Skip to main content

Can we start buying now?

Today has also been one very interesting day for the financial markets. 

With time running out for AIG's vault, it seems like all eyes are looking at the Fed to provide a bridging loan to lend the company a helping hand. Additionally, if rumours are right, WAMU may soon get off the radar screen if JPM has interest in them.

Looking at the market on the macro level, we have witnessed the more than $600B in share value that got worthless or disappeared in the financial and banking sector, and historically, equity markets on average drops 26% during a recession, where now S&P 500 has already reached 23%. In addition, current dividend yield of some stocks have begun to surpass yields from Treasury Bills products. One more evidence is taken from Thomas J. Lee, JPM Chief US Equity Strategist in New York, net cash balances in margin accounts at NYSE member firms are highest in at least 50 years, citing $932B has poured into money fund since Aug 2007.

So do you think this could be a possible turn?

For my personal preference, I will be keeping a good eye on medical, pharmaceutical and related industries to start with. For some reason, the value of such stocks tend to get undervalued after financial stocks get a big hitting, as the value of such stocks do get affected by the changes of sentiment of the stock market in general. 

Next, I will be back on the saddle to continue market momentum trading, as irrational moves in the market could have been greatly reduced, and therefore making it easier for momentum trades to be made on the FX (specifically GBPJPY/ EURJPY in Asia, and EurUsd/GbpUsd in Europe) and futures markets.

Tell me your views.


Labels:

Comments

SD said…
No, dun start buying yet! There is no more confidence in the economy. Put it this way, we don't need everyone to withdraw their policies from AIG, but that no one is buying/renewing policies, that itself is giving enough problem for them.. Well, probably what we need is a little more faith.
September 17, 2008 at 12:11 PM
Grentone said…
Thanks for your comments. It's just some historical data that I had referenced on.
September 17, 2008 at 3:09 PM
Post a Comment

Popular posts from this blog

Financial Crisis Management

Back in the 80s, when the US government had to deal with a crisis where the Resolution Trust Corporation, which is a holding company formed and housed within the Treasury, to deal with distressed real estate that was funded by loans and savings, the strategy was deemed a sucess where it was later reused by the HK and Indonesian government during the asian financial crisis. This indeed managed to give immediate liquidity and confidence to the markets during such turbulent times. In addition, this came as a win-win situation for the governments, because as these distressed assets were bought in a 'fire-sale' price, which was significantly cheaper than its face value, the governments made profits from such transactions, where in today's case, the similar situation applies. The target of this plan for the purpose of restoring order in the banking system, so banks will remain confident to lend, as well as to free up funds for further lending and use when the economy grows.  Afte...
Post a Comment
Read more

Can Banks Be Trusted?

Today's events have indeed been a thrilling experience experience for the international markets. As I am writing this, the China Central Banks has just cut its key interest rate again by 27 basis points to spur growth, Lehman (est. 1844) has filed for Chapter 11 (Bankruptcy) , there are rounds of ECB having an emergency rate cut, UBS sneaking in to declare another $5B of writedowns, AIG seeking help from the Fed with a request of a $40B bridge loan after rejecting an offer by Flower to prevent themselves from joining the slaughterhouse where their CDs are currently gapping outwards, and it seems that the only few pieces of good news are probably that Merril had a merger with BOA, as well as a consortium of global banks have put together a $70B fund to facilitate liduidity and an orderly resolution between Lehman and their counterparties. ECB also joined in with $30B to curb liquidity woes as well.  In my opinion, it seems like an obvious trend that all Fed Governors are challenged ...
3 comments
Read more

Video: Lesson On Elliott Wave

Hi mates, Just received this in the morning. It is a short interlude of the Elliott Wave course. If you are a serious trader, and would like to have a roadmap to the markets, I would suggest you take a good look at this, this has worked for me. Enjoy... Watch this full $79 course, FREE. Click Here!
Post a Comment
Read more