Radio Australia Today Editorial

US Bailout Fails. Market Falls. Seatbelts Fastened.

30 September 2008

The thing about hosting a breakfast program in Australia is that we, along with Tokyo, are the first big market to open every day.

So with the US700 billion dollar rescue package failing a few hours ago, we will be the first ones outside of the US to feel the effect.

The Futures tell us that it won’t be pretty. Expect a seven percent fall, at least initially. This was bound to happen. I’ll give you a apocryphal note to explain why. Yesterday, almost as an afterthought, I asked one of our market analysts on the program what would happen if the US Congress changed its mind and refused to agree to the rescue (or ‘buy-in’ as the US politicians tried, hopefully, to call it). The analyst laughed a little and said it would be disastrous. The little laugh was indicative of her view that the rescue package was a certainty to pass.

She’s not laughing now.

There will be plenty of panic in financial circles right now. Advisors are seeing their clients’ portfolios lose real money minute by minute.

My stockbroking neighbour Charlie, who has been lamenting the stockmarket of 2008, will be suffering, I know. But even though his head gets lower everytime I see him in arriving home late from work, his advice is always the same: don’t get out of the market; this is a terrible time to pull out shares. They have lost 30% or more of their value this year, so pulling them out of the market when they are at their low ebb is hardly the most bright financial move. (“Hey guys, let’s invest in some companies. When they lose heaps of value, we’ll pull them out!!”)

The bottom line always has to be that if the economy is strong, and most of ours in the Asian region are strong, and if we are investing in reasonably strong companies, then be like the Doors’ Jim Morrison and be Riders on the Storm.

There may be bad to come, but there’s plenty of good to follow that.

– Phil