March 14, 2009

We must either make do with less or work more

Weekly Snapshot
• Chinese Premier Wen expressed concerns over safety of their US holdings
• US consumer confidence slightly higher than expected
• US trade gap narrows to $36bn, lowest in 6 years
• Switzerland intervened to weaken its currency and adopts quantitative easing
• Switzerland, Luxembourg and Austria are planning to ease banking secrecy
• Standard & Poor’s downgraded its AAA credit rating for GE and GE Capital
• Citigroup reported the profitable first two months for 2009
• Bernie Madoff pleads guilty to 11 counts, goes to jail
• Roche Agrees to Buy Genentech for $46.8 Billion
• Freddie Mac made a loss of $23.9bn in Q4 - needs another $31bn from the government
• Audi reported a rise of 30% in profit after tax for 2008, its best year for sales
• China’s exports dropped in Feb-09, down by 26% compared to Feb-08

US Equity Markets
The US market rally that started on Tuesday ended the week with four consecutive positive trading days. The good news comes with some analysts suggesting a market bottoming process currently in formation. However, as the above chart suggests, it is important to keep things in perspective. Equity markets are far from being “out of the woods”.

Recommended Read
As a sobering note towards the ballooning US fiscal deficit, here is an article that should be required reading for US politicians:,1518,605695,00.html

As noted a few times before, leverage is what caused the excesses leading to the ongoing financial crisis. More leverage is supposed to fix these problems? I couldn't agree more with the former German chancellor Ludwig Erhard when he said: work and only work is the foundation of prosperity: "We must either make do with less or work more." He felt that the third way, which leads to the vault of the next best bank, was a dead end.

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Good luck & good trading!

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