Even as more and more radical and strong measures are being taken worldwide to mitigate the ever-deepening economic crisis, the million-dollar question that arises spontaneously is whether these steps would be enough to get the whole thing back to normalcy. In an unprecedented move made by some leading economies in the world, the rates have been cut by 50 basis points by their regulatory bodies. A rare move- because, such cuts are usually not done by such influential bodies simultaneously. In some way, this collateral move by the Feds, ECB, BOE, Bank of Canada etc. only goes further to show a glimpse of the severity of the situation. It could be presumed that in the normal course of events such an action, which can be marked as a tailor-made one for the financial markets, would not probably have been taken. Normally, a 50 basis point cut by the Feds alone would have been sufficient to send the Dow Jones index zooming up for sometime. Many other world indices would have followed the trend eventually. As of now that does not seem to be the case even though it is probably too early to comment on it.
Dow took a positive U-turn soon after the news broke out only to be followed by another couple of U-turns over the next few hours and ultimately ending in the red thus refusing to take the much awaited eventual and decisive U-turn towards the greener horizon. This volatility continued for sometime reflecting the utter indecisiveness and lack of confidence among the investors even after such a development and that is something which emanates a kind of creepy feeling at least in the medium term. The silver lining in the dark clouds is that some of the Asian markets have traded green. The reason could be the fact that some of these are isolated to the ongoing sub-prime crisis to an extent. Nevertheless, only the coming days would unfold their actual trend.
Let me mention here that my educational or professional background has not much to do with finance or economics as such. With whatever awareness I have acquired over past few years coupled with some insight, I would advocate that unless noteworthy improvements are observed primarily in the US and then some of the European markets within the next week, one would have sound reasons to draw a conclusion that what have been done of late are probably not enough to meet the requirements at all. In that case, I would feel sympathetic to all those who had invested in the stock markets with a short to medium term outlook, especially to the ones who would be forced to liquidate their positions incurring substantial losses in order to meet their sundry financial obligations. The ones invested in with a long term perspective, say two years or so, have not much to worry about, I guess.
I spoke of me contemplating some long positions in cheap call options for the month of December with a medium term view. As of now I have abandoned the idea after seeing the very recent developments. If all these extraordinary news are failing to drive the market up, we are most likely in the midst of a financial whirlpool and are probably still far away from the so-called bottom. If the current state continues, I would endorse the following: to the ones blessed with enough green stuff to flaunt with – go for bottom fishing right from now onwards with a long term view; to the ones for whom it is an issue – abandon all strategies, stay in cash and bide your time; to the ones like me who are not quite blessed and yet can’t abstain from burning their hands in the market – try to ride the chart-waves right on very short term basis i.e. intraday or at the most STBT, BTST etc. without dreaming any farther…………. until, of course, a clear picture emerges in due course of time.
Let me take this opportunity to thank all those who appreciated my blog, and encouraged me to keep it going.
