Rally for the true believers
by Peter Switzer
Wall Street’s rally and what is bound to happen on the Aussie stock market today, which will be up again, is, as Paul Keating once famously said, “one for the true believers".
Regular readers know that I won’t cave in to the doomsday merchants. I recognise the reasons for bear markets and excessive panic resulting in big market falls but I have historically-driven confidence that great companies’ stocks will prevail over time.
So back in August when all looked terribly grim I told my readers it was a buying opportunity for the brave and the long-term players. I was right and even though I won’t be surprised if European actions ahead could hurt the current rally, I know over time my good quality company thesis will be right and I will make money out of it — great money.
Wall Street was helped by the improved European plan, which got better yesterday, and more improving US economic data. Recall those ‘experts’ who had the US going into a double dip recession — well, they look like they got that one wrong, again!
Here’s the summary:
- The Dow was up 339.51 points, or 2.86 per cent, to 12,208.55.
- The S&P 500 was up 42.59 points, or 3.43 per cent, to 1284.59, which was a big gain.
- The VIX or fear index is tumbling and that’s great for share buying ahead.
- The market liked the 50 per cent haircut for the banks that have lent to Greece as it now gives certainty to what will happen to the banks.
- US economic growth came in at 2.5 per cent, which was the best result in a year!
I think if the Europeans keep hammering away at their rescue plan we can build on these great past few weeks but there are still other issues out there that can hurt this rally. However, as I said yesterday, we are heading in the right direction. Now let’s hope the Reserve Bank has the brains to cut interest rates on Tuesday to give the Aussie economy the lift it so badly needs. It’s possible they will delay any cut because of this European-inspired market enthusiasm but that would just compound the errors the Bank has been making for more than a year!
Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
Published on: Friday, October 28, 2011
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