DFM down 6%, Obama recognizes unjustified optimism
Posted on 24 June 2009 with no comments from readers
The Dubai Financial Market took a six per cent tumble yesterday with the recent advances in bellwether stocks like Emaar Properties being wiped out and investors selling out before the holiday months of July and August.
Stock markets in the US hesitated after Monday’s big sell-off but confidence is waning among investors stateside.
Irrational exuberance
Last night President Obama observed in a press conference that he had been amazed by the resilience of Americans even when the facts did not really seem to justify it. If you wanted an explanation of the recent rally in US stocks as the worst recession since the Second World War deepened then this is it: natural American optimism.
But Obama is a fine politician and managed to slip in that his administration would not be taking any measures likely to create bubbles in the economy, as if the massive stimulus plan and zero interest rates was anything else.
The question for financial analysts is not whether a bubble will be created but where it is likely to appear. The oil and gold price have been early beneficiaries and this is doubtless a marker for the days to come.
Ask not where is inflation going to come but where is it already appearing. And as we know trends tend to extrapolate and be self-fulfilling as investors notice them.
10% correction?
But what of stocks? Will we see a correction and then a renewed bull run? That is what Marc Faber and a few other commentators expect. Then we could have another crash in the autumn.
The DFM will likely track this pattern along with every financial market in the world. However, the real buying opportunity will be in gold and oil – and especially their stocks – if a general sell off in the summer months gives an opportunity to buy commodities at bargains prices.
However, the very fact that a humble commentator like myself can predict this trend tends to suggest it may well not happen, and that commodity prices might prove to be rather stronger than generally expected through this period.
no Comments posted by readers:
Hi Peter,
I have been reading your views for about two months now.
I would like to thank you for publishing information which makes sense.
Have been trying to find out where I can trade commodities such as Gold and Oil in Dubai. I would appreciate your input. Thank you.
Ed Note: You should try the Nasdaq Dubai – any local bank could buy stock for you such as their Gold ETF, or you could trade oil and gold futures on the DGCX – use Google to find these websites and supporting info. NBD Emirates Bank has a paper gold deposit program.