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A Volatile Ride

May 23, 2011 – 5:06 pm

The European debt issue is back. Downgrades for Greece and a surprise downgrade for Italy impacted all stock markets around the world including ours. It didn’t help that worries about China’s growth also was in the news.

As for Europe this problem has been simmering for a long time and it should not surprise anyone that it flares up every so often. I doubt it will be a long term economic problem for the rest of the world. China is another story. They have been trying to slow their economy by raising rates in an effort to stem inflation. It appears that they have been successful in slowing their economy but have they gone too far and is inflation tamed? Will they be able to engineer a soft landing and maintain growth at a level that will keep their economy moving forward to produce enough jobs? That is a tall order. At some point their attempts at managing a free enterprise system within a communist command and control government is going to fail. We are seeing stresses being built now in over building. They can manage it for some time and they can hide the problems for a while as well but at some point it will spin out of control. It’s when, not if. But that could be years away. With their cash hoard they can mask a lot of problems and they will do so.

For us with our dollar gaining strength we are likely to have a small correction. Make no mistake with oil prices falling with other commodities and jobs being created it should only be a correction; something to buy, not sell. Meanwhile it will be a wild ride.

Good Trading
Steve Peasley

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