Saturday, October 6, 2007

Weekly Markets Thoughts - August 12, 2007

The Fed kept again the interest rates unchanged. Is there any other choice? Well, not really and until it is possible the rates will be kept at these levels. The problem is that it is already very suicidal not to increase them as the inflation is accelerating more and more. On the other side, rising interest rates will block the not so robust American economy and will push it to a recession probably never seen beforeIt is a no win situation and the only thing to do for now is to postpone the disaster as long as possible, not to prevent it. And this is exactly what the Federal Reserve and its Chairman Ben Bernanke are doing.

The big story for the past week was that American Home Mortgage Investment filed for Chapter 11. Hey, everybody is looking surprised. Are you really? With all those mortgages given to people who have trouble to pay their grocery bills, is it surprising that they are not able to make their mortgages payments? And the absurdity of giving a 40 years mortgage to a 55-60 old year borrower? We have been to the extreme for sometime now and the bankruptcy of AHMI is just a little sign of what is lying ahead of us. It is a little warning wave. The tsunami is not here yet but it is approaching faster than most of us can imagine. As I said in one of my previous commentaries, we are not there yet. Those of you who are overloaded with mortgages of two, tree or more properties, you still have the time to reposition and better diversify your investments. For another 12-18 months we have the opportunity to rethink our investment portfolios and hedge our assets value.

The stock markets are still in a correction mode but nothing significant. Most of them crossed support levels and are going down further. It is still within the expectations. There is room for a further decrease but no place for worries. Not for now. The fall will push them back up and 2008 is expected to be a very profitable year. And probably the last one for a long, long time.

The currencies are consolidating and preparing for the next move up. The US dollar index is staying around 80.50 and is going to improve a little bit. Nothing major!

The commodities are the only stable place to be now and for the years to come. They will be your lifeline - the only hedge against inflation and economic collapses. Gold and silver are building a very solid support and the next move up should be very impressive. Crude oil is correcting from its recent highs but has room to rise further. The fall season is usually very good for commodities and this fall will not be an exception. Do your research or ask your financial advisor for help.

Best regards and good investing,

Stefan Penkov

Disclaimer: Stefan Penkov is not a registered investment advisor.The opinions and statements made in the above publication are the result of extensive research and are believed to be accurate and from reliable sources. The contents are my current opinion only, further more conditions may cause my opinions to change without notice. The insights herein published are made solely for international and educational purposes. The contents in this publication are not to be construed as solicitation or recommendation to be used for formulation of investment decisions in any type of market whatsoever. WARNING share market investment or speculation is a high risk activity. Investors enter such activity at their own risk and must conduct their own due diligence to research and verify all aspects of any investment decision, if necessary seeking competent professional assistance.