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Honest Information, Profitable Trading

Durudarshan - Investment Analysis

My Blog

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The downturn in the stockmarket may be temporary

Posted on July 24, 2015 at 4:01 PM Comments comments ()
It has happened in the past : When the big boys are on holiday in the summer, their prodigies in the stockbrokers are left to mind the books.  And these careful chaps always err on the side of caution, book their profits, reduce any liabilities, and have peaceful sleep at the weekends, content that they will have earned themselves some good bonuses while sitting in the big boys' chairs.  It's happened in the past, and it seems like it is happening this time, although I have no way to confirm this. 

Another reading is the rout in Shanghai, where the Index dropped about a third in a matter of ten days, resulting in heavy losses for some investors.  I heard some people had lost everything, having borrowed heavily and gambled it on the stockmarket.  At one time the Shanghai index was moving mechanically like a yo-yo, and it seemed like the market makers let go the thread and it came crashing down.  Of course it was like 1929 to some of them, when they lost everything....It was like an illusion disappearing.

The Chinese economy showed a good growth figure, the GDP at 7 percent for a second consecutive quarter showing it holding up favourably considering the world scenario, where exports to certain nations have been curtailed.  And the Chinese are not importing as much foodstuffs from Europe as before, leading to dumping of goods within the European Union and bringing out angry farmers on the streets of Lyon. 

The ace card in this game may be that China has realised its vast power to play the game their way.  With the commodities hitting new lows, they are in no hurry to buy up and build inventories....they will just wait to see how low prices will go before starting to stock up again, for processing and export mainly.  Their construction of buildings and other infrastructure may need to slow down, as houses remain unsold (having been built to high European specifications but for a market where the paypacket is 1/15th of that in Europe or Japan).  The rising middle classes and the billionaires in China can of course afford and do buy residential villas in California and Europe; it is the middle classes who need to be able to purchase the properties lying in China, unsold.  When I heard the Honourable Xi Jinping would set new standards this year, I expected impressive growth.  In the past, his policies have always been favourable for good growth figures, that is my observation.  Now he is the President, there can be no doubt that he would guide his nation along this track - but of course, he will patiently wait to see what may be favourable for his nation's books.  Commodity dealers will just have to wait and watch when China starts to buy up once again.  My guess is it may even be very soon (to avoid the situation of a slow down due to lack of enhanced acivity).

As for Greece, I gather there was a technical problem or problems in transmission of capital, but that should soon be sorted out.  Greece should start to tick along as normal very soon, and that confidence will rejuvenate all the Euro Area countries, I believe that would be logical. 

The anticipated rate rise in the U.S. is likely to be an 8th or quarter percent in September, and not really something that should over-concern anybody.  Over the course of 2 to 3 years, it is likely to rise to a top of 2-1/2 percent.  (My assumption is that England and America tend to follow similar methods of calculation, and I have deduced the above from Bank of England Governor Mark Carney's policy guidance recently).

If I am right in my assumptions, everything should be all right for the world economies. 

Oil is something to watch.  OPEC or Russia in their wisdom may decide not to throw away this valuable resource for nothing, or they may continue to flood the world with a glut, knowing they would destroy the shale and fracking operations in the U.S., and the slow down in those sectors will soon impact the rest of the economies.  With a strategy of 'beggar thy neighbour', the world powers could induce recessions within their own countries, and that would be a shame, when it is all so unnecessary.  Or they may play it straight, and work in their own favour, and that would actually favour the whole world. I think the latter course will be better, and everyone can be happy. 


I wish you a joyful weekend.  The weather is likely to be good in most places.  Rest and relaxation and religious activities always help me recharge. 


Kind regards,

Duru-darshan


8:59 pm  London



 



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