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

Overblown economical hype

It seems like over the last few days investors have lost their minds. the SP500 is up more then 7% in a week, on mediocre economic news that point to the fact that the recession is not as bad as previously expected. Thank god for this mornings Bernanke testimony, to pour some cold water on the lemings.
Of note the SP500 pushed past the 950 mark for about an hour before getting slammed down again. Analysts are paying close attention to this number, as most predict that this is where the summer time rally will stall. There is a lot of money tied to the options around this number, so it will be very interesting to see just who will win this battle. A piece of advice to the average investor, sometimes its wise to pass.


- Arthur Smelyansky

Investors must be pretty desperate when they bid the market up 2% on news that the industrial production didn't cut back output as much as initially expected. It seems like everyone is trying to catch the bottom of the economy, so they can ride the recovery to the top. The problem is catching a bottom is like catching a butcher knife thats falling by the blade. Lots of blood will be shed, and many will regret it later.

My advise for now, is to buy some Treasury Inflation Protected Securities. Because if history taught us anything,is that when interest rates are at an all time low, inflation is bound to spike at some point.

- Arthur Smelyansky D.M.S.

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

Dont be fooled by the weekly unemployment numbers

Every Thursday we get the weekly initial claims numbers. Today we had the lowest initial claims in 7 months, is that a good thing? The market seems to like it.
If you sift through the numbers you will realize that while yes less people were laid off this week, don’t forget not many companies will layoff people just before a holiday.
Also the continuing unemployment numbers spiked to a new all time high.
So before you go out and start buying stocks thinking the market is about to recover, think about this, If unemployment is at an all time high, and climbing how is that a recovery?