The cry on the street over the past few weeks of 2009 has been that the crisis is nearing an end – don’t believe it.
Citigroup, the mammoth US bank that the government owns a 40% stake in posted a profit for the last two months and it helped rally the stock markets more than optimism about a recovery.
US Treasury Secretary, Tim Geithner announced that the recession will end in 2010 – wishful thinking. After Citigroup (once a 100+ US Dollar a share company, now holding firm at $1.35) announces their undeclared exposure to bad debt, and actually puts this huge weight on their books, you will see the euphoria subside.
Forex traders were not fooled, as the currency markets seem to have a better finger on the pulse of reality.
While the dollar has been pumped up after the Yen lost its safe-haven appeal and the Euro and Pound deal with political and economic woes in their back yard, the dollar pretty much gave back some of those gains to almost every currency out there yesterday.
Keep in mind though it is also a holiday week so no one is really trading, but since I have to write something, might as well take the opportunity to jab something.
Some argue that this was mere profit taking and yet some, like me, attribute this to more of a protest against what the forex street sees as double-talk and balance-sheet economics.
Geithner does not know that this recession will be over in 2010 – in fact no one does, and the data being released across the globe each day says everything to the contrary.
Citigroup posting a profit without putting their “toxic assets” on the books is also foolish – because it will eventually have to declare them and once they do they will see how the markets react then.
The Eurozone is being plagued by the same kind of issues.
Central Bank governors coming out in interviews declaring new and aggressive policies towards fighting economic turmoil in the region without having a quorum in the ECB body and without mentioning specifics, is giving false hope.
Meanwhile rating companies are slashing the worthiness of many European countries, like Greece in most recent history. Many Forex online blogs I have read are looking for specifics from Juergen Stark and Jean-Claude Trichet and company – but only smiles and waves are what they are getting.
The EU is in a bind, because its Eastern members are in trouble and are not being helped by the ECB while the PIGS (Portugal, Italy, Greece and Spain) are also having issues and rest assured, no one expects the EU to let them fail. Social unrest is the key here – and you can see it each day in the newspapers.
Strikes, riots and disorderly conduct are plaguing the EU right now – banks are falling and being nationalized, the currencies are in flux and the stocks are dead and the EU does not know what to do – so they state in interviews and in public speeches that they have a plan – things will be great – and the forex trading expets and online Forex writers ask “how”? You can do what you want with a dead fish, make it look as pretty as you can – it still stinks.
Don’t be fooled – read the numbers for yourself – look at the geo-political situations and make your investment and trading decisions based on your own knowledge and instinct.
Public officials have a job to make the citizenry feel safe and secure – and sometimes this is done by not letting on to the fact that they are just as scared as the street is.
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