Wednesday, January 28, 2009

In my best Oprah voice: And you get a bailout, And you get a bailout, and you get a bailout....

So, the stimulus passed the house and should easily pass the Senate barring any unforeseen bumps in the road. I think the market has digested this news now and is looking forward to the bad bank bailout.

The markets have rallied as the charts, stars and weather all combined to push forward despite terrible news across the board. I think it's possible to play this through the end of the month as funds complete their window dressing. However, the increasing pressures on the global economy are very evident.

I'm very concerned about a number of issues including:

* China's economy: As the US economy has sneezed and China caught the plague. This has a number of key ramifications for the US. 1) China is going face skyrocketing unemployment, possible social unrest and it could lead to government currency devaluation to stimulate their economy. 2) If China looks to stimulate their economy with their own funds it will leave precious little money for some other large country to borrow for their own bailouts and stimulus efforts (hint, hint: That country starts with U and ends with an S).

* The global reach of the economic difficulties is rapidly becoming apparent. There are estimates that now say we could lose up to 40 to 50 million jobs globally this year. This cycle of stimulus spending to replace these evaporating jobs will eventually create spiralling inflation, etc.

Cheers!

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