Thursday Outlook for International ETFs

Includes: DBA, EEM, EFA, EWZ, FXI, IFN
by: David Fry

<< Back to page 1

Some [well, me] are worried about US financial institutions selling themselves to overseas interests as we’re reminded by this line from a current article in Asia Times: “Indeed, China's infusion of US$5 billion into the financial titan Morgan Stanley in December to help rebuild its capital base has been portrayed by some experts as a successful inroad into the Wall Street fortress that should be used by Beijing to acquire more power to influence opinions in US political backrooms.”

At least based on McClellan Oscillator the market isn’t much oversold anymore; in fact it’s back to neutral:

I feel like I’m back in 1987, marked by financial volatility and similar headlines. Although the market hasn’t crashed as then, the two-way action the past few days serves as a strong reminder of those days. Wednesday took a lot of wind out of bears, but we’ll see how it plays out over the next few weeks. The Fed has another shot to lower interest rates in a short two weeks. Goodness, how low can they go from this level?

Essentially the government has thrown the kitchen sink at the markets to support Wall Street and avert a recession. Time will tell how it all plays out.

As this short YouTube video clip reminds us, the value of money in dollars isn’t what it used to be. Further, remember this movie was made at least 10 years ago. When Austin demands $100 billion we should remember in the current environment with central banks injecting hundreds of billions, his request seems a pittance today.

A good source reminds me that recessions don’t usually start with interest rates as low as they were even “before” recent interest rate cuts. But then things are different since our problems with mortgages and derivatives linked to them directly or obliquely are unique and imposing. Currently 10-year bonds with yields of around 3.60% represent a negative 1.4% return below what passes for a headline inflation rate. That’s either a really poor investment or a really bad sign for what lies ahead. We might remember the Japan market top in 1990 and the various stimulus packages [public works mostly] and interest rate cuts [to basically zero] the government there did--all to no avail as its market still is less than half its previous high.

Have a pleasant evening.

Disclaimer: Among other issues the ETF Digest maintains long or short positions in: SH, SDS, IYR, PSQ, DBC, DBA, GLD and IEF.