The Nikkei-225 has reached an important resistance. It is my belief that the global central banks will continue to print money, so we can expect global equity markets to keep rising for the time being. For this reason I see the Nikkei probably rising to 12,500 resistance before being overwhelmed by inflation concerns. In the short run inflation tends to look good on balance sheets, however eventually it eats into consumer confidence and results in more job losses.
For the Japanese market it will be interesting what impact a change in leadership will have on the economy. This is a landmark development for Japan. Historically when Japan has had periods of reform, they have been earthquake-type shifts in policy, so with two senior business figures leading Japan's new party it will be interesting to see the impact of this new team. I watch with interest their forthcoming announcements.
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Andrew Sheldon
www.sheldonthinks.com
There are a great many people predicting another slump in the Dow. Certainly that can be expected given the protracted rally we have just experienced. The rally was of course driven by the Fed and Bank of England 'recapitalising' the monetary system with government debt, as opposed to household debt, and also printing money. The implication is that there is no end to the largesse until it has no effect, and that 'crisis of confidence' typically comes in the form of inflation. For this reason I see no reason why the Dow can't keep going on its current track. A pull back is inevitable, and no doubt the continuation of the rally will not be justified, but neither is silly government monetary policy.
US unemployment continues to rise, sales continue to slump. A big factor in the Dow slump will be the sign that central banks around the world are starting to raise rates. But I do not predict this will be a significant obstacle until inflation gets up to around 5%. At that point, people will conclude that we are in for a serious slump. By that point gold will likely be over $1800/oz. My latest calculations suggest gold will rise to a minimum of $2200/oz. See my commodities post.
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Andrew Sheldon
www.sheldonthinks.com
Investment Strategy
If you are investing for the long term, you still need an investment strategy. Dont be fooled by the rhetoric of fund managers. The reason they advise you to 'buy & hold' is because they dont want to compete with you in sell-offs. Markets and industrial sectors are cyclical, so they demand trading to get the best returns. Fund managers actually cant hope to match the performance of small investors (if you are half good) because they have to manage huge amounts of funds and charge you a fee besides.
MY ADVICE is (i) look at a range of market indices and decide upon what level of correction would give you the justification you need to get in & out of the market. It might be a 5-10% retracement or a break of trend. (ii) Diversify if you dont have an intimate knowledge of the company or management. More than 30% in one company is aggressive.
The Nikkei-225 has reached an important resistance. It is my belief that the global central banks will continue to print money, so we can expect global equity markets to keep rising for the time being. For this reason I see the Nikkei probably rising to 12,500 resistance before being overwhelmed by inflation concerns. In the short run inflation tends to look good on balance sheets, however eventually it eats into consumer confidence and results in more job losses.
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