Saturday, November 1, 2008

Sunday morning coming down

I sat at a table last night with some other traders/investors. Some are in the business others are active traders or investors. All have taken a thump from the current situation. A few have had to sell some of their positions due to leveraging. In the last week all have been buyers believing that the forced selling as margin calls came rolling in is near the end. Two have been active traders attempting to buy and sell into the dips and rallies. Now there were only 8 of us at the table but I think if you could network similar groups at the moment the sentiment would not be too different.
Credit is thawing, overnight inter bank rates are down and still moving down. All key economies are seeing domestic rates fall. All at the table shared my opinion that China will not miss this unique opportunity to steal a big break on the cash strapped West. They have enormous cash reserves to pump into the economy and the capacity to make internal structural adjustments. Examples so far.....$US290 billion into rail infra structure, removing the restrictions on farmers to trade their land rights, lowering interest rates, freeing up the urban real real estate markets by reducing taxes etc, grabbing the chance to do a deal with troubled Russia to build a massive capacity pipeline extension etc etc.
All saw opportunities in Australian resources and agricultural companies and their supply chain companies. The mood was much brighter than a month ago. Those on the workshop floor were saying client contact was resuming from those who hibernated, who didn't panic and are liquid. One who works mainly in H.K. said the panic was primarily over. The sheer speculative money that had driven the Chinese buying had been cleaned up. Sovereign funds were on the ready.
Because of the low debt ratio in the mortgage market major problems would not arise in the H.K. or Chinese domestic market. A slowdown no doubt but the Chinese Government will keep the Commercial market alive.
So a positive night........which eventually descended into red wine driven outrageous solutions to any world topic introduced. The wines were Black Jack Shiraz, Torzi Matthews Frost Dodger and Bannockburn Shiraz......and as usual the women at the table had by far the best palates for identifying the wines. Its a turning market it seems but it won't be a rocket. (Although as I have suggested previously AGS could be one.) And Newport for the Melbourne Cup...I backed him at big odds in Sydney so have to follow up!

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