About 4 months ago, when current credit crisis just started to show up, somebody (I think it was Goldman Sachs, but not sure) said that total amount of writedowns related to mortgage crisis is going to be around 500 billion dollars. Current status: total writedowns around 100 billion, plus 200 billion coming from Fed on March 27, plus 30 billion provided by Fed to JP Morgan for buying Bear Stearns. 330 total. Now, home prices fell hard lately and projected writedowns amount should be adjusted to something like 600-700 billion. So, we are somwhere in the middle. So far, so good. If credit crisis is the only problem, we should be out of the woods by the end of the year. But...
There is a small problem, like an elephant in the room. Nobody talked about it lately, probably thinking it's going to disappear somehow. Name is: China. It seems that Chinese government is holding Chinese bubble using all possible measures. Why? Old Chinese tradition, saving face. They can't do it forever, but they definitely, if at all possible, will hold it until the closing ceremony of Olympics.
There is an interesting dilemma. If I'm wrong about Chinese bubble and it doesn't pop in September-October, now is a good time to buy stocks. Anything, even bank ETFs (but not any bank stocks). If I'm right, then it's time to sell all commodities short, with possible exception of platinum.
A lot to think about...
Disclaimer: This article is not intended as an investment advice. Every person should make her/his own investment decisions based on all available information and advice from her/his own financial advisor.
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