Bear or Bull?

The volatility of the US financial markets in the last few weeks has left me spinning.

After a pounding, the Dow has made a sizable comeback in the last two days. But, is this comeback a representation of long term prosperity or is it merely a momentary head above water gasp of air before plunging back into deep waters again? The thought that millions of life long savings could vanish into thin air, thanks to some unethical practices a few industries (read mortgage) have opted for seems unfair. Whatever happened to the notion of "protecting the consumer"? The phrase appears to be more analogous to theory than practice.

The credit crisis fears in the US have affected not just the US financial markets, but have strongly shaken markets around the world, as a result of US mortgages getting wrapped into bonds and securities and selling into world wide markets. Sometimes I do contemplate as to the seriousness of the mortgage crisis. After all, the US mortgage market represents only 5% of the US GDP, so as long as the factors representing other 95% of the GDP are in check, things should be OK, or so one would think.

In the mean time, the US Gov't is finalizing an economic stimulus package intended to motivate people to start spending again. In my opinion however, the package preaches exactly the opposite of the basic economic fundamental, which is to save. If so much of the economy is dependent on people spending lavishly, something has gone wrong in creating the economic parameters. In addition, the subject of whether the package stimulates the economy depends a lot on other variables such as, is the money spent on American made goods or goods imported into the US from other countries. This smells more like politicians trying to bolster their resumes than anything else.

Coming back to the stock market, and whether the market is bear or bull, well, no one probably knows. The market movement is an output of what millions of people (including speculators, retirees, savers etc) decide to do on a given day. If all of these people were to make the exact same move with their funds, then the market would be very predictable. Because of the complexity of millions of people behind millions of stock transactions, the market is anything but predictable. So, the best move would be to not fall into the hype that media lashes out on the flick of a TV remote control button, but rather to keep the money invested as long as the money is not needed to shore up immediate financial needs.