Irrational

Posted by ednathan on October 22, 2008 · Leave a Comment

by Ednathan Thadeu Andrada

In another twist in the markets this week, the Dow rose to 401 points bucking negative economic news that hounded Wall Street investors during trading day. This came after the industrials lost 733 points the previous day. In this kind of market environment, no one seem to have the answers. Perhaps one can suspect that the only rational explanation for the rise is bargain hunting.

But does that mean that the market has already seen the bottom? Many of the so-called pundits are skeptical with the notion that the markets has reached the abyss and there is no way to go but up. With how the markets are behaving lately, what lies ahead looks even more daunting since any form of logic that was left has clearly been thrown out of the window.

As expected, the local markets followed Wall Street’s lead yesterday with the Phisix slipping to its 18-month low. The peso also breached the P48 to a dollar mark as dollar holders are keeping their greenback in hopes for a better opportunity to sell. A weakening peso holds off any significant reduction in prices of petroleum products here in the Philippines.

I believe any move by the Bangko Sentral to control inflation through monetary measures like increasing interest rates is absolutely counterproductive because it will not address the problem. On the political front, Congress must anticipate a recession next year and should allocate enough funding in anticipation for any pressure to the financial system.

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