Monday, 20 February 2012

Markets fully loaded in 6 weeks of 2012



I find myself thinking all the time that this year is going to be a repeat of last year.

After all, 2010 had been good, economies in the West and East had bounced back after the huge fiscal stimulus for 2009. Markets had come back and although everyone knew there were deep underlying problems, the sentiment was that there was time to sort everything out - yes growth rates would be slow, but there was growth.

So at the beginning of 2011 there was a big 'risk-on' phase continuing where 2010 left off. However, events undermined it all. Oil spiked as the Arab Spring began. Then slowly the realisation hit that the Euro area was really in trouble and another catastrophe could hit. Some of the fiscal stimulus started to wear off too.

In the end 2011, ended a terrible year with Western Countries slipping into recession, much discussion of Euro break-up and the US recovery in doubt.

Just 6 weeks into 2012 and we are back to Jan 2011 in terms of markets and sentiment. Greece and the Euro area are being stabilised, number suggest growth is returning and the East has not missed a heart beat.

Yet, Iran threatens the oil supply and just like last year the price has spiked. Oil at $120 is probably not compatible with any real economic growth, so central is it to the world economy. Greece too is still likely to collapse at some point this year as successive bailouts fail to fix the underlying problems.

The markets seem to be discounting this with the FTSE100 bubbling up to near 6000 today, is this a case of deja vu all over again though?

6 comments:

Steven_L said...

I was too cautious this year, getting out a couple of weeks ago.

But I need the cash (which was planned for a holiday) to move up to Aberdeen for a new job now. Oh well. Then I'll need to gat a car again and some pike fishing gear.

Still long BP though, tends to stay in the green even on the red days and recovered from going ex-dividend within 2 days. Still reckon I can squeeze a bit more out of BP.

Could be tempted to have a little flutter if anyone can suggest something.

Anonymous said...

Just noticing this wv. Very ugly

Budgie said...

The markets have decided, as I did 9 months ago, that the euro was (is) not going to disintegrate imminently, or even in the medium term.

Budgie said...

Has Merkel rattled her sabre enough to satisfy the home voters? Yes, I think so, therefore the real bailout can go ahead.

The ECB has cannily protected itself by swapping old Greek bonds for new. This is dire news for the private holders. The lizards have supported their own, as I feared they would, but now at the expense of future trust upon which the markets depend.

CityUnslicker said...

Budgie - agree re Greece. A bad precedent - but shows that politicians can trump markets even in the great game - owning the currency supply and regulatory framework is handy!

Not to say MR Market won't have his revenge one day soon....

Blue Eyes said...

The issue is that while the pessimists might be right, the alternative to being bullish is to never take a risk and for nobody to ever push the envelope. By definition markets have to be optimistic otherwise the whole thing would collapse.