Economics-5-

Emailed 1/14/2011

I would like to just highlight the following issues in economics for this year.

The Federal Reserve have pumped 2.5 Trillion Dollars in the economy to get it going since the start of this Crises. Yet latley, due to the fact that unemployment is still high 9.7%.. they decided to continue pumping an additional 600 Billion Dollars until June 2011.

What does this mean.. It means that the Feds is adamit to improve the economy no matter what, and accordingly the stock market as well.

Bernanke annouce that the GDP for the year 2011 will be between 4-5 %   which is very bullish.
The problems in Europe is huge and every body knows that, however no body knows what is the next step for it. Germany, Japan, and China decided to help as well to stablize the situation in Europe.

The last unemployment report came out to be 9.4%, my estimate by the end of the year woud be 8 Plus which is considered heaven.
People will start go back shopping to a great extent, prices would be leveled to a reasonable low prices in most items.

Housing has a great back log of forclosures which will take many years to clear it and with that the banks can spread the losses over so many years. The prices of houses may decrease slightly, some more than others due to the fact that many jobs lost use to pay higher salaries.

Income will not increase that much as the fear was deflationary all through and according minor increases in income will be happening this year.

As demand start increases, businesses will start hiring again and it seems that this year the market can go up 10%.
This could be investment from money coming from China, Europ, Japan
.
So What to do.
Diversify, diversify
Add some to Mutual funds or Stock index account which is formed of stock, and less on the Fixed intrest account or cash reserved
Bond and Mutual Bond became priciy since more money flooded these bond in the past couple of years.

Don't do something your not comfortable with.
If you thing difrently you may be right as well.
The market in one year can go up, down or side ways and those who did any thing could be right at one point.
Buy and hold now in my mind would be one year and then review it again as if you are buying and holding again.
It is a fast moving change in the economy and accordingly is the market.
That is my story and I am sticking to it.
Good luck.
Nazeeh