Have we Bear-ed enough?

Asian stock markets rose Wednesday as investors welcomed a hefty U.S. interest rate cut of 0.75% to 2.25% and a rally on Wall Street overnight. The Dow Jones closed up 420 points or 3.5% to 12,393. Sentiment was also lifted by better-than-expected earnings from major U.S. investment banks Goldman Sachs and Lehman Brothers, easing concerns about fallout from the global credit crisis.

Japan's benchmark Nikkei 225 index rose 2.48% to 12,260, while Hong Kong's Hang Seng index was up 2.26% to 21,867. Australia's main index rose 3.6%, and markets in South Korea, China and India were also sharply higher. The KLSE closed higher to 1,187 or up 0.55%. The intra-day high was 1,207.

Generally, everyone is interested to know whether the markets have reached its bottom and recovery is on its way. This is perhaps the most frequently asked question in the financial markets today!!

MyTake: As we all know, the US economy is currently facing 3 major problems, ie credit crunch arising from the fallout of subprime housing loans, inflation and growth. (some may want to include "mistrust" as the fourth problem).What the Fed is doing currently is correct because by reducing interest rate, growth would be achieved despite the effects could be felt months latter. Secondly, the fact that the Fed is providing some breathing space for the market by pumping in liquidity, extending financing and loosening the financing collars of the lenders will ultimately help to put stability in the credit markets. I suspect the Fed will let inflation takes care by itself as a slowing down economy will in effect lowers the demand for goods and services and thus inflation. The dollar weakening is a problem but it will also be corrected as the economy gets back into stronger footing or by "intervention". The bigger issue is that the Government needs to make sure its citizen stays in their home and not runaway and not servicing the housing loans. I think the catalyst needed for the market to start its meaningful uptrend is not here yet but will only come about when Warren Buffett and the likes start buying in the market or when states and pension funds, national funds or even tax payers monies are being used to prop up badly beaten stocks (HK uses it successfully in 1998) and the buying of defaulted housing loans and schemes from banks and companies. These type of intervention is not talked about as it touches on bail-out, especially this year is an election year. However, if things get real tough, these desperate measures will probably save the day.