Interest rates vs inflation.....

There is a huge question that is brewing behind the scenes, when do we raise interest rates? Some analysts are saying we should raise them now, to avoid inflation spiralling out of control. However should the rates be raised now, we are going to throw cold water on the economic recovery, and risk the economy falling back into the recession. However should the FED wait until the economy is stronger, we risk losing buying power to inflation.

I personally think that we need to wait, as raising interest rates now would break the housing market, and cause major havoc on the financial industry which the FED has been working overtime to save. While inflation could be painful in the future, by being preemptive we are hurting the present.

- Arthur Smelyansky

buyer beware

The equity markets are up today, just before companies start to announce their earnings for the last quarter. Investors seem very optimistic and are betting for better then expected results, despite what the economic data has been showing. It is very easy to forget the numbers and hope for a miracle, however unlike some earnings reports, economic data is hard to fudge. The economy still has some painful months ahead, and if my research is right, the banks are headed for another round of painful write offs caused by major defaults in the commercial loans/mortgages sector.


- Arthur Smelyansky

Banks are not done with the writeoffs

Its seems to me that we are about to get another round of mortgage write offs. The culprit this time around will be the commercial sector. Up until now, banks have been extending the mortgages trying their best to keep the borrowers afloat hoping that the market rates will come back to the 2007 numbers. This is called extend and pretend, and if that sounds familiar, its because thats what Japan did in the early 90's. It looks like history is about to repeat itself.


- Arthur Smelyansky