SELL ON RALLY!!!
the us government announced its decision this weekend to take over the two troubled mortgage-finance companies fannie mae and freddie mac. the news was well received by the equity markets judging from the rally on monday.
however, i bet to differ. although this bail out might help to stabilize the credit market temporarily, it also reveals the severity of this credit mess that is endangering both the us and the global economy.
Just a few points to ponder about:
1. the us government is bailing out investors owning more than US$5trillion of corporate debts and mortgage-backed securities while common and preferred shareholders of the two companies lost more than 80% of their share value over the weekend from last friday
2. this exercise would cost the us approximately us$300b which they cannot afford to begin with
3. an increase of us unemployment rate to 6.1%, the highest in five years according to a report on friday
so why should the markets take this positively and justify the rally. i think it is a bear rally and investor should sell into strength.
the us government announced its decision this weekend to take over the two troubled mortgage-finance companies fannie mae and freddie mac. the news was well received by the equity markets judging from the rally on monday.
however, i bet to differ. although this bail out might help to stabilize the credit market temporarily, it also reveals the severity of this credit mess that is endangering both the us and the global economy.
Just a few points to ponder about:
1. the us government is bailing out investors owning more than US$5trillion of corporate debts and mortgage-backed securities while common and preferred shareholders of the two companies lost more than 80% of their share value over the weekend from last friday
2. this exercise would cost the us approximately us$300b which they cannot afford to begin with
3. an increase of us unemployment rate to 6.1%, the highest in five years according to a report on friday
so why should the markets take this positively and justify the rally. i think it is a bear rally and investor should sell into strength.
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