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Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Obama Hits the Banks that Hit Stocks and Commodities, UK Inflation Soars

News_Letter / Financial Markets 2010 Feb 03, 2010 - 07:09 AM GMT

By: NewsLetter

News_Letter The Market Oracle Newsletter January 24th, 2010 Issue #5 Vol. 4


The Market Oracle Newsletter
January 24th, 2010            Issue #5 Vol. 4

Commodities Currencies Economics Housing Market Interest Rates Education Personal Finance Stocks / Financials Real Gems

Obama Hits the Banks that Hit Stocks and Commodities, UK Inflation Soars

Dear Reader

The big news story of the week was Obama being shocked into action on the Banks AFTER the bruising election result from Massachusetts, which followed a year of dithering on the financial sector reforms issue. Obama has been a huge disappointment during is first year as the U.S. electorate had CHANGE, CHANGE, CHANGE rammed down their throats during the campaign, however we have seen very little actual change where even his flag ship health reforms have now basically been put onto the back burner. Perhaps Obama has now CHANGED and he will actually do something that he has long promised to do i.e. to hold the banks to account and real reforms to prevent them from bankrupting the United States. Obama's announcement immediately triggered sharp falls on the stock market which had been ripe for a correction for several weeks, just waiting for the trigger to begin correcting.

Will the next UK government follow Obama's lead and reform the banking sector? Or will it take a big gamble and bet the countries future on all of the meg-banking casino derivatives trading business that will seek to set-up home outside of U.S. ? We will find out AFTER the next General Election. Though I suspect that Britain will seek to secure this business as the UK manufacturing base is pretty feeble when compared to even that of other consumer imports addicted economies such as the U.S., and we Britain needs some way to address the huge budget deficit that racked up another £15 billion in December as politicians continued to the lie to British the electorate when they make statements that the vast NHS and Education budgets will not be cut but instead increased which IS an election LIE as my analysis of 4th Jan elaborated upon (British Politicians Lying to the Electorate, NHS Budget 4% Cut (Minimum)).

Stock Market

My published stocks analysis expired at the end of December that had called for a rally that targeted 10,500 into the end of December, before a significant correction began, my focus since has been on completing the Inflation Mega-trends ebook (overdue by 8 days) which includes stock market trend implications as well as many others as we head for high inflation for at least several years if not longer.

The 3 day plunge is the strongest price / time action since the birth of the stealth stocks bull market in March, my analysis implication has listed the size of the corrections to date as a guide to what to expect during 2010, therefore this current decline is strong in terms of price / time change that is suggestive of FURTHER declines even if the stocks bounce from current very oversold levels, this is inline with my overall scenario of a sideways trend for 2010 for western stock markets which my earlier analysis (UK Interest rate forecast) alluded to.

Nevertheless this so far is still a correction which means we are STILL in a stocks bull market the probability for which at the very least favours a 2010 sideways trend with an upward bias. Instead we will soon see the perma-bears appear again on CNBC to claim the Bear Market Rally is OVER ! Much as I reacted to the crescendo of crash calls last October (Stock Market Crash Again?). A 60% gain in 9 months is NOT a bear market rally, it IS a bull market, even if the performance of the indebted western stock markets is to be poor during 2010, I do expect emerging market stocks to again significantly out perform during 2010. More on in this in an in depth analysis this coming week (newsletter).

U.S. Dollar

The Dollar bull market remains in tact and continues to target USD 84.

British Pound

The conclusion in the interest rate / inflation forecasts was that Sterling would weaken against the Dollar after a bounce back above £1.60 (with the key trigger being £/$1.57) but strengthen against the Euro, recent price action has been in line with these trend expectations.

Gold

Gold's immediate trend remains in line with expectations for a correction targeting $1050 and possibly lower, last in depth analysis of 2nd Nov 09 for a bull market for 2010 remains therefore the current decline looks like a good accumulation opportunity, the lower the better! Remember we are in an inflation mega-trend.

Inflation Mega-trend

The Inflation mega-trend manifested itself this week as UK inflation soared by a FULL 1% in one month, rising from 1.9% in Nov 09 to 2.9% in Dec 09, the biggest rise on record, which is pretty much in line with my forecast trend as per the analysis of 27th December 2009. Deflationist in the UK have suddenly fallen silent for now though I can see the cogs turning in their heads looking for possible explanations for being WRONG but still being right at the same time! Which means that they DO NOT UNDERSTAND what Inflation or Deflation is i.e. the direction of general prices in an economy which means the Consumer Price Index (CPI). The Stock market indices or house prices or even bond prices are NOT General prices, they are ASSET prices.

The fact is that if you listen to the mainstream press on BOTH sides of the Atlantic which believes the Central bankster's that Quantitative Easing aka money printing is going end, then you will only ever be able to act AFTER the FACT, i.e. AFTER inflation has risen, AFTER interest rates have risen, AFTER your investments have gone up in smoke!

My target for Q.E. stands as of 10 months ago that Q.E. in the UK will continue towards a target of £450 billion, and the target for 2010 is to reach a total of £275 billion (08 Jan 2010 - Bank of England UK Quantitative Easing Money Printing to Hit £275 Billion 2010 ). Similarly Q.E. in the U.S. WILL Continue regardless of utterances from the Fed that it is coming to an end.

Britain's $85 million Fake Bomb Detector Gift to Iraq

An item in the general press perked my interest which illustrates how smoke and mirrors are used to DEFRAUD governments, much as Quantitative Easing defrauds savers in the UK of the REAL value of their savings due to virtually ALL UK Instant Access Savings Accounts Paying a NEGATIVE REAL RETURN on savings of as much as -3%. The item in question is a British company along with several other companies around the world selling FAKE hand held Bomb Detectors to Iraq and Afghanistan. Basically they are selling a plastic box with nothing inside it, with an antenna stuck on the end, i.e. along the same principles as a divining rod. This worthless kit is being sold to the Iraqi government for $40,000 each on which they have spent $85 million. Not only has the Iraqi government been scammed, but countless people have lost their lives as bombs get through the fake explosive detectors.

The latest news is that the alleged fraudster has been arrested. Perhaps some day in the future when the economy lies in ruins there will also be a proper day of reckoning for the bankster's ?

Your analyst trying to get this ebook finished ASAP.

Source : http://www.marketoracle.co.uk/Article16728.html

Your analyst.

By Nadeem Walayat
http://www.marketoracle.co.uk

Copyright © 2005-10 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

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