Bulls on the Horizon
The bear market isn’t over, but bullish language made an appearance over the second half of March.
US Treasury Secretary Timothy Geithner finally released details about plans for the bank’s toxic assets, something that was holding the market back, and the reaction was positive. It’s great or at least better-than-expected leadership that will keep the market in positive territory. On 27 March, US mortgage rates were at record lows of 4.85%.
There has been optimistic news coming from some economists like Goldman Sachs’ Jan Hatzius. He expects a second half of 2009 economic recovery, but he did add the disclaimer though that more stimulus is needed to sustain any recovery.
CNBC reported that Brian Rauscher from Brown Brothers Harriman told his clients that they should prepare for a rally for at least the next three to five months. In the near term, he sees a pullback below 780 before the S&P 500 heads to a zone of 900 to 1,000.” I just hope this guy is right.
Consumer spending in February and March came in better than expected.
Back home, the headlines pulled out the R-word prematurely earlier in the month. It looks like Australians are in panic mode with 70% thinking the world is headed for a depression and we’re on our way into recession.
Sure, Australia may go into recession but we won’t know officially until June 3 when the Australian Bureau of Statistics releases the March quarter growth statistics. Until it’s fact, there is no need to spook the market, small business and consumers. The consensus of economists is that the recession, when it officially turns up, will be a “mild” one, nothing like Keating’s “recession we had to have” back in the early 1990s.
I surveyed household name economists - Craig James (CommSec), Saul Eslake (ANZ), Rob Henderson (NAB) and Shane Oliver (AMP). All but one had us in a mild recession with unemployment topping out next year a tad over 7%.
Shane Oliver went for 9% but even this is a lot lower than the 1990-91 recession where unemployment got up to 10.9%.
All said our economy turns positive in 2010 and some can see it by the second-half of this year.
In a Yahoo article I wrote earlier this month, I outlined some ways to help readers get through this economic downturn and increase savings – a few of which I will mention again here. Some may be drastic, but they are helpful if you want to save money during these tough times.
- Ensure your job is safe. If you think it isn’t, start getting your house in order.
- GST your life. Impose a 10% tax on yourself – so if you spend $30,000 a year, put $3000 aside.
- Do a complete budget and work out if there are cheaper ways you can live your life. You don’t need to overhaul your lifestyle, unless of course you are buying the latest and greatest plasma screen every time a new one comes out, but little changes may help. Examples include cooking at home if your take away bills are high, or reading a book rather than going to the movies weekly.
- Check out all your loans and ensure they are at the best rate possible.
- Go to the tax office website and see what deductions you are entitled to. If you’ve never had tax advice, it may be time to invest in information that could reduce your tax bill.
- If you do lose you job, talk to your lenders as quickly as possible. Don't let things get out of hand as it will hurt your credit rating.
- The Reserve Bank defied predictions in the April meeting by cutting the cash rate of interest down to 3% from 3.25%. Whether the banks pass this on will be another matter.
From the wild and whacky department, the Rudd Government’s stimulus package was targeted by an Armidale law lecturer, who argued that the payments were a gift and that the Federal Government did not have constitutional powers in this area. The High Court ruled the payments are constitutional, and eligible people will start receiving payments from this week.
Over the past four weeks the local stock market has rallied around 18% while the Yanks went up over 20%. This rally will be tested but I feel there are a growing number of wise guys and gals who think the March lows will not be breached. If you are into praying, this could be a good thing to petition God for!
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Published on: Wednesday, June 24, 2009blog comments powered by Disqus