EconomicCrisis.US

It finally happened. Last week, one of the big bond rating agencies, Standard and Poor’s, put a “negative” watch on U.S. government debt. This is the first time the good old US of A isn’t AAA-rated with a “stable” outlook.

How long can we spend $1.40 for every $1 we bring in? According to S&P, the chickens will come home to roost as early as 2013 if Washington doesn’t start getting our nation’s finances in order.

The credit watchdogs are rightfully worried the right and the left won’t come to an agreement to reduce deficits until it’s too late, resulting in a possible downgrade of our actual bond rating, from AAA to AA, and not just a downgrade in the “outlook.”
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The U.S. dollar faces a long list of challenges in the New Year.

The U.S. greenback could strengthen in 2011-but only against the European euro and other currencies with heavy exposure to the European debt crisis, including the British pound sterling. Against virtually every other currency, however, the U.S. dollar is likely to be the loser.

In short, the outlook for the dollar in the New Year depends almost entirely on which currencies you’re comparing it with.

Euro Madness
Not surprisingly, the euro is in for a rough time.

In a just-released survey conducted by Bloomberg, the three currency strategists with the best track record over the last 18 months say that the worst is yet to come for the euro in relation to the dollar.

In fact, these strategists expect that the euro’s slide will continue into the middle part of next year – extending what’s already been the worst year for that currency since 2005.
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With a tightening in available credit from UK lenders a large number of borrowers have been struggling to remortgage their property as their product reaches the end of the initial term. For some this will not necessarily cause a problem only because of the historically low Bank of England base rate. However, for anyone that needs to remortgage to get away from rising payments this can be a real problem and one that may not go away for some time.

Add to this the situation regarding house prices falls in the last few years and there is also the problem associated with reduced equity levels. Most lenders today are asking for a minimum 20% – 30% deposit and this can be impossible to achieve if you find that the equity in your home has reduced significantly to the point that you cannot remortgage. All of this has added to the woes of people struggling with house repossession.
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If you’re like me and reluctant to join the stock market frenzy with open arms, then consider buying reverse index funds that bet against Treasury bonds.

This strategy offers a high value alternative to joining a 50%-plus stock market rally since March as long-term interest rates rise on most days when the stock market climbs.

As stocks soar, investors continue to unwind safe-haven positions in staid, low-yielding Treasury bonds – a trend that won’t end any time soon unless the economy sinks into another nosedive. TBT, or the ProShares UltraShort Barclays 20+ Year Treasury Fund, provides twice the inverse performance of its benchmark; it’s definitely a volatility-based strategy but also one that holds merit because the post-1982 bond bull market is dead…
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