U.S. financial crisis is getting worse and it seems the current cycle of recession could stretch deep into 2010. While it was a good sign for traders to short the stock or whack the Put Options when Dow Jones plunged below 8,000-level recently, the global financial systems could experience turmoil many times worse than 1997-1998 Crisis. It’s either Great Recession or Great Depression for you, there’s no two ways about it. And if you’ve patiently waited until now without committed any hard-earned money into the local stock market then give yourself a pat. I mentioned local stock market because if you’re trading U.S. stock market then you should be laughing all your way to the bank – provided you go along with the pulse of the market.bad” because President Obama won’t let it. Well, I suppose time will tell but if you need a Yale professor to convince you otherwise then you shall have it. Yale professor Robert Shiller agreed (with FinanceTwitter *grin*) that it’s not bottom yet for both the housing or property sector and the stock market. In fact Shiller thinks the housing prices still have another 50% to fall before reaches fair value despite the already 25 percent nationwide decline since the 2007 peak. As for the stock market Robert Shiller believes he could get a better deal when the S&P 500 drops further to single digit P/E (from current P/E 14X).
This is the best time to test your emotion (yeah, I’ve mentioned that boring statement yet again) and if you can filter between the diamond and glass then this is probably your time to make the first barrel of gold. And by this I meant you can differentiate if analysts / fund managers / economists were actually bull all their way to confuse novice investors. But you really can’t blame them because their boss was yelling at them to increase the transaction volume (else start packing) so here you are reading “Buy” calls from them. Sometimes I wonder if they know what they’re doing considering 7,000-level is quite vulnerable and have never been tested for its support strength for many years. Dow plunged another 250 points Mon to 7,114.78 and is starting threatening the 6,000-level.
If Dow never recover or show its muscle above 7,000-level then expect the worst to come any minute soon. All this while the Dow has been absorbing the pains of beating and it can only do so for so long after which it would probably drop like a rock. You might say “Nah, it can’t be that
Sure, we shouldn’t talk ourselves into this gloomy and doomy thingy as it would just make things worse. But why fly against the wind when the writing is on the wall? Robert Shiller also believes that President Obama’s administration has yet to find the silver bullet to the current problem. To add salt to the wound, it appears Citigroup Inc. (NYSE: C, stock) is quietly taking advantage of the havoc by asking U.S. government (or rather taxpayer) to convert its $45 billion of preferred stock in Citigroup to common stock and hence increase government’s stake to 40% from current 8%. But the problem is if the government was to do so it should end up owning 80% of Citigroup and not 40%. This is just one of the many problems that could prolong the economic recovery process as the bailout or rescue plans seems to be getting complicated.
However with the pending installation of Najib Razak as Malaysian sixth Prime Minister in early Apr 2009 and the much talked about second stimulus package of about RM35 billion plus the coming UMNO general election, the local stock market “should not” experience any huge drop (invincible hands are supporting the KLSE) unless of course the U.S. financial market drops extraordinary bombshells to the already pessimistic investors.
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