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The rally on Wall Street was...

Discussion in 'The Economy' started by Tropo, 25th Mar, 2009.

  1. Tropo

    Tropo Well-Known Member

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    The rally on Wall Street was completely unjustified if one thinks that it is the start of the bull market, warns Kirby Daley, senior strategist at the Newedge Group.
    He tells CNBC's Amanda Drury why this is just another bear market rally.
    Video - CNBC.com
     
  2. Chris C

    Chris C Well-Known Member

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    I reckon a large part of this bear market rally (on the Dow) is just due to the fact that prices of many stocks in early March just looked super attractive using traditional gauges of value prompting many shorts to take profits and many traders to get back in to ride this rally up. I heard or read of many people out there willing to call this the bottom.

    I know the Dow fell 1.5% last night but if reasonably bad news stays away from the headlines over the coming days and weeks, I'd say there is a reasonable chance the rally will continue. Of course this won't be reflective of the economic fundamentals which I still believe are completely stuffed. So eventually the markets will be reminded by some catastrophe or further catastrophic figures that things are very bad and we will resume our downward slide. Of course at the moment Australia is just going along for the ride, playing out as a less volatile Dow, but I'm sure we will start getting some of our own pretty dire news soon.

    In regards to the new toxic asset bailout plan I'm quite keen to see how it works. Though I'm personally expecting one of two things to happen; firstly private investors won't come to the party even though the deal is VERY sweet; or secondly they will come to the party but they will be wiped out along with the US taxpayer when the economy regresses further. So ultimately I don't think the plan will work and the US government will be forced to nationalise the banks.

    Paul Krugman had some very interesting insights on the plan yesterday if anyone can be bothered to go scout for the interview. He suggests that even if the plan works it still doesn't solve the problem... so whilst I personally don't think it will work, there are many other there who are arguing even if does the world isn't in much better of a position anyway.

    So more money to the wall street boys club?

    :D
     
  3. lorrimer

    lorrimer Well-Known Member

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    One of these days, one of these rallies are going to hold. We have already had 4 or 5 dead cat bounces. The thing that will drive the market forward will be the fear of missing out on the upside rather than the fear of another crash. Slowly things are starting to improve. I'm in the UK ATM and the housing market here is beginning to pick up, as it seems to be in the US. I listened to a phone in radio show yesterday and the majority of small business owners that called in said that they were now far busier than a year ago and many were taking on more staff. The concensus amongst friends and family is that the media have been far too pessimistic and have fuelled the problems.
    Of course the problems are very real, however, just as we manipulated ourselves into this predicament, we will manipulate our way out of it, the stock market will pick up, confidence will return and everything will OK for another number of years. That's how it's always been and how it will continue to be, so long as humans control the system rather than computers, because as far as I know computers don't have the greed trait.
    The problems will simply be deferred for future generations to sort out.
     
  4. Chris C

    Chris C Well-Known Member

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    So are you expecting a V shaped recovery in the stock market?

    I personally think the longer this bad boy of a global recession holds the more likely we will see a "U" or "L" shaped recovery ... and I think the recession still has some legs yet.

    I'm expecting most investors will be very hesitant to put there money back into the market especially given all the sucker rallies and false bottoms that have emerged through out the bear market so far. Reckon there might be a quickish 20 - 30% gain over a couple of months, but I think the following years will be relatively slow going and potentially still quite volitle from time to time...

    It would seem that there are "some" positive signs starting to emerge, but they are still far outweighed by negative figures, and there are still a lot of problems that have been around for quite some time that have still yet to be fixed... so I'm not counting my chickens just yet, but if the declines in the world property markets can slow significantly it will do wonders for banks being able to begin to really assess the damage and proceed to start patching the large holes in their balance sheets.

    I'll be very interested to see what happens to the world at the end of all this... I personally tend to think that we will operate under quite a different system.

    I have read quite a few articles of late about the USD being dropped as the reserve currency of the world. Apparently China and Russia are screaming out for it, and the Unite Nations is planning a discussion group next week to discuss the issue... could be very very interesting, and may change economics as we know it.
     
  5. lorrimer

    lorrimer Well-Known Member

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    No "V" shaped recovery, as any major rally will be quickly knocked back by investors eager to recoup some of their losses. I think 30 -40 % could be attainable given the extremely oversold level of many decent companies. Thereafter volatility for sometime until the economy improves. I think the " perfect storm" is now past it's worst and attention will now turn to value investing.
    As for the US, I have considered the US and the UK to be basket cases for many years hence the reason I moved my family to Australia 7 years ago.
     
  6. AsxBroker

    AsxBroker Well-Known Member

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    Hi Chris,

    Definitely no "V" shaped recovery.

    You can see this in bank term deposit rates...
    Plot the better rates, ie 4.25% for 4/5 months, 3.7% for 9/10 months, 3.5% for 12 months, 3.7% for 24/36 months, 4.3% for 36/48 and 4.5 for 60 months...

    Draw this on some graph paper and you get a nice "U", for clients after explaining it I also add three dots (two for eyes and one for a nose) and it always gets a chuckle...

    Cheers,

    Dan

    PS These are St George Bank Term Deposits as at 26th March 2009. Please read the PDS before making any investment decisions.
     
  7. dmesh87

    dmesh87 Member

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    I dont have any idea if the rally will last, but right now people seem to be responding to the positive news of increased new and existing home sales and panicking that they missed the bottom. May have to wait and see how this and next weeks economic news looks.
     
  8. try anything once

    try anything once Well-Known Member

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    anaother day, another 2.3% gain on Wall Street. When will it end?....
     
  9. Chris C

    Chris C Well-Known Member

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    I think they are in a lot more trouble than anyone wants to talk about at the moment. They are having some real problems with selling their debt to the market. After the FED throwing $300B at long term treasuries it seems the "flight to safety in USDs" is now reversing. This definitely doesn't bode well considering the US is planning to auction over $50B in new treasuries every week of this year... and it's not like this trend is going to reverse for many years to come.

    :confused:


    It will look bad, but bad news has never stopped the markets rallying before...


    Probably when there is another high profile corerate collapse or when governments start looking like they may default on their debt (UK? Eastern Europe?)... I expect either of these situations will cause another strong leg down.