Party like it's 1999?

FT ^ | 3 Oct 2007 | John Authers

[oblomov]

On Monday morning, as fresh news of severe losses by the giant financial groups, UBS and Citigroup, revealed even more damage inflicted by this summer's credit squeeze, the reaction of stock markets was clear. They rallied.

In Monday's trading, the Dow Jones Industrial Average, still the most widely watched index of the US stock market, managed to top the all-time peak itreached on July 19. This was broadly representative of the most important developed market indices. The US S&P 500 index and Germany's Dax index are within 1 and 2 per cent respectively of their mid-July highs.

Neither the S&P nor the Dow have closed as much as 10 per cent below their highs since July. Thus, technically, they never even suffered what analysts would call a "correction". They were briefly more than 10 per cent below their highs at noon on August 17, but that afternoon regained all the ground they had lost as traders wagered, successfully, that the Federal Reserve would be forced to intervene the next day.

Meanwhile, emerging markets are on fire. The MSCI Emerging Markets Index is up more than 50 per cent over the past 12 months, and it has leapt up by more than 25 per cent since August 18, the day the Fed cut the rate at which it lends to banks. The biggest emerging markets have rallied even though they were already in nosebleed territory; in dollar terms, China's Shanghai Composite is up 416 per cent since the beginning of last year, India's Sensex is up 112 per cent, and Brazil's Bovespa is up 133 per cent.

[oblomov]

There are conflicting economic signals- employment, shipping rates, commodity prices, and exports are bullish, credit expansion and the ISM are bearish. And employment gains reflect an increase in government payrolls that have made up (so far) for the layoffs in the FIRE sector.

Regardless, why not play the rally while it lasts?

[what's up]

My info is that in this century (or at least from '29), the 3rd year of every President's term is a bull market. The 4th is a bear.

I plan to be long in the market thru Christmas, then get out for next year (or maybe go short).

[familyop]

We’re in a good position to correct trade imbalances.

[B-Chan]

Irrational exuberance. Some people never learn.

[Mariner]

It’s true that the current-account deficit will be fixed.

[PugetSoundSoldier]

Dunno, but I’m cashing out my Shanghai investments in 7 days when I’m over there. Tripled my money in the last 16 months, it was good to me... But the smart money in China is now jumping to the HK market, so I think I may follow as well.