Quarterly Market Update !

Hi everyone, it's been a long time i haven't post any update here. The main reason is i have a hard time predicting where the market is going to go, i guess that goes the same for some of you out there.

For the 3rd quarter of 2007, it is a tough quarter for most of the trader i believe. Even Hedge funds manager struggle to perform, professional trader suffer losses due to the highly volatile and uncertain world stock market. On top of that, increased oil price created a significant amount of risk to the economy.

~Subprime Mortgage issue
From the 2nd quarter, the subprime issue, which leads to the breaking of trust among the banks. A lot of investor are questioning about the investment banks rating for the CDO. A triple A credit rating is actually just a triple B or a single A rating. Investor no longer trust the rating and flee from this assest, massive redemption is happening in US and then spread to UK nothern rock. The effect is slowly price in to the market, we've seen banks reporting on the first quarterly loses on the Fix Income and CDO. As there will be more deliquent cases mount up, so the subprime issue may continue to worsen for the coming quarter.

~Carry Trade rewind
After which risk willingness start to unwind, so do carry trades. And what does that mean? The era of an easy money is finally come to an end. As investors not willing to take risk, the fund will flight to safety asset and if it continue to worsen, the liquidity will soon dry up.

~USD weaken to record low
Japan and China led a record withdrawal of foreign funds from the United States in August, heightening fears of a fresh slide in the dollar and a spike in US bond yields. USD slided further after the first US interest rate cut of 50 basis point. Especially against EUR, CAD and AUD. Will FED cut interest rate again this 31 Oct? And what will the G7 meeting mean during this time? Rumours about some of the European union expressing the disappointment on High EUR dollar is hurting the economy, but US seems to be comfortable with the USD weakening, which will benefits the economy during this market down turn.

Let's revise some of the big headline news for the past few months:
- Alan Greenspan predicted the coming of the US recession.
- Bear Sterns Hedge fund collapse.
- The bank of England bail out the northern rock mortgage institute.
- Barclays drop the acquicision plan of ABN AMBRO.
- Warren Buffett drop the plan to buy stake in Bear Sterns, and sold some holding in chinapetro.
- China inflation at all time high.
- India regulatory change, investment halt.
- Oil reach $90 per barrel.

~How will all this things gonna end up ?
A prediction done by a reputable bank's chief investment officer for your reference: (US Market)
- 40% chance of prolonged soft landing.
- 20% chance of a short soft landing.

-30% chance of a short recession.
- 10% chance of a prolonged recession.

So the fact is US is going to slow down. Whether it is a soft landing or a recession.

Next article i will discuss about how US recession will affect Asia and the rest of the world. And where shall we invest? Stay tune.