When the US Capitulates, What of the Aussie Stock Market?

It’s a rough week on the markets around the world.

Overnight the UK markets crapped themselves. The FTSE 250 was down almost 4% in early afternoon trading. Brutal stuff, and akin to mid-March just a couple of short months ago.

There’s every chance that Friday markets will be brutal across the board, across the world.

Not to worry.

This is exactly what we expect markets to continue to do for at least another month or two. Finally, we might be seeing some rational behaviour come back to the market.

That’s not to say that things aren’t ripe for stock pickers. Heck, I don’t think there’s ever been a greater time to be an active investor — but boy, do you need to do so with a fair bit of trepidation!

The situation may seem dire. Economic recession is here and it’s everywhere.

Australia isn’t escaping this one like we did ‘technically’ in 2008 and 2009.

I’m expecting that governments around the world will play the stupid game of tax hikes (whether it be GST, income tax, or other hidden taxes like pensions and super). What it all means is the taxpayer will once again be bailing out themselves thanks to the incompetence of the government.

And it also means the middle gets squeezed harder and the gap between the rich and poor will get massively wider. And then we’ll find even greater social unrest and you guessed it, the socialists call for the end of capitalism (again).

Worth noting, that it’s not necessarily the fault of capitalism that’s the root of the financial system’s problems. It’s the fault of power.

Frankly, the US is rooted

It’s this idea of power and where it exists, who has access to it, and how they use that power that has distorted the world’s economies, the whole financial system, and even non-financial system networks.

Therein lies the problem. The problem of major decisions impacting the largest number of people, taken and made by the fewest number of people.

That’s where the real distortion lies.

This is…

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