John Durie | November 20, 2008 Article from: The Australian
THE word is finally out - NOTHING IS WORKING - and, as a result, global stock markets are in freefall. Consider the following - the US leadership is in transition, with a lame duck administration in place, but it has already promised close to $1 trillion in aid to the economy.
The Chinese leadership is fine, but it has also thrown in close to $1 trillion and the world is still sinking.
The US car industry is close to filing for bankruptcy en masse.
Babcock &Brown is on its last legs.
The Australian Government has thrown some cash into the pile while it runs a few law reform reports on market manipulation to show it is doing something.
The ASX is finally doing something about transparency in short-selling, but has ignored pleadings to actually publish the right figures by also publishing short sales that are closed off later in the day.
The S&P/ASX 200 index was down 4 per cent in mid morning trading with financial stocks doing it worse - down over 5 per cent - and the big mining giants, BHP Billiton and Rio, getting slaughtered down 7.5 and 9 per cent, respectively.
Is there any wonder the market has collectively decided that nothing, absolutely nothing, seems to be working?
Governments around the world have given it their best shot, but the shots have been fired and, while interest rates in Australia at least can fall some more, if the best shots are gone, what’s next?
The big local banks are battening down the hatches, with ANZ leading the way and cutting its loan-to-value ratios across the board in an attempt to minimise damage next year.
Amid all this, some are still hopeful that deals will be done and today’s hot rumour is that, just maybe, QBE might be raising some capital for another run on IAG.
Granted, both stocks are down, with IAG off some 4.6 per cent at $3.57 and QBE off some 3.8 per cent at $21.50 a share, but, then again, everything is down.
It must also be said that noise levels around the local bourse are becoming a genuine threat to one’s health.
Amid it all, Macquarie Bank has underwritten a $C450 million ($563.8 million) equity raising for Canadian gold miner Agnico Eagle, which is a fair sort of statement of its financial strength right now.
More good news is that the darkest hour comes before the dawn, which, in stock market terms, means that when the entire market is maximum bearish, it’s a sign that we are nearing the bottom.
Trouble is, no one ever rings a bell to tell us we have hit bottom.
