FXIS Market Insights

Weekly Snapshot
• US unemployment soars to 8.1%, highest since 1983; employers slashed 651,000 jobs in Feb-08
• ECB cut rates to 1.5% and forecasts -2.7% GDP growth for the euro area
• Bank of England cuts interest rates by half a percentage point to a new low of 0.5%, adopts “quantitative easing”
• German industrial orders are down by 42%
• French fiscal deficit might reach 5.6% in 2009, the highest level in 16 years
• AIG reported a net loss of $61.7bn for Q4 in 2008, total loss for 2008 nearly $100bn
• US government extends another $30bn to AIG in addition to $150bn in equity & loans given last year
• Wells Fargo slashes dividend 85% to 5 cents
• China sees signs economy might be recovering
• Coke plans $2 billion investment in China

Things that make you go hmm...
A whole website devoted to this theme; their finance section has an interesting story about a sector in the economy that seems to be booming: http://www.makeyougohmm.com/category/finance/
Condom sales were up 5% in Q4 of 2008 and up about 6% in January '09 compared to last year. There may just yet be certain recession-proof businesses.

On another note and along the "lines" of things that make you go hmm..., CNBC had a very telling slideshow of famous last words: http://www.cnbc.com/id/28435645/28435645

My favorite line: "In today's regulatory environment, it's virtually impossible to violate rules...it's impossible for a violation to go undetected, and certainly not for a considerable period of time." Bernard Madoff, Oct. 27, 2007.

Recommended Read
Some signs of a market bottom nearing: http://www.bloomberg.com/apps/news?pid=20601087&sid=ahZohVugqHKU&refer=home

Betty Liu and Lynn Thomasson are pointing towards signs of a possible market bottom nearing soon. Steve Leuthold, a traditional short fund manager is quoted as saying: "now is the time to buy equities because investors are too fearful about the economy". Another typical short seller, Bill Fleckenstein, apparently closed his 13-year-old bear market fund last year because "valuations made it too dangerous to bet on more losses".

Neither the US stock market nor any other global equity market appear to be reflecting a clear bottom just yet. But there is a growing sense of capitulation of a large part of the investment community. The VIX Index, an indicator of fear reflecting the amount of volatility in the market, had recovered from the insane levels of last fall (high of 89.53) but is yet again at the 50 level which, in historic terms, is about twice as high as average volatility in the markets. Some traders also argue that we need to see levels near 80 once more before a "true capitulation" is evident and the market bottoms out.

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Good luck & good trading!

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