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Will We Borrow & Spend In 2008?
Author: Ravi Prakash (info)
Website: http://www.optionstradinglessons.com/
Posted: December 31st, 2007 at 11:49 am EST
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It seems we are still using old tricks to solve new problems in the hope of achieving new results. Insane. The Feds are most probably going to drop interest rates in the early part of 2008. In the hope that financial institutions will borrow and lend to each other more freely than they have in the past few months. I do not think we can succeed by borrowing and spending our way through another recession. I think we are already in a mild recession in many parts of the US.
Even though we still have 1 more trading day in 2007, I have taken the opportunity to assess the Market’s annual performance report card. To date the DOW is up 7.2%, S&P500 4.2% and the NASDAQ, a whopping 10.7%. Then again GOOG is up 52.56% and AAPL is up 135.53% in 2007 and tech stocks with gains like these explain why the NASDAQ has fared better. From past newsletters you know I expected the major indices to be much higher by now. Like many I did not foresee the mortgage/real estate issue to create such a credit crisis. That just goes to prove there is no such thing as a sure thing, especially in the Stock Market. As for my personal report card, I did well trading options in 2007. My long term retirement and children’s college funds have done well too. Thank you Oil. I hope my newsletters have provided some insight as we navigated through this year together.
The surprise this year that was not really a surprise was the inflow of billions into the US via sovereign funds. Hot economies looking to do something with all the excess Dollars they have under their mattresses. I definitely see more of that money being invested in the US in different sectors in 2008. It makes sense, with a cheap Dollar and many public firms selling at a discount to their true value. Economics proves that money is always attracted to where it will be treated best.
Now that 2007 is nearly over, I wonder if most of the bad news is also over. There is no doubt that the economy is slowing down and profit expectations for the next quarter or two have been toned down. As long as employment remains steady or grows a bit the US economy will avoid a full fledged recession. In spite of the good intentions of the US government, I suspect quite a few folks are going to lose their homes. The statistics show that anywhere from 1.5 to 2 million homes were bought by people who could not really afford them then and definitely not now. Do I think the mortgage and financial sector have learnt their lessons? No I do not. They will end up in trouble down the road again. Greed and short cuts to quick wealth have been with us since we invented trade and money.
My hope for 2008 is that we get fresh leadership in the U.S. government (personally I would like to fire every single one of them), who will change the way we conduct ourselves around the world. Politics and business are very closely related and for businesses in the US to do well we need to do well in politics too. Both domestically and internationally since the world is getting smaller and world trade is here to stay.
I Wish You All A Happy & Prosperous 2008!
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Authors, Investing, Options, Ravi Prakash, Stock Market
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