10% moves?!

I'll confess - some of these 10% daily moves have me completely confounded.

How can things suddenly be that much better than they were the day before?

Going down, I can believe because I think the selling pressure is justified but a 10% move up in markets when we have yet to feel the ECONOMIC IMPACT of this financial crunch.

I'm just a simple guy and certainly don't have the same insight that these fund managers and analysts enjoy, but just for a minute indulge me.

Just look at the South African economy:

1. The third biggest book retail chain yesterday went into liquidation yesterday - this affects 300 odd people working across 33 chains.

2. 7000 cars per month are being repossessed and something ridiculous like 70 000 people are more than 2 months behind on mortgage repayments.

3. A local fluorspar mine and a uranium mine have been mothballed in the last two weeks - 350+ people out of jobs

4. The local marketing sector probably doesn't want to believe it, but lets assume for a moment that at least R1bn will leave the sector in 2009. (Or more specifically won't be spent and rather hoarded for better times)

5. Ask around - how many of your mates have seen their Christmas bonuses and 13th cheques disappear into smoke?

My theory is that you can get as excited as you want about these big spikes up, but just remember that so far we've had a corresponding plunge a few days after a big spike.

There's bad economic news which is going to have to find its way through the system and by trying to chase good news all the time, you might find yourself being suckered.

I appreciate that the longer you are in the market, the better your returns ultimately will be (as much as many other traders dispute this!) but ask the tough questions of your financial advisors who are encouraging you to pile back into equities because SURELY ITS HIT A BOTTOM.

Point out to them that we haven't had a chance for the economy to absorb the above - how is it that things can look rosy now?