Dollar index finally cracked above 80, with hindsight, many simply attribute this rally to Irish bailout, but crisis comes and goes, this is just one of the reasons.
US core CPI should have bottomed in October with 0.6% yoy, say goodbye to that. US unemployment, consumer confidence/spending will continue to show signs of improvement for the next Q, as with tradition, government revisions come a month late, so watch out for broker GDP upward revisions. Goldman’s too conservative.
QE2 by all means is inflationary targeted, so those who question the effect of the QE2 judged by the yield spike in the 2-10year Treasury Bonds are confusing with short term “sell on facts” with the ongoing trend.
EURO is a very interesting question, because by following its current path, Greece and Ireland will eventually default, because they can’t exit the euro to monetize debt, nor their budget cut will save the day(that’s why Irish govt is standing firmly on its 12.5% tax rate, one last hope to lure MNC to relocate with their revenue streams). But again, it’s a long fought battle for years to come.
Short term, the EFSF will need another injection, rumored 500bln by Germany if Spain is the next. Personally I think that event risk is still far(not kidding), Spanish banks are already deleveraging judged by its ECB borrowing/bank assets ratio continue to decline vs Ireland’s continuing climbing.
And if you really think for the long term, ECB will certainly come up with a plan for “haircut routine”, the real crisis is not about bond holders taking a haircut, but how much.
USD’s correction range probably comes around 82 and finish this rally, dollar index should remain elevated for a few months but 70 sth is going to be tested again by mid 2011, 75 can’t hold. But you can imagine with Euro being an "egg with cracks", dollar's devaluation is not a given.
A share’s 2800 is very sweet spot and this level is a BUY.
A share is not unique, policy ambiguity or price controls never hurt the trend. China needs at least 6 times rate hikes to cover the negative rate environment, still plenty of time to make bubbles.
Disclosure: Long