This bank-engineered equity rally

The boutique investment house is “concerned” that banks may have been using their bailout money — and no doubt some of their quantitative easing-gained liquidity — to buy equities, thereby fuelling the summer rally.
The danger, they say, is that this is a relatively “thin” rally — and one which is vulnerable if banks suddenly decide to pull out and crystallise their gains.
more... FT Alphaville » Blog Archive » This bank-engineered equity rally

 

Hmmm its all very interesting. Although there appears a definite connection between liquidity and asset inflation, I am not convinced that the old argument of "money sitting waiting on the sidelines" that you hear so often actually carries any real weight, because if investor sentiment is not there to invest it, then it means diddly squat. Also you only have to look at over the past few years, the super laws in Australia pushing cash into share markets, and the Future Fund investing in the market, and the general cash from individuals in Oz going into the sharemarket to realise that all that cash amounted to naught in the scheme of things anyway (post crash).

I do firmly believe, (and I certainly stand to be corrected), that this rally at 50% is getting a bit long in the tooth and a correction could be imminent. On that basis I am much more on the sidelines, with only a few punts in and stop losses on them. I am hoping that a correction provides opportunity for further investment.

However having said that, it can get a bit tiring watching the market like a hawk everyday, so for me the strategy that I am going to implement is:

1) Regulary dollar cost averaging into fortnightly investments into a geared Oz share fund (doing so since Oct08)

2) Sitting on a lump of STW, couple of big banks and probably BHP and RIO (Had been doing this, now sitting on sidelines and will go back in once correction occurs, unless it just doesnt occur...??)

3) Short term trading of CFDS in the stocks mentioned in 2 above

This way I sort of get my cake and eat it to, makes it fun as well!

Anyway, getting back to the post, whether its banks or whatever, I think there are arguments building for the rally to be questioned, although there are points to be made for both bull and bears at the moment.

Was reading today that they founder of PayPal who is a billionaire reckons this recovery is not real (i.e a false recovery) and wont last...

Timbo
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