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.

Will He Or Won't He

I believe this time US federal reserve will not cut interest rates as turmoil in financial markets from US subprime mess has been contained well and all the stock markets are either re-claiming their old heighs or making new heighs. If he does cut the rates then it will pump more dollars into the riskier assets like stocks and commodities, with more weakness in dollar. This will further create inflation among already hyper inflated riskier assets and make them more vulnerable to sudden shocks resulting in huge instability in the credit and financial markets. Thus for the sake of overall health of financial markets, US fed must not cut rates this time around, we already have enough of cheap money roaming around.

Inflated Equities

Falling dollar is inflating riskier assets like stocks and commodities. Emerging market stocks especially in china, India, Taiwan, Singapore are amid tremendous upward momentum due to huge flow of dollars from dollar investors and this has created extremely expensive equity valuations in some of these markets, especially in India and China. Crude oil too is continously trading above US$80/Barrel and stock markets are ignoring this important commodity price completely. History is evident that whenever crude oil has skaled a new peak, equity too has formed new high! As long as financial markets expect US federal reserve to cut interest rates, equity valuations will continue to be very expensive.

Will Fed Cut The Rates Again?

Financial markets seems to believe that US fed will again cut the interest rates in order to stop a housing slowdown led recession in that country. And hence dollar is seeing continous selling pressure against major currencies, and stocks along with commodities are seeing a major sharp upmove. But US fed might not go all out on rate cut spree as inflationary fears in US are still present. Therefore over exhuberance of stocks of emerging economies will have to be taken with caution, they say:- better late than never!

Wheat, Maize And Crude Oil Prices

Price of commodities like Wheat, Maize And Crude Oil is rising continously for the past few months and they are creating new records. From inflation point of view, it's a cause of concern for monetary policy makers as they have to strike a balance between growth and inflation. Already financial markets are facing a fall out from slower growth expectation in the US, Japan, and Europe.
Asian countires like china are raising interest rates in order to contain a rapidly growing economy and India is also far away from softer monetary policy. Volatile times ahead for stock markets as they have to face lot of uncertainty ranging from elections next year in the US to slower world GDP growth to rising crude oil and food prices to rising fears over a possible attack on Iran and also tighter credit markets across developed nations and narrowing interest rate spread between developed countries and Asian tigers.
Happy Investing.

Investor Confidence Is Shaken

By looking at stock market behaviour for the past 3 days gives indication that investors/traders confidence has been shaken and they are using any rally in the markets to lighten their stock commitments. Cracks in the credit markets and subsequent pouring of around U.S.$550 Billion in the financial system by various central banks only indicates the intensity of underlying unresolved problem.
This is causing huge nervousness among investor/trader class who may not want to enter the markets unless and untill some assurance that problems with subprime mess has been contained.
This world runs on credit, so if that gets affected badly then we have a serious problem in our hands and smart market players knows this. Good luck with our investments.

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.

Reason For This Carnage

Market players always try to find reasons for market falls as and when it happens, this time around excessive credit lending to not--trust-worthy people(having very low credit score) in the sub-prime mortgage market is sited as the main culprit behind steep stock market fall as they have de-faulted on their loan obligation. But i say excessive GREED was, is, and will always be the biggest culprit behind every melt down in the asset prices.

Will The U.S. Fed Cut The Rates?

Market players are placing huge bets on a possible Interest Rate cut by U.S.Fed in it's next speech in September following the liquidity crunch in the financial system due to huge losses suffered by large players in the U.S. sub-prime mortgage paper. They also believe that to give a push to U.S. economy and to stabalise slump in the U.S. housing market, Fed will cut the rates.
However their bets can go wrong due to many reasons, one of them is since Inflation in the U.S. is still a cause of concern as Fed himself pointed out in his many speeches, also due to recent pumping of dollars in the system Inflation has the chances of getting a head up. Crude Oil is still above U.S.$70.
So markets will be watching Fed speech very eagerly and any dissapointment on rate cut can induce volatility and more nervousness among investor/trader fraternity.

Keep A close Watch On News Flow

As the title of this thread indicates, keep a close watch on the level of noise originating from U.S. on sub-prime mortgage crisis.
As various central banks of developed economies keep pouring money in the financial system to meet the liquidity demand and maintain the financial markets in good health, it's not far that financial markets again re-gain their strength. Patience will be the key.

Smart Strategy In Rising markets-Part 2

In times of extreme turbulance, hightened volatility, nervousness, tremendous uncertainity over extent of crisis that have caused panic selling in markets like we have at present due to mess in U.S. subprime mortgage market where investors don't know the extent to which this crisis is affecting the overal health of financial system, it's very prudent to be in cash since events like these can provide excellent long term buying oppurtunities once the dust settles down and markets have discounted totally all the bad news.

Smart Strategy In Rising markets-Part 1

Rising markets are like rising hot air balloon, the greater it rises the more it gives the thrill. One must not forget that if anything goes wrong, fall will equally be sharper. Same with the financial markets, one must be equipped with necessary tools to deal with such situation and one such tool is to always keep the risk/greed in control. Happy investing.