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 Falling stock market: not a game for the feeble

016.08.19.  A lot of money was made yesterday as panic wiped $55 billion off the books. The brokers get their fee when you win or lose. Too many players frighten too easily—like lemmings they follow each other over the cliff. Like a bouncing ball the market returns, often higher than the last time, and so it goes and always has. Judith Sloan should be heeded, more so than your sales broker, whom with urgency puts cheese into the ever ready trap. Acquaint yourself with the smell of gorgonzola cheese and remember it well!
It was a grim day on the Australian Securities Exchange yesterday, with $55 billion wiped off the value of shares. It was not so long ago that we were celebrating a peak in the market as signified by the All Ords index.

Source: Judith Sloan, News Corp

Sharemarket plunge is grim but not gruesome

It’s important to bear in mind the difference between the equity market and the real economy, however. The equity market can weaken even if the economy remains fairly strong.
Having said that, most of us are invested in the stockmarket either directly or through our superannuation accounts. So a tanking sharemarket is a dampener on those important animal spirits that keep the economy rolling on, particularly in relation to household consumption, which is the largest single component of GDP.
The global headwinds and associated uncertainty that are affecting the Australian economy are becoming stronger — think the US-China trade war; the Hong Kong situation; Brexit; and the German economy going into recession. These will inevitably affect growth in our economy and the recent rapid fall in the price of iron ore — from a high base — is not a good sign.
While our GDP growth has been sluggish, it is unlikely the June figure, due out early next month, will be negative.
A technical recession — two consecutive quarters of negative growth — is unlikely but, were it to occur, it is somewhat down the track. Our labour market continues to perform strongly, with yesterday’s figures reinforcing this point.
The odds are that the Reserve Bank will further cut the cash rate by 50 basis points before the end of the year, but the government will need to be prepared for any fallout of decelerating growth.
While there are good reasons to hang on to the budget surplus this financial year — if only to give us some wriggle room if things really turn pear-shaped — it is time for the government to get on with dealing with some of the medium-term constraints that are holding back the economy: red and green tape and complex industrial relations laws are two examples.

{ 9 comments… add one }
  • Muphin 16/08/2019, 6:56 am

    From what I have gleaned from the PRO Trump media. Democrats, the likes of Warren, Sanders, Biden and the ANTI Trump media, plus a few others who will go to any length to depose Trump, are spreading the rumour of a recession in the USA.

    The US economy is booming with unemployment down, wages up and for the first time in 30 years self energy reliant.

    What RECESSION ???

    • Pensioner Pete 16/08/2019, 7:50 am

      Muphin: Precisely, what recession? How can there be a recession when the economy in the US of A is booming thanks to Trump. The only situation as I see it is, a stock market ‘correction’ as does happen from time to time and cannot be considered anything out of the ordinary in the scheme of things.

      • DT 16/08/2019, 8:55 am

        Socialists Democrats and here Labor Greens want a recession.

        Labor are even trying to embarrass the government into spending money not budgeted to try and get the government off track to achieving the first budget surplus since 2007/08.

        Yes, a budget surplus does not retire the debt, but a surplus has many advantages, far better to be spending less than annual revenue than more.

  • Xword 16/08/2019, 8:28 am

    “October is a particularly volatile month for stock exchange fluctuations … Other particularly volatile months are November, December, Janu…” – Mark Twain

  • DT 16/08/2019, 8:52 am

    Chance of recession somewhere in the 4 out of 20 mark at this stage.

  • Graham Richards 16/08/2019, 9:11 am

    Stock markets go up down like a w&$#%s drawers.
    There are natural corrections, abnormal “happenings” not to mention speculators and the ever increasing hysteria of the left which simply cannot believe that the real conservatives are once again proving that left are an unneccesary cork in the asshole of progress.
    I really wish that the general public could be a lot more perceptive of what’s really happening around them. Use that grey matter that nature bestowed on you!

    • Peter Sandery 16/08/2019, 11:10 am

      Great definition of the left, GR.

      • TommyGun 16/08/2019, 3:14 pm

        Love it!! 🙂

  • Jack Richards 16/08/2019, 9:44 am

    The ASX 200 is still about 3% above where it was in April.

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