Hi All,I've taken the liberty of copying some recent HC posts...

Hi All,
I've taken the liberty of copying some recent HC posts relating to the market situation.

Generally, these posts should be confined to the general forum, but I thought it may be of use to the dabate if we analyse the other side of the coin.

Post #6799892

Hey Fellas

Its important that we understand what is happen to the markets at the minute.

QEII ends at the end of this month, and all the economic indicators show a sluggish growth path for the US, giving credence to additional loose monetary policy like QEIII!

We'll see the markets remain volatile while this plays out, together with the EU sorting out the Greek Debt issue and the US lingering debt ceiling issue making negative headlines!

Dont let the US Markets political stoush to force the Federal Reserve to actually continue their QEIII pump priming efforts, scare you guys!

This is a temporary bit of pain or opportunity for those still accumulating shares, which will be very beneficial to lifting the stock markets around the world from July onwards.

As we mentioned a couple of weeks ago, the Germans have come to the party with a "bridging" finance for the Greeks, while the Greeks are now selling off Nationally Owned Property on the Greek islands and infrastructure assets to pay down some of their debt, which was a pre requisite for this additional funding. The EU is now dotting the "i"s and crossing their "t"s to ensure this debt issue is resolved before mid to late June.

The US economy was always going to show signs of sluggish growth, but it is still growing. What the Federal Reserve is keen to continue is for Wall St to continue to rise in the medium term, 9-18months, to ensure there is enough capital appreciation from the share market for companies, traders, private investors like us, to make capital gains, so that they will pay down debt/accumulate other asset classes like houses, helping support that market and increase consumer spending. Thereby lifting GDP through aggregate demand, since the Federal and State Govts have extinguished their Fiscal Stimulus positions!

The Fed and US Govts are trying to stimulate the US economy directly through share profits made on Wall St, they are doing this through the QEII! It also has the effect of depreciating the US dollar, which helps US companies increase exports and reflect higher profits in US dollars, when those profits are sourced from over seas!

I would expect Mr Bernanke's next speech to be very supportive of additional quantitative easing or some other continued effort to pump prime the economy to facilitate the target to grow the US economy. And this is exactly what the players on Wall St want. Hence last night's message, and it will continue, until Mr Bernanke does respond in a positive way.

Then watch Wall St lift in a big way! :)

What does this mean for the ASX and our investments locally? Well our miners are making hundreds/billions of millions of dollars annually, thanks to China and India!

Once Wall St gets what they want, in July/August then its going to be a very positive shift in the ASX!

Then we will have multiple positive fundamental shifts in the world economy lift the ASX, especially the Materials and Energy Sectors:

1. China's inflation will show signs of heading towards their target of 4% thereby allowing banks to begin lending, albeit in controlled manner to acquire minerals for their infrastructure development.

2. The Indian monsoon season starts in 3 weeks and continues until mid to late September, which reduces their monthly exports of iron ore by 20-30% during this period.

3. QEIII, or something very accommodating will be announced by Mr Bernanke in the next 30-60 days, providing additional lift to Wall St and world markets overall.

4. Japan begins their massive reconstruction efforts. Engineers/purchasing managers/govt depts have been working on assessing the damage and what needs to be done to rebuild northern Japan. From July, we will see them begin to enter world markets to buy iron ore, coal, copper, nickel, zinc etc using the $300Billion freed by up the insurance industry and Federal Govt!

5. Once the EU proves they can soften the blow of Greek Debt restructuring, the markets will then feel safer, knowing that the same can be applied to the other PIIGS!

Stay calm, dont panic if you are in the position to continue to accumulate shares then the next month will give you the best time to do this, for a sustained and strong lift in the markets in the second half of the year! And this goes for most stocks in the Materials and Energy Sectors!

Cheers Nectar

Post #6803042

Nectar,

Without a doubt in my mind the US sell-off is market hand wringing for QE3 and raising the debt cap. Pundits expressing concern at the US recovery is ridiculous given unemployment sits at 10% and the housing market keeps falling. Not great for the past engine room of the US economy, the good old consumer, but hardly a new story. What is not mentioned is that corporate balance sheets are in much better order to meet any earnings softness from here.

Personally I think the US market needs to be weaned from government liquidity as this is mostly being hoarded or traded at the moment i.e. its not trickling through to the US consumer through jobs growth.

So what about the little Aussie bleeder? Well a month ago we were being sold off due to AUD strenght i.e. a proxy for our robust economic outlook. Now we are being sold off due to concerns for global growth i.e. our poor economic outlook. So which is it investors? the RBA, which has a decent track record under Stevens, thinks we are about to carve it up due to an unprecedented capex boom. Main thing holding us back seems to be our blasted minority government (and that is an apolitical statement). If you have the fringe dwellers running government then you have plenty of hemp clothing, agricultural subsidies and mung bean dahl but not much solid economic leadership.

To me, the current price moves 'feel' contrived esp when tired old stories like Greek debt and Chinese inflation start being rolled out by the 24-hour news cycle. So it is more the market makers clearing the decks for a crack at 5,000 by Christmas than a valid sell down. Welcome to a range trading market where the traders rule.

The big question is how do we break out of the range trade (4500-5000 ASX)? Well the Japanese reconstruction will help, clarity on Chinese monetary policy will help but ultimately we need good US Joe Average to feel confident about their jobs and wealthy (due to housing/shares) and to start spending again! So QE needs to start trickling through rather than being hoarded on bank balance sheets earning negative real returns or flowing into commodities/emerging markets carry trades. Possible but you will need more than 6 months.