Tufar on Finance and Economy » Thoughts

What to Expect in 2009

Nicolæ Tufar — Sat, 27 Dec 2008 10:10:46 +0000

Bankruptcies, collapses, loss, death, fraud. Housing bust. Liquidity Crisis. Credit crunch. Commodities prices bubble in the first half and bust in the second. This is how we will remember 2008.

What will await us in 2009?: Continuation of this year’s tendences, stagnation, or a swift recovery? The stock market is trending sideways since October 20 and refuses to go any lower. Bonds see unusual demand due to investors requesting their advisers to get out of stocks and into bonds. Corporate bonds are deemed to risky for investment. The Fed is taking care of this by dropping the interest rate to make it meaningless to invest in treasuries. Soon all this money will be pushed out of treasuries into corporate bonds and equities.

The problem remaining: toxic assets on the ballance sheets of the banks. Because of them, banks refuse loan. The Treasury is addressing it with TARP. The economy gave a little bit of slack? Unemployment figures start to worry us? Obama’s infrastructure spending program will take care of it. Every aspect of crisis is taken care of and I am positive that in 2009 we will see the early sings of recovery and with oil and commodities prices at record low, the economy will gain speed quicker than in other recessions.

What will fuel recovery and growth?: Zero interest rates and inflationary Fed policy. It is just a matter of time when the gears of economy get back to full speed. Demand for oil and commodities will rise again and we will back to speed by the fall ’2009.

Everything is going to be alright.

Merry Christmass and a Happy New Year!

Obama is a Disaster for American Economy

Nicolæ Tufar — Sun, 26 Oct 2008 06:12:10 +0000

Analysts Can not Predict the Future

Nicolæ Tufar — Wed, 22 Oct 2008 09:38:15 +0000

Earnings Forecasts

FT Alphaville reports that predictions made by analists are no better than extrapolating past earnings into the next quarter. Nither analysts nor the business woners and managers know the future. Trusting analysts’ judgment in time of crisis is foolish, asking their oppinion in time of prosperity is worthless.

Next Bull Market

Nicolæ Tufar — Sat, 18 Oct 2008 18:21:46 +0000

The period of credit expansion from about 2001 is over. Large amount of capital is destructed; deflation rampant, a half year or a whole year of recession awaits us. Why this deflationary cycle was so severe? In my opinion, it was caused by spike in commodities prices, especially oil. Because of commodity price inflation the Fed and ECB was reluctant to lower rates and we got severely short on liquidity. The main reason was the housing correction of course.

Now, with commodities prices quickly deflating, and Fed rate at 1.5% and soon to be lowered to 1.25% and then to 1.00%, the central banks are no longer worried about inflation and are intended to flood the market with liquidity. Now, we need to convince the banks to give out the loans and the world economy is ready to start a new expansion cycle.

What will be the next bubble? I am thinking on and, as usual, my guess is no better than a random guess. I will watch and see. Meanwhile I am off the market, just playing here and there with small stakes.