October 17, 2008

Be fearful when others are greedy, and greedy when others are fearful

If you’re not sick of the daily swings in the global stock markets yet, I dare you to look at the action in commodities and currencies. The oil price went from an all-time high of over $148 in Mid-July to about $69 yesterday. That’s a drop of 54% in just 3 months. The currency markets have been equally volatile and increasingly erratic, defying most rational traders’ expectations.

On Equities
Some positive signs appeared this week. Although the gyrations continue to be gut bursting at times, we have seen a slight improvement in the frozen credit markets. LIBOR, the benchmark for international short term lending rates, continued to slide down from the recent highs. The lower the “real” short term credit rates are available for businesses, the sooner liquidity can return to the financial system and do what it’s supposed to do: Spur economic activity.

However, the best news today was the Op-Ed by Warren Buffet in today’s New York Times:

Warren Buffet shows his exemplary courage in times of tremendous economic stress when he says: “Be fearful when others are greedy, and greedy when others are fearful.” He noted that he has been on a buying spree of American Stocks in his personal account which is typically fully invested in US Government Bonds. Whether he is a fool or a genius, only time can tell. But clearly, volatility will not disappear anytime soon and the markets will continue to be choppy for some time. If your gut is sensitive and your pockets are half empty, stay out!

Continue reading at: http://blog.fxistrategies.com/?p=31

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