Yen Is Weakning Against The US Dollar

Yen is trading at 117.20 against the US dollar after showing considerable strength in the month of August when subprime mortgage mess unfolded in the US and yen carry trade unwinding started. It seems at around 113 levels, lot of carry trade happened as japanese central bank doesn't increased it's benchmark interest rate and japanese as well as oversees investors/hedge funds/PE funds still wanting to have a pie of cheap funds available in yen currency, have them invested in riskier yet high yield assets of emerging economies lke India, China, HongKong, Taiwan, Russia. This is causing tremendous price rises in these assets and thus is a cause of concern in the short term.

US Job Data

US job data released by labour department beat earlier forecast by experts of 60,000 jobs being added versus fresh data depicting that jobs that added infact are 90,000. This data can make US federal reserve pause in it's rate cut spree. It's very essential for US central banker to hold it's rates so that dollar can be hold steady against Euro, Yen, Canadian Dollar. If he cuts the rates then it might again unleash huge liquidity to riskier assets, which alredy are extreme inflated levels. Also central banks of US and European countries should slow down the level of printing their currency if they want to have financial markets in healthy shape and avoid bursting of equity and commodity bubble in an abrupt manner.

Real Estate

Almost every asset class has seen sharp correction over the past few weeks, be it stocks, commodities, currency like the dollar, even Art has seen some softening in resale prices, but real estate prices have so far remained over heated in most commercial parts of the world. Even residential property rates in the emerging markets like India, China, Taiwan are over heated. Continued over heated prices is a cause of concern for business as well as genuine home seekers.
Huge money flows have gone into real estate segment, be it PE funds, massive loans from financial institutions and banks to builders and home buyers, black money has also flown with great intensity in to this area. Rentals are also ruling high making the business operations and other commercial activity less profitable or even viable to run. This has caused inflationary pressures in the final product prices. This real estate segment has to undergo a major price correction in order to restore affordability and investment viable proposition.

Some Stability In The Dow Jones Is Good News

Dow Jones closed 233 points higher on the back of some bottom fishing by market players. Dollar also climbed to 114.20 against the Yen, after falling continously for the past few trading sessions amid yen carry trade un-winding. History is evident that volatile currency movements can play havoc with stock and commodity markets, as seen this time as well. So keeping a very close watch on important currencies is very much desired if one wants to succeed in financial markets.

Gold Is Stable Amid This Stock Carnage

There is a old saying that in troubled times rely on Gold, well, that's seems to be the choice investors are choosing amid sell off's in stocks across the world. Gold is trading stable at U.S.$660 per ounce and so far escaped the carnage from stocks melt down. This precious commodity will continue to out-perform stocks in the short term as investors will consider it as a safe investment bet in these nervous and volatile times. As their is a serious erosion in the risk appetite of investors/traders, safer investment avenues like Gold and currency like Dollar will find favour. For the few weeks, stocks will bear the brunt of this yen carry trade un-winding currently under way. However, some very selective buying can be made in extremely resilient business fundamentals, but in very small quantities.It's however an individual choice and decision.

Problem Of Plenty

For the past two and a half decades, U.S. federal reserve has done nothing but to print more and more dollars and that has created the problem of too much money chasing few asset classes and hence bubble like situation in each and every asset.
Asian countries are holding U.S.treasuries worth trillion of dollars just to finance U.S. consumer's shopping list and keep their growth going.
This never ending credit cycle has turned financial markets across the globe at very risk of un-sustainable inflated levels. After all where does that huge sum of money goes other than stocks, bonds, real estate, currency, they have to park it somewhere. And thats the problem for these markets.

Currency And Stocks

We have come a long way seeing how Commodities and Political events can influence the stock prices, but i believe contraction and expansion in the value of Dollar can play havoc in the stock markets as can be seen in present correction in stocks across the world. So it will be very prudent to have always a close eye on the movements of important currencies.

Commodities, Currency And Stocks

I am asking myself what's difference between this years correction in stock markets and last year correction in May-June-2006.

Last year correction started firstly in Commodities and that spilled over to stocks. The intensity with which these markets fell was shocking depicting how over leveraged positions can play havoc in the system.

This years correction occured because of cracks in the subprime mortgage markets in the U.S. and also due to Yen carry trade practice adopted by large firms. So this time credit markets and currency markets are creating tremors in stock markets.

Who knows whats next!

Credit Cycle

We should ask ourselves one extremely important fundamental question i.e., whether Credit cycle that has fuelled spectacular price inflation across the asset class has cracking or not before we raise doubts about continuation of bull run in stocks, commodities, properties.
I say in some segments of U.S. subprime mortgage market, it is showing signs of troule with many borrowers defaulting on their credit liability, and hedge funds along with large investment banks who love to buy these certificates are facing problems. Thats adding volatility in currency and stock markets because they pull back money from other assets like stocks if they face turbulance in holdings of their other invesments like subprime mortgage certificates. Volatility is the name of the game for some time now.

Crude Oil At U.S.$100/Barrel And Stock Markets

The very possibility of crude oil reaching U.S.$100/Barrel sends nervousness among investor class but if history is anything to go by then whenever the crude oil prices have scaled new highs, stock markets across the world have also reached new highs.
Many investors get confused by this phenomenon forgetting that if one asset (crude oil) gets inflated in price terms then people have to invest money somewhere(like in stocks) in order to earn equal or more returns for maintaing their original net-worth.
So dont get scared if oil does that, remain in peace with your good stock investments.