Crucial to keep one's confidence in pessimistic times

The S&P 500 surged 11.6% in broad-based buying interest and ended the day at sessions highs following a late-session surge. The Dow rose 936 points -- its largest point gain ever and largest percent gain since 1933. All ten of the economic sectors rallied, with gains ranging from 7.2% (industrials) and 18.5% (energy). Overseas markets also rallied, Hong Kong's Hang Seng spiked 10.1%, and Europe's Eurostoxx 600 rose 9.9%.

With regards to the global efforts to help the financial markets, the Fed and other central banks announced plans to provide as much dollar liquidity as needed in short-term funding markets. The 15 eurozone countries said they will guarantee new bank debt until the end of 2009. In addition, several European countries announced plans to guarantee interbank landing and directly inject capital in financial firms. The U.K. government plans to inject up to $63 billion in three U.K. banks.

The U.S. is expected to outline a comprehensive plan of its own as soon as Tuesday, and is likely to include interbank lending and bank debt guarantees, and direct capital injections in financial institutions.

Investors will have a clearer picture of how credit markets will react to the measures on Tuesday when banks and the Treasury markets reopen. They were closed on Monday in observance of Columbus Day.

For Singapore, most stocks went up. I believe that the markets will get better maybe not immediately. As stock prices continues to fluctuate, there will be more bargains that will emerge. Certainly, the current prices do not reflect the fundamental strength of many blue chips and hence there will be opportunities to acquire quality stocks at bargain prices. But do prepare for the long haul, if necessary.

The economic downturn that is sure to come has not arrived. When it does, pay cuts and job losses are sure to inflict alot of pain on those not prepared. The current surge in stock price is not a stabilised one. Hence, do not borrow money to invest nor invest with the money you need in the next three to five years.

The crisis that came when the Hong Kong government intervened to defend the Hong Kong dollar peg and shore up its stock market in August and Malaysia imposed capital control the following month may seemed a long time ago. That crisis lasted 14 months. This present crisis started a year and a half back and is expected to reach the bottom, according to recent estimates in the next 1 year. All factors taken in, may mean that the whole crisis duration may linger longer than the last one we had.

But given the concerted action taken last week by governments and central banks across the world, I am hopeful things will be ok. We seemed to be reaching the nadir of this financial crisis. Can this be compared to the 1929 crisis? Nope .. I don't think so, the tools available to us nowadays weren't available then.