Review: Challenges To Maintain Free Market Capitalism

Hi guys,

It has been awhile since I last wrote a review on the markets. 

As I am writing this now, here is a summary of the asia stock markets:

Shanghai Composite  35.94 (1.92%) 1,839.621

Hang Seng  1,142.11 (8.30%) 12,618.38

Nikkei 225  811.90 (9.60%) 7,649.08

Straits Time  145.39 (8.33%) 1,600.28

Kospi  110.96 (10.57%) 938.75

Taiwan Weighted  150.89 (3.19%) 4,579.62

FTSE 100  290.02 (7.09%) 3,797.81

DAX  367.65 (8.13%) 4,152.05

SMI  347.22 (5.89%) 5,546.51

Currently, DJIA, S&P 500 and Nasdaq futures are traded at limit down. There are also talks in the market of possible intervention from major central banks tonight, IMF seeking funding from China and Japan to aid emerging market economies, where they take into consideration of high default risk from these countries. 

What speaks for the strength of the USD despite liquidation from companies, hedge funds and the CDS, and for the weakness of other currencies over the past few weeks. Primarily, the  cause was by a surge in demand from parties who are not part of G7 or G10 who do not have large swap lines with the Fed, e.g Korea, where they are not part of G7, their system at this moment would experience additional pressure on the won, as they do not have swap lines with the Fed, therefore, in order to obtain Dollars, they have to post their national currency (Won) as a form of collateral in exchange for dollars. Similarly, the similar situation is happening to many emerging economies like Pakistan, Russia, Kazakh, Emirati and etc banks. 

With further job cut announcements, starting from a few institutions like Caterpillar, GM, Merril, Chrysler and Goldman, we may continue to see further evidence of a full blown recession, that the US dollar may have not factored in, in the next few weeks, after the liquidity squeeze gets resolved. 

Watching the Banking Committee yesterday, where the Congress tried to grill Greenspan, Snow and Cox, was indeed an emotional moment for me. The ex-Fed Chairman was given utmost disrespect, as his speech was cut short, and he gets very rudely interrupted during his Q&A, I thought he deserved his stand to explain, as someone who had dedicated to serve as the Fed Chairman for more than 40 years. If you were his age, and given this time where you could be flying elsewhere for your retirement holidays, would you waste your time in front of a group of people whom you know that will grill you, and admit that your ideology of a free market system was flawed? In my opinion, I respect this chap for his honesty, and to be very honest, in my opinion, there are no flawless system in governing in the financial markets? Even nature does not give you a perfect forecast of any nature product's life cycle. 

Continuing from the above emotional message, I personally feel that we will continue to face challenges in the financial markets, where the DJIA we may see a bottom at around 7,200. In view of Euro/Usd, the USD will likely begin to weaken on the mid term from 1.22ish. These views are just my personal views on the market, and they are not meant for professional financial advise, therefore I hope you could just view this with a small amount of belief. 

Hope you guys have a great weekend. Good trades to all.