Before you invest you might like to educate yourself. This latest "rally" is just window dressing and momo trades.....DYODD an PROTECT THE CASH!!!
The article linked below details the nature of the debt problem that the US government will be confronted with next year.
In 2009, the Federal Reserve basically bought up almost all of the net new issuance of debt in the US by purchasing $1.25 Trillion of Fannie and Freddie debt with money the Federal Reserve essentially created out of thin air aka monetization. Without the Federal Reserve buying up all of this Fannie and Freddie debt, the credit markets would have collapsed in 2009. However, the Federal Reserve has stated it is winding down this monetization program NLT March 2010.
If the Federal Reserve is going to stop monetizing then who will step up to purchase all of the $2 Trillion of NEW Treasury debt the US government plans on issuing in 2010?
The money has to come from somewhere.
My bet is that the money will come from investors fleeing collapsing equity markets.
Among the most aggressive C.D.O. creators was Tricadia, a management company that was a unit of Mariner Investment Group. Until he became a senior adviser to the Treasury secretary early this year, Lewis Sachs was Mariner’s vice chairman. Mr. Sachs oversaw about 20 portfolios there, including Tricadia, and its documents also show that Mr. Sachs sat atop the firm’s C.D.O. management committee.
From 2003 to 2007, Tricadia issued 14 mortgage-linked C.D.O.’s, which it called TABS. Even when the market was starting to implode, Tricadia continued to create TABS deals in early 2007 to sell to investors. The deal documents referring to conflicts of interest stated that affiliates and clients of Tricadia might place bets against the types of securities in the TABS deal. Even so, the sales material also boasted that the mortgages linked to C.D.O.’s had historically low default rates, citing a “recently completed” study by Standard & Poor’s ratings agency — though fine print indicated that the date of the study was September 2002, almost five years earlier.