-one will say we had enough, we are better off if we leave the union. Greece should exit the euro in 1-2 years, devalue by 50%, one more year of problems, then economy will recover and tourism will boom
-Only one solution for the euro. Have to make euro a very weak currency to survive. Dramatically lower euro against the dollar. ECB against this, but will eventually lose the fight. ECB is only central bank trying to reduce balance sheet
-1/2 of U.S. money markets funding the peripheral European banks. Once this funding redeems, it’s over
-Euro will break apart
-New ECB president will hike interest rates in September to prove he’s more German than Italian, but it is completely unsustainable

Source Link