Anorak News | Equities Bounce On A Dead Cat Trampoline

Equities Bounce On A Dead Cat Trampoline

by | 18th, July 2008

WHAT’S this? US shares are soaring… JPMorgan Chase, the mega US investment bank, revealed that its second quarter trading is ahead of analysts’ gloomy expectations. Yes, it is the same JP Morgan Chase that has been hit by a 52 per cent fall in profits.

By mid-morning, the Dow Jones industrial average was 71.6 points higher at 11,310.8.

JPMorgan Chase in 39.62 to 39.67 on Tradefair.

Yesterday, the Dow Jones ended more than 200 points higher as another US bank, this time Well Fargo (27.10-27.25), the US bank, revealed plans to increase its dividend.

So banking is back. The cat that bounced wasn’t dead, just resting between its eight and ninths lives.

So let’s now go to California, where IndyMac, a lender based in Pasadena, just outside Los Angeles, has gone belly up. It’s a dead cat doing an impression of Northern Rock.

So banks are up. Right?

Paper money is not being totally debased. Paper money can be worth the paper it’s written on, and then some. Get out of money; get into commodities, those things that might have some value, more than some banker’s signature and a picture of a dead president.

On Wednesday, investors smacked the US dollar, which dropped to a record low against the euro. The dollar’s latest losses also pushed the pound back above the $2 mark.

Will it shift more? The Tradefair EU/USD spread is 1.5845 – 1.5846.

The buzzword is “uncertainty”. What happens next?

There are always good times around the corner, right? According to Liv-ex, the fine wine exchange, the average price of vintage champagne has risen by 27 per cent in the past year. Who buys it? How much can a Russian oligarch drink?

Good times? The US Federal Reserve Board has published an upgraded estimate of 2008 growth. The near-recession growth range of 0.3 to 1.2 per cent predicted in April is now at 1.0 to 1.6 per cent.

And here’s the International Monetary Fund telling us: “On the positive side, demand in advanced and emerging economies might be more resilient than projected to recent commodity price and financial shocks, as was the case during the first quarter of 2008.”

So equities may not be so badly off.

What to do? Why, follow those in the know, of course.

As Gordon Gecko once said, “Most fund managers are sheep and sheep get slaughtered”.

Happy days…

Posted: 18th, July 2008 | In: Money Comments (2) | TrackBack | Permalink