Over time I think we eventually all learn that the trend is your friend. The opening this morning reflected an allmighty struggle between the bulls and bears and pretty much set the volatile swing tone for today. Lots of pundits out there saying we're bottoming. I wonder. Consider this: The US consumer is punchdrunk at the moment. The cycle they find themselves in is vicous. You own a house that is probably worth less than the mortgage you're paying. Your mortgage belongs to a company that is just about insolvent. The company (Fannie-Freddie) sits on USD5bn of property it can't sell. New buyers can't get credit to buy property even at an average 17% lower price because house prices in the US still need to drop another 20% before pre 2000 income to price ratios are normalised. This recession (let's call it what it is) is U shaped and is going to take a long time to play out. And the Fed wants to raise rates. What I see here is that the single most important factor here is time. It's going to take time before things get better and right now I absolutely am not going to try and guess a bottom. I really don't think this downtrend is over by a long shot
Good point Super Idego. It's what I assumed as well till I started thinking about what pricing-it-in is based on: An assumption that the US consumer is basically ok. But now I'm doubting that when I look at the wider picture. It is a fact that 70% (I think) of US GDP depends on a healthy consumer bank balance. Employment over there is about the only plus now, except that's probably going to change. I'm not being negative, merely posing one cause and effect scenario.
Well said super i think we may be placing too much emphasis on US market and their problems. The important aspect of the US for us is oil and dollar strength.Our market could have priced in the credit crunch and probably overdone it a bit.
Nova.. The only part about your statment you need focus on is "The trend is your friend" right now that trend is unfolding downwards, so untill that changes negative is the right way to be. The more uncertain the more the trend is to be trusted.