The Market Volatility Big Picture

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Today, the market is up nearly 100 points (at the time of writing). Who would have thought a Greek referendum could have such an influence on the Aussie market?

But as we’ve said many times before, such market volatility is not a sign of strength – it’s a sign of extreme fragility. For traders, this is a time for stomach ulcers and night sweats. If you’re lucky, you might make money.

For investors, it’s a time to ignore all the noise and focus on the big picture. In a world of sound monetary policy – which we don’t have – prices give off reliable signals. In a world of crazy fiat money systems controlled by increasingly desperate central bankers, prices tell lies. Today’s big rally (assuming it holds) tells you no more than the sell-off earlier this week. It only communicates confusion.

The big picture is this: The world’s monetary system is buckling under the pressure of excessive debt. Attempts to prop it up create even more debt, market distortions and disincentives to create wealth.

The capitalist system is being twisted beyond all recognition. Consumption is preferred to saving, speculation preferred to investment. Under this scenario, wealth preservation takes precedence over wealth creation. Guard what you have!

Greg Canavan
for The Daily Reckoning Australia

Greg Canavan
Greg Canavan is the Managing Editor of The Daily Reckoning and is the foremost authority for retail investors on value investing in Australia. He is a former head of Australasian Research for an Australian asset-management group and has been a regular guest on CNBC, Sky Business’s The Perrett Report and Lateline Business. Greg is also the editor of Crisis & Opportunity, an investment publication designed to help investors profit from companies and stocks that are undervalued on the market. To follow Greg's financial world view more closely you can subscribe to The Daily Reckoning for free here. If you’re already a Daily Reckoning subscriber, then we recommend you also join him on Google+. It's where he shares investment research, commentary and ideas that he can't always fit into his regular Daily Reckoning emails. For more on Greg go here.
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8 Comments on "The Market Volatility Big Picture"

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shortchanged
Guest

“Guard what you have”, well said Greg.

WhereToRun
Guest

‘Guard what you have’ is very good advice, but where to run? Stocks are moving up and down across the board like boats with the tide. There is little respect for defensives or reward for cyclicals. Even gold is not a safe-haven because gold and the Aussie $ are ‘risk on’ in the U.S. and they go up and down together. Whatever you win on the swing is lost on the roundabout.

Guarding against loss is great advice, but where to run?

Chris in IT
Guest

“Even gold is not a safe-haven because gold and the Aussie $ are ‘risk on’ in the U.S. and they go up and down together. ”

Think twice. If they go down together, what do you lose? If the AUD and XAU both halve, have you lost a cent?

SvetlanaBabe
Guest

I would rather invest in Gold than the Aussie dollar anyday!
Gold has outperformed the Aussie dollar over the last five years by a spectacular amount.
Just goes to prove, people will often believe anything except facts!

Ross
Guest
Guess where they’re trying to sell Genworth, the mortgage insurer with half the Aussie market who global “investors” now think is a bad bet? Yep, on the ASX. Per Banking Day “Genworth Financial plans to sell up to 40 per cent of its lenders’ mortgage business in Australia through a listing on the ASX. Genworth is the larger of the two firms that dominate the mortgage insurance sector and has a market share of around 50 per cent” and “The sale by the Australian government in 1997 of the non-financial assets of the Housing Loans Insurance Corporation is the great… Read more »
shortchanged
Guest

Ross is right, but the whole game, and it is a game to them, is a racket, a con, and the most astute, with insider connections will win. There! I wonder whom have I upset?. By the way, I was a chauffeur for several years to a Chairman of the Board of a multinational company, and you would not believe the conversations I heard in the car. Hence the above.
Well said SvetlanaBabe.

WhereToRun
Guest
To Chris in NT, For quite a while now, U.S. spot gold and the AUD/USD rate have moved together. When U.S. markets flick the ‘risk-on’ switch, USD gold goes up and the $A goes up with it because New York judges both to be in the same risk class – a risky commodity and a risky currency. So, $A gold does not rise as much as $US gold, which keeps a lid on $A gold prices. This has also worked in reverse. When US markets run scared and risk is ‘off’, US gold drops, but the $A has also eased… Read more »
WhereToRun
Guest

Correction: Re: above post. Final para, second line. Amend ‘risk-on light flashes…’ to read, ‘risk-off light flashes…’

wpDiscuz
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