Investment Comments (March 23, 2009)

三月 23, 2009

Stock is up because banks are now debt free after one trillion of write-off’s removed from balance sheet thanks to US government.

Transfer of debt from private sector to the public sector implies less government spending in other programs. Unless US government is willing to pay tons of interest in the following centuries.

We may be out of recession this year, if spending is back on track and jobless rate is stabilized. This Thursday’s GDP release may not be so shocking anymore as the market would rather see what happens in Q1 2009. Unless Q4 2008’s GDP ended up like a whopping -20%.

However, once back to boom, US government will be forced to raise taxes, and cut programs to reduce spending. This may slow down the recovery, but at least it will not have effect to interest rate. Fortunately, this low interest may stay for a while longer as result of higher risk rating in US related investments (hence reduces capital inflow).

In the end, for the following ten years, I will put my money with TSX because of dividend income tax credit advantage. However, we should look at emerging market (agriculture in Africa) and natural resources (food, water, electricity) in the long run.

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