-
Traders react as stock markets fall - Source: Reuters -
Watch Video
-
Related
Slump. Surge. Slump. Surge. This week has been a rollercoaster ride. Or like riding a bucking bull in some Western film.
Downtrodden market cowboys watched with their heads in their hands as some $4 trillion was wiped off the value of the markets.
Panic is apparently the new sheriff in town.
At the local watering hole, debt-drunk countries were grabbed by the throat by the credit rating agencies.
Panic fired indiscriminately, taking down anyone and everyone.
Bargain hunters did swagger in, although their confidence was short lived. But they are brazen, there are bargains to be had and they will be back.
By the end of the week you could be forgiven for thinking order had been restored to the Wild West but think again.
They say that change is the only constant but at the moment that statement would be more apt if you substituted 'change' for 'volatility'. Most commentators believe more lies ahead.
Daniel Skipper from OM Financial told me on AMP Business this week "I think the volatility will still be there but hopefully it won't be quite as hectic as it has been this week and last week".
Hectic is one word for it. Some even started calling it the Global Financial Crisis version II. I'm not sure we had ever really shrugged off the effects of the first version; we just shifted the burden from one place to another.
But the behaviour of the sharemarket was certainly reminiscent of those panic-stricken days following the collapse of America's Lehman Brothers.
The four trillion-odd dollars assessed as having been wiped off stock markets this week is an incomprehensible number.
Someone emailed me asking where does it go? Or did it ever exist to begin with? An indication that to most, that number is largely abstract.
Watching this frenetic market activity results in many people saying, triumphantly, "this is why I don't invest in shares!".
But for those with a strong constitution it does present opportunities. If you need convincing that there are bargains to be had, just ask the man regarded as possibly the world's most successful investor - Warren Buffett.
He told CNN "the lower stocks go, the more I buy".
Locally there are plenty of examples of companies which have seen their share price has slumped, but whose prospects remain just as compelling.
There have been some other positive spin-offs for us, petrol prices have fallen, the kiwi dollar has come off its highs and many forecasters now don't expect the Reserve Bank to be raising interest rates quite so soon.
This week, as I've studied and recounted the minutiae of movements in the dollar, commodities and stock markets I've been less concerned about the volatility itself as I have about what it indicates. Even if stock markets settle down for a while, those factors haven't changed.
I'm often accused of being glass half-empty on the global economy but bear with me.
America still has phenomenal levels of debt, interest rates near zero for the next few years, unemployment at 9.1% and an economy that's growing, but only just.
Europe has three countries that have had to be bailed out and several much bigger ones that are looking shaky. But saving Spain and Italy, if it comes to that, is far beyond the means of the fund set up to bail out the others.
The situation seems precarious, and potentially destructive.
I'm sure I'm not alone in yearning for the odd tumbleweed to come blowing back through this western drama.
But I fear that still might be hoping for a bit too much.
