European View
Dear economyguy reader,
As I travel across Europe over Christmas and New Year, I see what is going on here in more depth and have a chance to talk to the Europeans and see their economy through their eyes. Generally, things do not “feel” as bad here as in the US because the of social umbrella that protects the citizens. However, you can see cracks in the economy in the form of homeless and beggars. Home prices have fallen in the UK, but are now stabilized. Property prices stopped rising in Brussels as this is the capitol of Europe, and bureaucrats are moving here by the busload.
This time of year is the most optimistic time – statistically speaking. The trading days between Christmas and New Year, and just after New Year are the most positive in that more times in history, these days have gone up, rather than down. Also, this time of year has less volume of trading, so movements can be exaggerated.
I would expect stocks to continue going up during this period, as well as gold and oil/gasoline. The exception to this rule is for bonds. I would expect bonds to lose value (increase in interest rates) during this period as the fear of inflation and a future FED move upward in rates weighs on this market. The current 10 Year Treasury is about 3.85%, and this is a recent high interest rate as the sideways trend is from 3.25% to 3.75%. However, the historic average for the 10 Year Bond is 4.75%, so there is a long way to go, and if inflation hits, you can expect this rate to go much higher. The Dollar is a question mark for me. After its recent rise, it has stabilized, and may stay stable until after the New Year when the world’s traders will decide which way it goes.
I am contemplating writing my Magnus Opus (that is a fancy way of saying a “big work”) for 2010, by reviewing my economic predictions for 2009 and making them for 2010.
Cyrus and I wish you all a very wonderful New Year, and a profitable one too.
Tom Harvey
