UPDATE

if you have been watching CNBC or Bloomberg for the past month, you probably have heard from 9 out of 10 guests on show saying this is a great time to buy into stocks and you will come out a winner 3-5 years down the road. should so many funds be buying into the market assuming these guests do what they say then why isnt dj rallying. they probably are lying or are sitting on the sidelines watching while preaching [dont do what i do, do as i say].

the market is telling you a different story, funds go straight into t-bonds [read earlier post on tbond yield in this blog] and the dj is going nowhere even after the rate cut of 75 basis points by the fed although it did rally a few hundred points to touch 9000 but didnt manage to stay there.

wall street journal had an article about synthetic cdo that said so many town councils round the world and pension funds are involved in synthetic cdos that any serial bankruptcies of companies listed in the cdos will lead to even more credit crunch for the global economy. there are also mbs on alt A loans [arm - adjustable rate mortgages] that have to reset interest rates in 2009/10 which could accelerate foreclosures of real estate. there are also prime mbs and conventional loans on the banks' balance sheet that will hit the wall if the tbond yield is any guide to bankruptcies.

china is also seeing its foreign reserves contracting. this is the reverse of what happens when its foreign reserves expand which add to the yuan money supply. the shrinkage of such reserves indicate a contraction of yuan money supply which will balance out the effects of any stimulus if the contraction is serious and could be an obstacle to its plan to stimulate the economy.

you have been told what will happen, prepare yourself and see how the final outcome will pan out shortly.