Weekly update

Here is what happened over the past week.

1. Rattled market by supply-shocked oil price, both domestic and overseas

2. China continue its tightening policy at least in the near term due to inflation concern. China posted one of its biggest trade deficit in Feb (a good amunition toward US regarding currency appreciation)

3. Depsite all the 'gloom' and 'doom' happending in the last week.

To put things to perspective:

- the US stock indices have clocked close to 100% return since the low in March 2009.
- Gold more than doubled its price over similar period
- Copper achieved record price even higher than that prior to the GFC
- Crude Oil...
- Iron ore...
- Cotton...
- Corn...
blah.. blah... blah...

4. Market recent jitter has been long overdue and demonstrates the irrationality of the market can certainly goes on longer than one can stay solvent.

5. The bond market has been ahead of the equity as usually with steady increase in yields on both 10 yr and 30 yr US treasury regardless of Fed's QE2 effort (aka money printing)

...Signaling much feared inflationary scenario with sluggish economy in not so distant future.
Or at least the bond traders are increasingly pricing in this scenario.

6. Richard Koo, chief economist at Nomura sums it up well...
When the households is relunctant to borrow under zero interest rate environment, it is sure sign of de-leveraging. It is what happens when the economy is burdened with so much debt that the only thing on mind is to pay down the debt.

Not a good sign for recovery...

All of the above are examples of consequences of the ultimate cause i.e. money printing

So it will be very interesting to watch the tone of Fed when it comes to end of June/July i.e. the original planned end of QE2

Invest wisely