Investing?

Hey thinking about risk and inflation it seems difficult to pick the right investment tools.
With major government spending inflation is only of a question of timing and magnitude.

Increase in Inflation usually immediately kills the bond market especially with these historically low interest rates on treasury notes. So if bonds are kind of risky at the moments should i rather invest in the stock market? Well the stock market increased significantly over the last two weeks but there is still significant uncertainty in the market especially with the government continuing its involvement in the business world.

My last post really made me think and led to the conclusion that buying a house i probably one of the safest high yield investments. Why? the house market is bottoming out, meaning house prices are low, now combine that with mortgage rates of 4.5% for Americans with decent credit and an $8,000 tax reduction. So financing a house is cheap and prices are very likely to go up. Investing in a house looks better than ever...

Housing Market

Shifting the sight from the stock market to the housing market can be very interesting, i mean most problems started when the housing market crashed and mortgages were defaulted on...

Well there are a number of very positive signs these days.
The latest Business Week's title story: Signs of Life / In some of the hardest-hit housing markets, buyers are starting to stir.

Also a friend of mine in the financial industry mentioned that mortgage applications are on the rise again.

I mean of course eventually people would have to start buying houses again, especially in an environment like this. The market is still flooded with offers and very few buyers. Offers are incredibly good and mortgage rates are at historic lows.

But maybe this is the first sign indicating an increase in consumer spending and a rebounding market. The stock market is strongly related to consumer confidence and spending, if one comes back chances are good that other one will do the same....

Currencies

Something a lot of people are talking about the Euro, Dollar and Pound.
The Pound lost most of its value over the last 120 days the Dollar appreciated from about 1$=.57 GBP where now $1 = .67 GBP and was as high as .73 GBP.

Great Britain was in the news a whole lot over the last couple of weeks. Especially the speech of Daniel Hannan was a much talked about topic (for those who missed it: http://www.youtube.com/watch?v=94lW6Y4tBXs)
It seems Great Britain has a very difficult time dealing with this global downturn in the economy. One fact that shows this more than anything else is the depreciation of the GBP to the Euro the exchange rate is almost 1 to 1 (1.05 Euros = 1 GBP).

But what lies in the future? The big question is how will inflation develop in the US. Will the trillion dollar expenditures of the government drive inflation beyond what we experienced summer 2008? will the oil price go back up and prices at the gass station hit 3 or even 4$/gallon?
What will the new government do to stop inflation? will it continue to increase its involvement in the business world?

these are many difficult questions and only one thing seems for sure. History has a track record of a stong increase in inflation when the economy comes back from a recession with excessive government spending.

Hello

Hi I am Alex and this is my blog that starts today and will toss you some interesting ideas and insights into the current state of the global economy.

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