The irony. Our Prime Minister Julia Gillard rung the bells at the New York Stock Exchange last night. The DOW dropped almost 2%.
Everything that the government touches turns bad. I've read numerous articles the past week from Charlie Aitken to Coppo (Goldman Sach's trading desk daily memo) and they've been ruthless about the current government and it's decisions. It's partly because it is the 2 year anniversary of the bottom of the GFC and also partly because the ASX has been smacked 4% this week that all this negative commentary has been floating about.
The instos have been waiting for their opportunity to sell and with commodities prices hitting all time highs, the Aussie dollar still above parity with the US and the Middle Easy troubles it has been an easy decision to sell. This is coupled with the governments dangerous decisions regarding the resources super tax (which hurts all Australians, yes we all hold BHP and RIO through our superannuation fund) and carbon tax. It's no wonder that Australian companies are targeting and acquiring projects overseas. Africa used to have Sovereign risk but now we do!
There is a lot of fear in this market which unfortunately doesnt bode well for the small cap stocks that we follow. For those that are gutsy it may be a time to top up on your favourite stocks whose share prices have been hit by low liquidity (the lack of buyers forces prices down on low volumes). For others it may be a time to sit on the sidelines, not open any new positions and wait until the world settles down. Having said this, who knows when things will settle - Japan has just been struck by an earthquake so markets may get hit further tonight.
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