The recent market volatilty is really not meant for the faint hearted.  The major indices across world gaining a few hundred today and dropping a few hundred tomorrow.

Yesterday, Fed annonuced a 50bp cut to both Fed and discount rate.  Major indices rally upon the good news (STI up 100+, HSI up 1000+, DOW up 300+).  This is a worrying trend, frankly i expected only a 25bp cut, as it will show that the US economy is still holding up but with a 50bp it implied that the US economy might be much worse than expected.  Economics 101, falling interest rate is a sign of recession.

With the subprime woes still at sight, the latest Fed move have invited a new monster on-board, the yen carrying trade.  Vaguely, I still remembered  more than 10 years ago, USD/YEN was near 100, there was even talk that to re-value yen so that is 1:1 to USD.  Similar to Subprime, no one know what is the extent of the yen carry trade.  If US indeed falling into a recession, the global economy will be affected, starting with China with major of its export heading to US.  This may be the straw that break the camel back (China bubble). If this happens, I will coined this as the “Era of the Twin Tower”, US and China.  Remember you read this term from here first.

Although I still hope for STI to surge to 4000 by year end but there are too much uncertainties.

P.S. Read from kleer blog that Credit Sussie downgraded KepCorp to Sell with TP $7.8 (now is trading $14), erm.. do they know something that we don’t??