Stock Preacher

US investors are decamping foreign ventures and bringing their US$s home, entrusting them to the supposed bedrock safety of United States government bonds, and China continues to buy huge quantities of the USA’s debt. These actions are lifting the value of the US$, and providing the Obama administration with a crucial infusion of financing as it directs trillions of US$s toward rescuing banks and stimulating the economy, enabling the government to pay for these efforts without raising interest rates. The movement of this money back to the United States appears to be exacerbating the financial crisis world wide. A US$ invested by foreign central banks and investors in US government bonds is a US$ that is not available to Eastern European countries desperately seeking to refinance debt, also, it is a US$ that cannot reach Africa, where many countries are struggling with the loss of aid and foreign investment.

Popularity: 7% [?]

Toxic assets are non-performing assets that are not only not paying interest but depreciating (losing principal) rapidly, with no likelihood of stabilizing in the current environment. The most common toxic debt talked about or referenced is subprime mortgage debt.

According to some estimates there was about US$1.2T of subprime mortgages written. The reason there is so much toxic debt out in the market on banks and others’ balance sheets is because derivatives actually multiplied the exposure to this toxic asset class.

Popularity: 8% [?]

The US Fed’s interest rate cut has given Gold a value shine in the eyes of investors.Gold bullion investments do not pay interest and in today investment climate look pretty good when compared to US T Bills, which also are paying zero interest now. The spot price of gold has climbed above $870 an ounce on the New York Mercantile Exchange, up about 20% from its October 2008 lows.The world’s currency markets reaction to the US Fed’s recent interest rate cuts started a rally in Gold, as investors weigh the benefits of owning the Yellow Metal vs. U.S. Treasuries and the US$. It is unlikely that the world’s central bankers will stop stimulating their economies by printing money and doing whatever it takes to restore growth and confidence, no matter if that policy causes rampant inflation. . With that in mind, do not expect this rally in Gold to be a short one because the Demand/Supply fundamentals in the market hold the promise of more gains ahead.

Popularity: 8% [?]

The Federal Reserve may today reduce its main interest rate to the lowest level on record and prepare for one of the boldest experiments in its 94-year history: using its balance sheet as the key tool for monetary policy. The FOMC is likely to cut its benchmark rate in half, to 0.5%, according to forecasts in a Bloomberg survey. The central bank may also signal plans to channel credit to businesses and consumers by further enlarging its $2.26 trillion of assets.

Popularity: 3% [?]

The U.S. Federal Reserve began a two-day policy meeting yesterday, it is expected to lower interest rates toward Zero and discuss emergency tools to end the country’s year-long recession. Observers expect the U.S. central bank to lower its target for benchmark overnight rates by at least 50bp to 0.5 percent and state it will deploy quantitative easing measures to restore growth. US industrial production fell 0.6% in November, with manufacturing output shrinking 1.4% to put it 7.3% below its year-ago level. A separate index of manufacturing activity in New York state hit a record low in December. The data offered a fresh sign that an already year-old US recession is deepening underscoreing the need for aggressive and unconventional actions by the central bank’s policy-setting Federal Open Market Committee. Some economists expect U.S. output to shrink at a 6% annual pace or more in the Q4 2008..

Popularity: 2% [?]

Financial markets are braced for large interest rate cuts across the eurozone on Thursday amid mounting evidence of a sharp slowdown in the leading global economies. In the eurozone, traders priced in a 0.75 %point reduction by the European Central Bank to 2.5 per cent on Thursday, a move that would be bigger than any it has made in its near 10 year existence. Although economists were a little more cautious, with inflation risks disappearing fast, they nevertheless believed a 0.75% point reduction was a distinct possibility.

Popularity: 3% [?]