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Thursday, August 21, 2008

BetOnMarkets Afternoon Report

Markets are on edge with both bulls and bears frustrated and unwilling to take on big positions. There are two big unknowns, the first is the continuing political crisis between Russia and NATO countries. The focus has now shifted from Georgia to the proposed missile defence battery to be located in Poland. The longer this goes on without constructive dialogue from either party, the more nervous investors become. As testament to investors growing unease, oil prices have finally started to move higher, a significant development considering the recent ambivalence seen in crude prices. Russia is vying with Saudia Arabia to become the worlds top oil producer.

Secondly, the specifics of the expected US government bailout of the GSEs Fannie Mae and Freddie Mac are still unknown. With billions, potentially trillions at stake for the US government and US tax payers, equity and bond traders alike are wary of taking on large positions. Financials are therefore underperforming again today, while gold and oil bounce back from their recent dips.