Global share markets come roaring back


The financial world has been saved. Long live the stock market. Death to gold for now anyway, writes The Motley Fool.

World stock markets are back on the up and up. For once, Australia lead the way, with our S&P/ASX 200 (^AXJO) jumping 2.65% on Wednesday.

The Australian economy expanded by 1.2% in the June quarter, the fastest quarterly pace in four years.

Treasurer Wayne Swan piled in saying “Even the biggest natural disasters in our history and the worst global downturn in 50 years can’t knock us off course.”

You can never trust a politician to give a straight answer. They are in permanent election mode. So we turned to Felix the Foolish Wonder Cat to give us the real story…

“Meow. I think Mr Swan means to thank China for keeping us on course during these difficult times. If they weren’t buying our coal, iron ore and LNG, we too would be looking at weakening growth. Whatever the numbers say, retailers are still doing it tough. The local pet shop was empty last week, although thankfully for me, it had plenty of Whiskers in stock. I’m hungry and tired now. Time for a cat nap.”

Thanks Felix. Next week we’ll seek his year-end predictions for the stock market, the Aussie dollar, and top selling Christmas cat toy. You can be assured it will be riveting reading.

Rise up

Wednesday’s 108 point rise in the S&P/ASX 200 was the market’s biggest gain so far in 2011, and the best day since May 2010.

Whilst the GDP numbers appeared to be the catalyst, others are not so sure.

In the Australian Financial Review, Frank Villante of Celeste Funds Management said it was a relief bounce and characteristic of acute market volatility.

“I think if people get euphoric about the data they are probably being a bit naïve because it’s not representative of the feedback we are getting.”

Back off you wretched bear market

Can’t we be euphoric for once in a while? Be damned with this wretched bear market. We’ve had it up to here with you. We’re fighting back, starting today.

The Americans, those pesky purveyors of sub-prime mortgages, also seem to be joining in the fun.

The Dow Jones (^DJI) jumped 2.5% overnight Wednesday. Not to be outdone, the Nasdaq (^IXIC) surged 3% higher. The VIX (^VIX), commonly known as the fear index, retreated almost 10%. Back off you bears.

Is this the bottom of the market?

It didn’t take much to ignite American markets. Bloomberg points to speculation President Barack Obama will announce a plan for more than $300 billion in economic stimulus, cutting unemployment and boosting economic growth.

Long forgotten are those dark days of the debt ceiling impasse. With an election looming next year, never doubt the resolve of a politician when it comes to being re-elected.

“The stock market likely marked its bottom” said David Sowerb, a portfolio manager at Loomis Sayles, on Bloomberg.

Hmmm. We’re not so sure about that. Predicting market bottoms is notoriously difficult. We tried it numerous times in 2008 and early 2009 with no success.

But although we didn’t precisely pick the bottom of the market, we were mostly right. Those dark days turned out to be a great time to buy shares. All of which reminds us of a classic Warren Buffett quote…

“It is better to be approximately right than precisely wrong.”

Just buy something

As we mentioned previously, the Motley Fool’s Investment Analyst Dean Morel thinks shares are cheap now – so cheap that he felt compelled to “just buy something” earlier this week.

Our internal compliance rules mean we can’t reveal the name of the company he bought yet. We’ll do that next week.

But just to be absolutely clear, don’t buy this company, or any company for that matter, just because someone else has, or someone else has told you to.

Although The Motley Fool is ultimately in the business of providing general financial advice (as per our AFSL), and at some stage in the not too distant future we will be offering readers a more structured subscription newsletter service, we always encourage investors to make their own investing decisions.

It’s your money

After all, it’s your money, your life.

We don’t know your individual circumstances. You might be a young high flier, willing to embrace risk, in which case you might be interested in buying promising mining stocks.

Or you might be a 55 year-old saving for retirement, where capital preservation is as important as capital growth.

Or you might be a retiree, where capital preservation and income generation is everything.

Anyway, you get the drift. We’ll have more details in the coming weeks. But rest assured, this Take Stock email will continue, and remain free. Where else can you get such compelling insights as those delivered today by Felix The Foolish Wonder Cat?

Good returns ahead

This week may not mark the bottom of the market. Hot off the press, Australian unemployment jumped to 5.3% in August, with Macquarie senior economist Brian Redican saying it was “certainly was a surprise”.

At least interest rates may be headed down.

Over in the U.S., no matter what President Obama says, their economy is still in a mess. There will be more bad news ahead. Nothing is more certain. At least if the market does crash again, readers of our free report Read This Before The Next Market Crash will be prepared. Click here to request your free copy today.

Gold may recover from its 2-day 4.4% slump from its record high of $US1921 on September 6th, the exact same day we said Dump your gold in favour of shares. Could we have picked the top of the gold market? Check back in 10 year’s time.

No matter what happens, at these levels, we’re confident shares offer the prospect of good returns in the years ahead.

Foolish contributor Scott Phillips also agrees, having recently taken advantage of the opportunity to buy three great businesses while they were on sale.

You could do worse than do the same.

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