Money Morning Uncertainty Index
We almost don’t know what to expect from today’s market. This time last week the bottom seemed to be falling out of it. Today a strong lead from Wall Street could help to push it higher. But it’s all ‘ifs’ and ‘buts,’ the reality is we don’t know.
It really comes down to the willingness of investors to hold open positions over the weekend. So far, as we watch the market opening almost everything is turning green. But we still have that nagging unease. The ‘V’ word is still evident.
We know that we are on the verge of overusing it, but volatility is still a major issue. It’s all very well for us to print a chart of the VIX index, or a table showing how the market has swung, but what does it mean?
The volatility in the market is just a representation of the uncertainty among investors. So in reality we could call it an Uncertainty Index. One day the market is certain things are bad so it get sold down. The next day it is certain that things are getting better so it is bought up.
We’ll update our Money Morning Uncertainty Index and provide the results in Money Weekend tomorrow.
Will US Earnings Season Lead to a Happy Holiday?
Earnings season has just started in the US so this could be a good opportunity to see whether there has been any impact on business. Aside from that the US market is supplied with a daily dose of economic statistics. This will either add to uncertainty or remove it depending on whether enough of the statistics point the economy in the same direction.
The next key event the US market will be looking at is the holiday period and whether the American consumer has any money or credit left to keep spending. Everyone knows that the US is already in recession it is just a case of how long it will last. The next couple of months should give us a good idea.
Margin Lending to Take a Hit?
We took at look at the Reserve Bank of Australia statistics on margin lending this morning. The latest figures only cover up until the end of June. So we look forward to what the stats for the September quarter will show.
According to the figures, the value of securities held in margin lending accounts peaked during the December 2007 quarter. That shouldn’t come as any surprise considering that is also when the market peaked.
Over the following three months a total of $19 billion was removed from the value of margin lending accounts. Of course this wasn’t entirely due to investors losing money as the market fell. Although it would probably account for most of it considering that the same period also coincided with a five-fold increase in the number of margin calls.
The interesting point about the statistics is that margin loan balances increased by $8 billion in the following quarter as the market regained some stability. We wonder what the balance was as the market tipped over the edge in September.
It will be interesting to follow these statistics over the next few quarters to gauge how confident investors are with getting back into the market.
Financial Advice From the PM
We aren’t sure if we’ll be able to cope with watching the PM trying to be all folksy with the ‘Aussie Battlers’ on Channel 7 this Sunday. There must be something else better for us to do.
But we are tempted to tune in just to see what advice the PM gives. We can guess that he is dying to suggest that everyone goes out and spends their part of the $10 billion government handout.
If the idea of the handout was to help avert a recession he will probably feel a bit short changed if the Battlers do the sensible thing and save it.
Cheers.
Kris.
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