GCC Market Analytics: What's On My Financial Radar

GCC Market Analytics is primarily focused on Gulf equity markets. Occasionally, however, it's a good idea to take a broader look at what's happening in the world. Below are some of the things that have appeared on my financial radar over the past week or so.

1.) Foreclosure Mess in the US

You know something's serious when a new term is coined to refer to it: Fraudclosure. The emerging mortgage foreclosure debacle in the U.S. has the potential to get very bad, very quickly. If you're not yet familiar with this subject I suggest you read this primer.

If there is a significant slowdown in the foreclosure process (Bank of America has already halted foreclosures in all fifty states) then that's bad news for the housing market, bank revenues and potentially their bottom lines.

However, it gets worse. Other issues connected to the foreclosure problem are also emerging. For example, check out this Felix Salmon article. Should anything close to this come about 2011 could see these part two of the subprime crisis.

2.) QE2

Ben Bernake looks set to crank up his money printing machine again. The big question, however, is how much money will be printed. This article makes the case that consensus market expectations on the size of QE2 may be far higher that what the Fed is actually planning.

If consensus expectations are currently being priced into the markets and the Fed action falls short of them then QE2 may not be the big party that everyone is hoping for.

3.) Sliding US Dollar

Down 13% since the June high, it looks like the prospect of QE2 is being priced into the US Dollar as well. However, should QE2 not meet expectations this fall may prove to be overdone, at least in the short-term.

There's a lot ot talk about competitive devaluation and the possibility of a currency war (see here for example). A sliding dollar may beneficial to the US but it's at the expense of someone else's share of world trade.

4.) China now in a bull market (again)

Better news for China equities. After falling 30% following the market top in July 2009 the Shanghai Composite Index has now rebounded by 25%. That's bull market territory.