The Tanking US Econonmy

It should be apparent that the US stock markets are taking, something that I have since long been expecting since last year. Debt owed by the individual is still far too high and the banks are laden with bad sub-prime loans which they still need to sort out.

With dropping housing prices, people walking away from their loans, the financial institutions that thought to buy these sketchy collateralized loans are getting bit in the ass when they cannot recover the money loaned. Expect the financial crisis to continue throughout the year, and as the US government and the Federal Reserve continually have to pump money into the financial markets, expect the US dollar to devalue further.

As large financial institutions, especially those that bought these sub-prime loan packages on margin (ie. a loan) are forced to write down their bad investments, they are likely to sell off stocks or other financial devices to make up for their losses to stay capitalized. There is a significant amount of volatility in the stock markets right now as a result of large sell offs which depress prices and people buying in to take advantage of cheap stock prices, driving the prices back up.

In short, expect a significant amount of volatility in the markets for atleast the next few months due to uncertainty of the financial institutions and how the government will respond.

Barring any catastrophic news in the next month or so, I believe that the stock market will recover temporarily. If there is a bounce in the next month or so, I will likely sell off some of my positions in the market and wait to figure out my next steps.

As of current, I find it rather hard to find any reliable sources of information because most financial sites are filled with plenty of headlines and very little analysis. Most news sources have been painting very optimistic outlooks of the economy (especially press releases from the US government) to prevent sellout fear/panic. In a sense, I do believe this behavior to be rather dishonest.

The US will not be recovering any time soon. I think it is rather likely for the US will stagnate for the coming years. High personal debt, increasing prices and a weakened production base from outsourcing will prevent a quick recovery in the economy.

Looking globally, I think that the Euro will continue to get stronger and there is a high chance that the Euro will take over the USD as the global reserve currency. Should that happen, the value of the Euro may increase somewhat as other counries buy into the Euro.

Developing nations with a strong production base will likely be the least impacted by the financial crisis as their economies should be able to produce for themselves and other markets even if the US economy continues to falter. The US, on the other hand is highly vulnerable as it is very reliant on other countries for production.

I wish I had more time to back up my comments with links, but as of recent, I haven't had much time to summarize my thoughts or keep track of what I have been reading due to being rather busy from work and havnig fun on the weekends.

For those in the stock market, good luck.