Monday, May 11, 2009

Market Rally Has Little To Do With Real Economy


Some of you may know that I am holidaying in Sydney now, but rest assured I will still be blogging on a daily basis. So far, the sector rotational picks have done well, so enjoy. As with the market's trend, I will always be asked, "eh, can continue aahhh?" To which I will reply, probably yes. Even my relatives here expressed surprise on the global turnaround on stocks.

My view is that things are shaping a lot better for equities than for the real economy. To those who still think the real economy is still pretty bad, I totally agree. However, reading the markets require more than an astute analysis and prognosis of real events. Markets are made up of liquidity, a lot of it has to do with confidence and trends.

I have stated that the governments everywhere have poured much too much liquidity to wrest the global economy from the current crisis. I am not here to say whether they should or should not have done that (well, they should not really), but to assess the consequences.

A lot of the liquidity injected has been parked by the sidelines, and it will take a minor confluence of positives to bring some of these funds back into the markets. There are still plenty who are apprehensive on the market's rally. When this group finally gives up and decides to join the rally, then we will have a minor correction, till then its pretty positive.

This is a rally punctuated with liquidity and revival of confidence. we can argue that the confidence can be slightly misplaced, but when it snowballs, its a pretty potent factor.

First level of resistance at 1,048 which I mentioned a week or so back. Any correction will be swift and shallow. I don't want to sound too bullish but the signs are pretty good even for this rally which may only be for another month or so.

p/s photo: Angelababy

8 comments:

solomon said...

I don't know you in person, but I read yr blog. When you decided to switch from fund management to research, i guess you are looking for quality of life.

Now, you are Sydney while market are rising. That's cool compare to some who had to take care of their client portfolio.

1048, that the number the players will take a break.

See anyone selling Dali's picture at Sydney street now??

richard said...

Whoa, she is really pretty! Enjoy the pic. tks.

chanyip said...

hi dali,

are u sticking to your comments about 3 steps forward 2 steps back? there's this finding on http://malaysianshares.blogspot.com/ regarding similar patterns with bursa 2 years ago. possible to offer some opinions on it?

thanks a lot!

easystar said...

Hi Dali,

I think it is worth adding to say that StockMarkets are forward looking and attempt to price in what is likely to come in a year time (both on the way up, and down).

Maybe the higher yield demanded on the US 30yrs has to do with this - money going elsewhere e.g. stock market rather than the US Treasury "about to be junk" bond.

Gamelion said...

There r unlimited of suckers being born everyday !!!!!!

plas said...

they say talk's cheap,but we all know that the hardest thing in this world is to find out that the moment you buy,the stock stay put or retreat! there's no such thing as a free lunch,so yr reward is well earned.so,I wish every1 luck & better return this time,even most ppl expect a correction,the game is far from over...so,you still have to grind it out with yr guts..
no harm to share a few tips...some of the old fore runner was gone while the new trend has a familiar feel,so keep to the top 20,eg. saag,scomi,mulpha,insas,knm,to name the obvious.

Big Bad Wolf said...

Greetings from Jogja to Sydney! :)

Forgive my plagiarism, but i hv to do this.
"You may know that I am holidaying in Jogjakarta now, but rest assured I will still be following your blog on a daily basis."

I jsut don understand how this market rally works. I mean, look at all the bad news in US. It doesn't seem to have much effect on the market! Fundamental is not workable in this new economy era i guess..

ps: i have just got myself a secondhand book which you recommended in your earlier blog article.
"Liar's Poker by Michael Lewis"
RP 27,000 (About RM 9). What a bargain!

chanyip said...

hi dali,

there's an article regarding the current market situation in another finance blog http://malaysianshares.blogspot.com/ from the graph, it is believed to mirror the 2007 crash. may i know what is your opinion on this?

thanks!