US Injects $1 Trillion to buy up Banks Toxic Assets

The latest moved by the federal reserves to use US$1 Trillion to buy up US banks toxic assets. This is a move to free up those assets that is basically pulling them down.Sound foolish to most but it is actually a very positive move. They use the funds from US Govt Bonds to finance this expensive exercise which by the way the major holders of this bonds are the Chinese Govt.This will affect the value of the US Dollars as seen immediatly after the fed announcment Euro/USD depreciated close t0 8% within a week.

Ok now lets let me explain how it will positively affect this economy directly by buying all this assets.Bank will be free from all this risk, which means they can start lending money to companies or individual either to finance a house or buy a car.When people are able to secure this loanit will have a chain reaction property market will stabalise this risky Toxic assets as long the US Govt have the financial muscle to hold this stock this assets will eventually apreciate that is their HUGE BET.

My view is that USD will continue to depreciate as they have to print lots of money to save the economy.

Euro/USD

My 1st target is achieved at $1.36 after this moved now i will be looking for EURUSD to try the $1.47 resistance level.

Citigroup

My recomendation to buy this stock like an option in my previous blog is now even more attractive as we now know that

1) It will not be nationalize

2) Getting detox by the us govt of all those toxic assets

3) By laying off 50000 jobs .

4) By controlling those exorbitant pay+bonus of their executive .

5) Competitor banks collapes which they have less competitors for the same lucrative PIE.

After all this points you can all add up and come to your own conclusion.


Kev Tian

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