Wednesday, September 29, 2010

The Pains & Fun Of Stockmarket


Pain or Pleasure is determined at the moment in decision-making.

When small countries collapsed, few blink an eyelid. Zimbabwe collapsed financially and Vietnam revalued her Dong. Stockmarket sharp correction is irrelevant if it did not happen in unison. Nobody seems to get hurt; at least not the majority!

Asia had her Financial Crisis in 1997/98 and the Financial Crisis 2007-2010 burned through US to Europe. While the former is a result of ignorance and blind expansion, the latter is the result of greed; Predatory lending, reckless valuation and leveraging, inaccurate credit ratings or selective ratings, off-balance sheet financing, Regulatory avoidance, you name it, you have it; greed under the cover of 'financial products innovation'.

If DEBTs can be used as collaterals to borrow more, if Insurance Company callously INSUREs 'vested interest' instruments larger than itself and Credit Rating agencies rate institutions who support their livelihoods, who rates them? Capitalism at its extreme breeds greed and selfishness.

Looking Back ...

Wall Street has its fair share of superlatives in gainers and losers:

Top Gainer                                           Top Losers

        %    Date                                        %     Date

1. 15.3    15 Mar 1933                          -22.6   19 Oct 1987
2. 14.9    06 Oct 1931                           -12.8   28 Oct 1929
3. 12.3    30 Oct 1929                           -11.7   29 Oct 1929
4. 11.4    21 Sep 1932                            -9.9     6 Nov 1929
5. 11.1    13 Oct 2008                            -9.9    30 Aug 2010
10. 9.5    31 Aug 2010                           -7.9    15 Oct 2008

US, being the world's largest economy, influence other nations and they dance to her tune.

Now ...

When the US was overwhelmed with toxic financial instruments, off balance sheet financing and creative accounting, tsunamic bankruptcies of established, old-name institutions threatened to send US into a financial ice-age. The US and the world, China in particular, went into overdrive with massive expansion of credit, fiscal, monetary and physical policies. That save the day; or did it?

Well, if you pour enough blue ink into the ocean the color of the water will turn blue!

The world has starved the ghost of recession from appearing momentarily. However, it won't be long before we hit the skids again. The Political will to spend and expand is constrained by competing needs and every country, big and small, is faced with the challenges of creating employment, feeding the population and maintaining social-commercial-political balance.

Protectionism has reared its head as have screams to cut spending (deficits), cut costs (buyers market) and raise taxes; its lowballing.

Future ...

The world-over is filled with unemployment, under-employment and mismatched and displaced workers; tertiary, urban, sub-urban and others. Income gap have widened and rising costs have made living edgy.

As more are forced to save, or to save in anticipation of tough times; even to minimize spending whilst expecting the costs of living to ease (due to deflation), the result is alot gloomier.

Coupled with above, nations are forced to look inward and care for their wards, by extension their political survival. Many a political brinksmanship is not about nationalism but about political survival.

Conclusion ...

The stockmarkets is/are still benefiting from the expansionary programs instituted during the crisis. Growth, including abnormally high growth, is the norm but will NOT lasts. Technically, most indices potentially can challenge its/the previous high but NO economy can continue expanding with unemployment and underemployment in its background. Lightening up seems an ideal choice (on the upswing).

Reality is always cruel; Excessiveness will stop sooner rather than later including fanciful Dubai's palm-shaped man-made islands and Ordos city in Inner Mongolia.

Cyclically, quarterly low is expected in October. For those who profited/benefited from this (October) downswing/upswing, good luck. Watch out for the next change of events towards/during the Total Lunar Eclipse on 21 Dec 2010.

Forward ...

Nobody goes broke by taking profits. When you make it, help the poor; spare some for the less fortunate.

Note: This Is NOT An Investment Advice; read to agree or disagree - no prize for correct guesses!

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