Wednesday, February 7, 2018


An egg shortage looms, after so many spent the Maori Holiday predicting disaster because the long running bull markets had stumbled and a few percentage points came off  overseas markets.

Since Trump was elected, the 'Dow" has grown from around 20 000 to over 26 000 and a correction was getting more predictable every day.  In actual real world terms the "crash" (while our markets were closed) of over 1000 points was a big drop but when compared to other corrections, the inflated figure was in percentage terms only around 4%.  The following day another correction came along and suddenly the big black hole so many have been wanting to come to pass since the unthinkable happened in Nov 2016, when the sky was gunna fall,  started to fill in again to become a mere pothole.

20 000 to 26 000 in 15 months and many trades that are predicated on computer reactions were unavoidable.

Much "paper profit" has been created in an unrivalled growth spurt fuelled by business confidence. Then came the tax cuts, following the consignment to history of the Cash Cow economy of Obama because Hillary fell at Bechers Brook, allowing the horse of very suspect breeding to come through and take the cup.

Paper profits that will only become real losses for those who jumped on board at 26 000 and panic sold at 25 000.   Of course such facts would escape the trained and skilled "repeaters on call" on  holiday.

Sheesh even Bernie Hickey understood what was happening.

Of course the fall measured in points was large but as a proportion of the 26 000 it barely made the top 100 of all "crashes'.   Hell in 1987 Black Monday saw a fall from 2600 (no, no missing zero) to 1750 in one days trading or 32.7% .   1929 saw a two day fall that removed 70 points to end day two at 230 from a September high of 318 points - a loss of 23.3%.

Percentage -wise,  far greater than yesterdays minuscule 4%

In the aftermath of the 1987 "correction" much blame was placed on computer created trading that seemed unstoppable.  Legislation attempts to curtail such robotic panic but I am unaware as to the current state of play when panic overtakes greed.   However, my understanding of the recent Trump bull market has many indicators stable and a long way removed from the sheer insanity of 1929 and to a lesser extent that of 1987.

Remember "The Share Groups" that met over coffee and euphoria prevailed?

Markets go up and markets go down - something of a fog shrouded fact to a large number at present in the news in NZ, and probably destined to remain so.

1 comment:

Anonymous said...

Read, try and understand how things work.

Lord Egbut