When Bernanke cut rates last week, the financial community breathed a sigh of relief because that pumped life back into the major stockmarkets. India and China are now hitting new highs off hopes that the sub-prime mess is going to be contained to the US and 3rd quarter financial results from investment banks such as Goldmans, Morgan Stanley etc. are also showing fairly good business in the last few months (investment bank performances tend to be a barometer of big money. When hedge funds and governments are bullish, investment banks tend to do well because they act as their. brokers and sellers). So even though results weren’t record breaking, they weren’t as bad as some had feared. Maybe. Funny how quickly sentiment changes doesn’t it?

But make no mistake - interest rate cuts tend to happen late in the growth cycle of the economy and precede a contraction. It is very likely that 14,000 will provide a strong psychological resistance for the DJIA, and that the US economy is set to slow. When that happens, the US consumer will stop buying as much from Asia and the prevalent thinking now amongst hedge fund managers is how that is going to affect Asian stock prices. Leaving that thought aside, if you look at the Hang Seng Index a very different story is emerging. It has shot upwards like a cannon following a relaxation of the rules in China governing the investment of Chinese mainlanders in the Hong Kong stockmarket. This tells us that Hong Kong is shrugging off these concerns on the premise that there is sufficient internal demand to drive the stock market.

And what of Malaysia? Even though it has recovered from the drop of late July it seems that not as much money has returned. Could it have all gone to India and China - the new safe havens of the global stock market? Perhaps. (Take a look at the country graphs to the right - where I have taken out Taiwan and put in China and you will see what I mean.)

Do these thoughts (and the graph below) make you feel happy? They still don’t for me.