RALLY IN ITS FINAL LAP

The problems in the U.S economy are not only continuing inspite of the liberal printing of currency notes by the Federal Reserve but are actually worsening day by day. Take a look the recent economic news and numbers:

1.UNEMPLOYMENT

This is threatening to touch double digits soon but President Obama continues to guarantee jobs to everybody everyday.

2.CLOSER OF U.S.BANKS - REGIONAL

Regulators have shut Warren Bank in Warren, Mich., and two small banks in Colorado and Minnesota, boosting the number of failed U.S. banks this year to 98 as loan defaults rise in the worst financial climate in decades, as losses have mounted on commercial real estate and other soured loans in the wake of the financial crisis and the recession that has gripped the economy. The failures have cost the fund that insures bank deposits about $25 billion, the FDIC said Tuesday.

The fund has been so sapped by the wave of collapsing banks that it now has fallen into the red. The FDIC now expects the cost of bank failures to grow to about $100 billion over the next four years -- up from an estimate of $70 billion made in the spring. Most of the $100 billion in costs are expected to come from failures this year and next.

3.SOCIAL SECURITY COSTS

As more elderly people who are losing jobs are not able to get another job, they are opting for the social security and medical benefits which is already putting a strain in that fund.

4.The major buyer of U.S.Bonds/treasury paper today is China which is now open in its view that it wants an alternative currency to U.S.Dollar and that it is looking at investments which are in real assets/value than in paper form.So, if China decides to stop funding the borrowings of U.S then imagine what will be the result. This situation is without taking into a/c the possibility of China selling U.S bonds/treasury papers?

The stock markets world over are in their own self,going up on easy money flow and discounting the positives only like signs of growth(or worst is over). These same theories are talked about even in December 2007 when U.S Fed cut interest rates from 5.25% to 0.50%. The money flow was there and also lot of MONEY WAS WAITING IN THE SIDELINES to buy at every fall. But we all know that the money in the sidelines never came to the market even after SENSEX came down from 21000 to 7700.

I am fairly convinced that this liquidity driven rally is in its final laps now and may soon end gasping for breadth as it has no final target to end the race but will have to end on its own only due to exhaustion.BEST OF LUCK