25 June 2009

Reason of Correction



Many of my friends make a lot of "horizontal-wealth" through investment during 1st half of 2009. However, starting middle of June 09, share market around the world turns ugly.

Why?
Profit taking?
Corrections?
Or, continuing of bear market?

Let's do some analysis over here:
  1. Like I said before, US funds accounted more than 50% of global market investment.
  2. Economists foreseen that USD will weaken in the immediate future.
  3. And, June is window-dressing month for fund managers.
If you relate these 3 assumptions together, the secret had unfold.

Explanations:
  • From March 09 onwards, US funds have been flowing out of US to other countries. Emerging Markets rally. USD weaken.
  • When mid-year reporting seasons approaching, fund managers lock-in their profit, pull their funds back to US. Emerging Market correct. USD strengthen.
Make sense?

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