Radio Australia Today Editorial

The Stockmarket. Is this the Beginning of Something?

29 October 2008

The US markets just had a great night, jumping up by around ten percent. In fact it was the second-biggest jump for the Dow in history.

No wonder our online news service has photos of stockbrokers with million dollar smiles.

The real reason they’re smiling is that the ‘waiters’ have finally started coming back into the market, people from Asia and others who have been holding their cash in their hot little hands, ready to pounce when it looked like the market turnaround was coming.

Now this may not be THE turnaround. It might just be a blip. There could be bad news again tonight for all we know. But as I said, the entrance of new money means the Waiters have had enough of waiting. Over the last few weeks the markets have been driven by low volumes, which means very few investors are buying and selling (mostly selling obviously), so the decisions of the few investors are deciding the fate of the many. The Waiters have been happy to let the few take this responsibility.

We also saw that the Hang Seng in Hong Kong go up a huge 14% yesterday. Ordinarily this would be cause for champagne and orgies, but the truth is that this surge just makes up for an equivalent drop in the market the day before.

We live in extremely volatile times folks. A year ago a single percentage point drop would be thought calamatous. Now a drop of ten times that figure happens every week somewhere.

Beware though. A few smiles, some extra investors and a good night does not a recovery make.

Somehow I don’t think it’s time to unfasten those seat belts quite yet.

– Phil