Friday, August 24, 2007

A Glance At The Market Today and Six Months Later

It's a day to watch on the market. Things have steadied quite a bit since last Friday's Discount Window Rate Cut. However, where the markets close today will give us an idea about what happens next week. A triple digit loss going into the weekend, or if the S&P closes below 1450, may signal the market moving negatively next week. If the markets can hold steady, perhaps next week will be benign. If the markets somehow end with a significant upside, it would be a pleasant surprise.

Ah, some news coming in. New home sales are unexpectedly up 2.8%. That could convince the Bernanke Fed that a Sept. rate cut is unnecessary.

Unfortunately, we are still talking about the short term. Over the next six months, I don't think that any of this solves the longer term problem of the credit crunch. (By the way, whoever coined the term "credit crunch" should be collecting royalties) The problem is still out there, and it's not just sub-prime lenders that
could be in trouble. Many people that were borrowing against their homes may not be able to continue doing that. Banks and brokers have started closing down subprime units and firing people. These upper-middle class unemployed will suddenly be unwilling to purchase homes. This housing problem has only lit the fuse. There are just too many things that are connected that could hurt the ecconomy. A weak economy will likely mean a bearish market.

I'm not sure that we are sliding into a recession yet but we could be going into a weaker market environment over the next six months. Stay cautious.

------------Sincerely, Trevor Stasik.

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