Friday, November 26, 2010

Rough Start to Black Friday and Update on European Debt Crisis

Before we begin, a few announcements:
  • I hope every had a very nice, safe Thanksgiving.
  • A new feature has been added to Invest Chief.  At the bottom of each post there are options to: email, blog, Twitter, Facebook, and Google buzz to share with your friends posts from Invest Chief. 
Markets opened lower today on European debt worries.  The Dow is down 83.36 or .75%, Nasdaq down 7 or .3% and the S&P 500 is down 8.05 or .67%. 

The main focus today should be retail, its Black Friday.  Earlier this week a surprising consumer report came out that showed us that consumers are starting to spend their income again.  A surprising lower number of people are applying for unemployment benefits went along with the consumer report earlier this week.  Retailers are also cutting prices a record rates to make it even more affordable for consumers to splurge on holiday gifts.  This could point towards a good holiday retail numbers.  Now to be clear, we are in no way out of the woods.  Yes, the consumer is showing signs of recover, as is employment, very slightly.  However, keep in mind we still have an unemployment number around 10%.  That being said, the economy is, no doubt, much stronger than is has been in the last few years.  Please refer back to my "Playing The Cautious Consumer This Holiday Season" article from Monday to see how to play retail this holiday season.

Back to the European debt crisis.  Ireland was recently bailed out by the EU and they have issued a 4 year plan to get their economy back on target and stabilized.  However, many people are skeptical that Ireland will be able to hit that target because of its insistence not to raise the corporate tax rate, which the EU has been pressing Ireland to raise.

 The problems don't stop there.  I was reading the Wall Street Journal on Wednesday and an article entitled "Fears of Domino Effect Pervade Europe" caught my eye.  Essentially, the article says that because of Ireland's bailout and unstable economy, other EU nations such as Spain and Portugal, and Greece.  Spain's economy is on the brink, as is Portugal.  Greece's debt securities are at risk to default.  Lots of unrest is occurring in Europe right now which could prove to have worse outcomes than earlier this year when these problems were last in the spotlight.  A safe trade to be in right now is Powershares Bullish Dollar Index (UUP).  The Euro is not safe right now due to all the uncertainty in Europe.  The Pound fell against the Dollar based on risk adversion.  Lastly, the Dollar rallies against the Yen based on a higher inflation number in October.  We are in an uncertain time right now with Europe's economic woes, potential second Korean war, TSA full body scans at airports.  A safe place to be is UUP.

***Please take the time to look at Getting Started in Currency Trading by Michael D. Archer, which can be purchased via the link to the left.  I have read it myself and it is the best book I have read about currency trading (FOREX). 

Disclosure: No positions

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