EveryBody Wants To Be Rich

Every investor/trader in stock markets want to be richer than his/her closest rival. That intense greed to outdo each other in this intense battle often lead to irrational exhuberance in the assets that they are struggling for and hence can take their valuations beyond imaginations, and that too within a very short span of time. As long as this intense greed keeps on rising with every passing moment, stocks will continue to remain expensive and volatile as compared to other assets. There has to be some corrective phase in order to restore sanity in the average investor/trader's mind. Who knows what can cause that corrective phase, but when it happens, it will be very painful for all the market participants.

Blow Out Phase In Emerging Equity Markets

Money flows from developed nations like US, UK, Europe is getting invested in fast growing economies like India, China, Taiwan, Singapore, HongKoong, Phillipines, Russia. This flow is very strong and there is almost herd mentality among them to enter these markets in a rush. This is causing extreme inflation in assets of these economies, notably in stocks. This money also is very reluctant to react to any adverse news and under such circumstances, making money at heightened valuations is an extremely challenging task for traders. Best to remain invested in excellent quality companies with excellent free cash flows and strongest of business fundamentals coupled with strong economic link.

RestLess Markets

For the past 4 years which saw unprecedented bull run in stocks and commodities, participants have become restless due to extremely hightened greed prevailing in their mind set as they try to outdo each other with a wide margin. This greed feeds irrational exhuberance among investors/traders and hence cause extreme inflation in assets and consumer articles. Coming times will no be different and hence stocks will continue to outperform any other asset class for a long time to come.

Chinese Stocks

Chinese stock market has weathered the storm created by U.S. sub-prime mess, all other markets have fallen sharply. Prime reason behind the outperformance of chinese stock markets is that it's domestic investor/trader participation is much more than dependance on foreign institutional money flows in their markets. All other emerging markets largely depend on foreign flows to drive their markets especially Indian and south korean markets where foreign flows are an important barometer for market direction. Also with chinese economy growing consistently 10% and above for more than past one decade is reflective of investor confidence in that market.
It will continue to outperform all other markets if it continues it's growth outperformance as compard to other economies.

Volatile

U.S. stock markets are behaving extremely volatile with one day up and other day down, volatility index is moving 10-15% up and down on daily basis. This is cause of concern for investors as well as traders. Asian markets too dance on the tunes of U.S. markets and decoupling still hasn't happened for these markets with the U.S. market. Investors need to protect their profits as and when it happens and should not shy away from taking profits as further sharp falls will again give them those bargain prices.

For some time to come, volatility will be the name of the game.

Asian Markets Are Taking A Breather Today

Today all Asian markets except China, are taking breather after moving up for the last couple of days. It seems investors and traders are back again in buying riskier assets like emerging market stocks, currencies and bonds. Crude oil is also trading below U.S.$70 per barrel mark and is a welcome sign. Yen seems to be stabalising around 116 mark against the U.S.Dollar. Agri commodities are however, ruling strong due to inevitable reason that population is growing and due to global warming, floods and other natural peril's will keep demand far more than the actual supply of these farm outputs.

Not all money is credit

Markets have been bearing the brunt of mahem in the U.S. sub-prime mortgage with several U.S., Europeon and U.K. funds going burst.
Investors and traders believe that all markets have risen because of cheap credit pouring in the markets, however this is paritally true as people do have their own money to invest in case oppurtunity arises, because if all was borrowed money then markets for the past few trading sessions would not have been found the support of new buyers!

Smart buyers have been utilising this sharp fall in equities as a buying oppurtunity and are putting their own money.

Excessive borrowed money can only inflate the valuations of given assets to artificial levels but any cracks in that credit cycle can turn that tide against the borrower as he has to return the money to original lender and he does that in panic as we have seen for the past few weeks. Therefore investng with own money is the only rational strategy one must adopt.

Bonds are rallying

U.S. bonds for the past two weeks are rallying due to carnage in the stocks, as investors/traders flock to safer money avenues in these highly uncertain and volatile times in order to protect their capital from any sharp drop in stocks.

They are not bothered at the moment about low returns from bonds but rather concerned about capital erosion from risky assets like stocks. They are right in their approach as sometimes remaining in cash can give excellent buying opportunities in blue chip stocks in case they fall sharply because of some external reasons not related to their business performance.

Investor Confidence Is Shaken

By looking at stock market behaviour for the past 3 days gives indication that investors/traders confidence has been shaken and they are using any rally in the markets to lighten their stock commitments. Cracks in the credit markets and subsequent pouring of around U.S.$550 Billion in the financial system by various central banks only indicates the intensity of underlying unresolved problem.
This is causing huge nervousness among investor/trader class who may not want to enter the markets unless and untill some assurance that problems with subprime mess has been contained.
This world runs on credit, so if that gets affected badly then we have a serious problem in our hands and smart market players knows this. Good luck with our investments.

Much Needed Bounce Back In Markets

Today stock markets bounced back after several days of sharp falls and closed pretty smartly anywhere between 3 to 5% up. Yen also is trading close to 115 levels against the U.S.Dollar. It's very difficult to ascertain the exact extent to which credit markets have been affected due to sub-prime mortgage mess and subsuquent defaults and several funds going burst due to this, one thing is sure that risk appetite of investors/traders has taken a severe beating and it will take a while before they can regain their confidence. It will be worthwhile to watch how markets do for the next few days before making a big financial commitment in the markets.

Manic Selling In The Markets

Markets today fell very sharply fearing more bad news from the cracks in the credit markets and yen carry trade un-winding. Yen got further strength and breached 112 mark against the dollar, creating more panic among investors and that caused japanese stocks to drop very sharply by 850 points. All other asian markets traded extremely weak and later in the trading session got some respite because of lowering of discount rate by U.S.federal reserve and some short covering. European markets opened in the positive territory and this will have good sentimental impact when U.S. markets opens later today.
Keeping extremely close eye and ear on credit markets will be they key going forward. Any bad news from this front in future will significantly damage already brittle investor/trader confidance.

Will The U.S. Fed Cut The Rates?

Market players are placing huge bets on a possible Interest Rate cut by U.S.Fed in it's next speech in September following the liquidity crunch in the financial system due to huge losses suffered by large players in the U.S. sub-prime mortgage paper. They also believe that to give a push to U.S. economy and to stabalise slump in the U.S. housing market, Fed will cut the rates.
However their bets can go wrong due to many reasons, one of them is since Inflation in the U.S. is still a cause of concern as Fed himself pointed out in his many speeches, also due to recent pumping of dollars in the system Inflation has the chances of getting a head up. Crude Oil is still above U.S.$70.
So markets will be watching Fed speech very eagerly and any dissapointment on rate cut can induce volatility and more nervousness among investor/trader fraternity.