Past the Tipping Point

I see a consensus about this past week being the bottom of the market. People are focusing on where to from here. It is a good thing that the worst is behind us and we are now entering Phase 1 again. Slow built-up. This is what happens with sharemarkets. The real world will lag behind the sharemarket movement. We are just starting to see the effects of tightening in credit, reducing number of jobs, slowing economy. Generally, it is still hard to see the real difference out in the street and that’s why I’m eager to see what happens in the next 3 months. Probably not much.

The effect I see right now is caused by the very low level of Australian Dollar compared to Euro and other currencies. These low levels haven’t been around for a long time. Certainly nothing I’ve seen. This effectively means a 20% drop just in the currency conversion. I don’t want to even try to add that to the losses in superannuation and index funds. I guess it is a good thing to still have a source of income and the will to move forward and continue on achieving life goals.

What follows now? I’d hope not to see large shake-ups of the price levels. Companies will go bust, obviously, and the earnings will be lower than previously. But that is all to change during the next year. If the recession is to last 18-24 months that means that in those 18-24 months we are to see moving forward. Cleaning up the bad credit, bad practices, adjusting regulation, the creation of the new environment. This will all have an effect on the economic outlook and, in turn, the share prices and earnings.

There is opinion that good times are ahead but that remains to be seen. Obviously, since it was this bad the future can only be better? :)