Sunday, 5 October 2008
The key week of the next decade
That is my prediction for this week. Quite a strong one, but it seems there have been 4 key developments that are going to dictate events:
1 - The US bail-out, so vaunted just days ago, looks like it will not achieve any kind of market reaction at all at the moment. No one would have predicted this ten days ago, which just shows how deep we are in uncharted, indeed, unchartable waters.
2 - The EU banks have appeared to be in just as much trouble as the US ones, the EU will now suffer accordingly. If Germany has guaranteed all deposits like Ireland, then the whole of Europe's financial and government system will be shaken to its core this week.
3- The CDS market settlement continues and so banks are not going to lend any money to anyone until this is all settled. If key industries like power and airlines can't access the credit they need then the lights go out and the planes will be grounded.
4. Hedge funds continue to have their funds called in by investors, liquidating more positions will drag the markets down further and destroy more confidence - some are predicting a very big stock market crash for this week.
Still, happy days eh? Hopefully we will all muddle through somehow...