Sunday, November 26, 2006

Currency Markets

The currency market senses the coming recession much faster than anything else. In spite of bullish technical patterns the dollar has decided to go down violently. A technical bull pattern can turn bearish very violently if the bases are taken out.

The coming waves of foreclosures and bankruptcies in the real estate markets is killing the dollar. Millions of properties are hanging there in the hands of so called ‘quick rich’ investors that have to finally declare bankruptcy and eventually the properties will be foreclosed. The effect on the banking system will be hundred times larger that the Saving and Loan scandal in late eighties.

The 4.5% yield in long bond rates (10 year note) with much higher short term rates is significant. It says some thing is happening in the economy that is not being reflected in the reports. It is the housing collapse and stagnating underemployment that is creating the real negative growth while the official reports show all green in the forefront.

The pattern shows, in each of these cases the housing market starts declining first, the stock market for months keep raising. The complacency increases, the money shifts from real estate to stocks. Then stocks start forming a parabolic top. Then finally stocks go down violently leading the bear market.


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Daily Home Price Analysis

4:34 PM  

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