What is Certain is Uncertainty

Global central banks are joining in (or properly to be said – concerted efforts) to basically give away money, but if stock market is a good judge, then the outcome is akin to spending us into the poor house!

It is natural for investors to think that the worst is over. May be so… but that will need us to be really luck…

Oil prices – a good market indicator of market’s willingness to take risk – lost steam and credit market conditions are also appear to be easing somewhat – but is this just a blip or are we at the turning point?

What I am really certain now is that we are facing greater uncertainty ahead.

The process of de-leveraging is still going on, and the speed is faster by days and on the real side of the economy, talk is shifted from simply a recessionary possibility to the severity and length of this downturn. US home prices yet to find a floor with US private consumption to show negative growth for the first time since Q4 1991 and unemployment is high and rising.

Measures so far are pretty much designed to keep banks afloat and it still very much lacking the traditional Keynesian in boosting aggregate demand. If this plan is not materialized in the next 3 to 6 months, it would not be shocking if the financial conditions of financial institutions will take another beating again in March 2009.

Rescue plans that have been put up so far will be severely undermined, which will result in a severe and sharper recession. An idiot will tell you that his first priority now is to have a good paying job now, otherwise it would be a bad dream if aim is to reduce the debt overhang of distressed household.

So far, the DJIA has given up more than 2,000 points from the last day of September 2008 and the S&P’s 500 index has lost 38% this year. More than US$8 trillion of stock market wealth has evaporated since January 2008.

The lending system is in bad shape and barely functioning at all. According to recent article in Wall Street Journal “secular bear markets can last for 14 years or longer, like the one from 1968 to 1982. Typically, such bear markets are accompanied by repeated economic disappointments, as excesses that developed during long periods of growth are unwound”.

Let us hope they’re wrong! God Bless!