The stock market is flying. But like all parties, the fun will come to an end.
Step right up folks. The way to make really easy money is to invest everything you've got, and more, into the stock market.
But there is a catch…
You have to do it now!!! Right now. Before it's too late.
Welcome to the Great Stock Market Party of 2009.
Forget the period before March 9th 2009, for it was an aberration caused by an overdose of pessimism. It happens from time to time, like in early 2003 and in late 1987, for example.
The Little Recession
Now everything is different. Everything is better. Phew. The Great Recession suddenly doesn't seem so Great any more. Perhaps we should rename it the Little Recession?
Unless of course you're one of the 2.5 million people without a job, or the 500,000-odd people who will probably lose their jobs between now and the end of 2010.
Or unless you are one of the poor souls who lost their house because you lost your job and couldn't afford to keep up their monthly remortgage payments.
Or unless you are one of those people who'd invested their life savings into 'safe' banks such as HBOS (RIP), Lloyds Banking Group (LSE: LLOY) or Royal Bank of Scotland (LSE: RBS).
It's Party Time
For everyone else, it's party time. Grab yourself some beer, wine and spirits and party like you've never partied before.
Interest rates are at rock bottom. The Bank of England has told us they'll stay low for an extended period, so rising interest rates is the last thing you need to worry about… they are not about to derail the Great Stock Market Party.
It gets even better. Alistair Darling, hosting a meeting of finance ministers from G20 nations, said his colleagues decided to keep interest rates low and maintain record budget deficits until economic recoveries take hold.
No wonder Mike Lenhoff, a strategist at Brewin Dolphin, was quoted on Reuters as saying "…we've had a very strong message from central banks that rates are staying where they are for quite some time, and meanwhile the global economy is recovering".
The Living Dead
The FTSE 100 is on a tear, up more than 50% from its March lows. Companies that not so long ago were considered to be on death's door, such Trinity Mirror (LSE: TNI), Avis Europe (LSE: AVE) and Travis Perkins (LSE: TPK), have soared hundreds of percent higher.
Then there are quality shares such as Next (LSE: NXT), now trading at a two-year high. It's like the recession never happened…
Just when you thought things couldn't get any better, provided you've got a job, your portfolio wasn't obliterated, your pension wasn't massacred, you don't owe a small fortune on your credit cards, and you didn't buy a house at the absolute top of the market and have a mortgage that will take you 50 years to pay off, there's a new game in town.
The New Game In Town
It's called the carry trade. It has its roots prior to mid-2008, when you borrowed Japanese yen at 1% and pumped it into just about any other currency you could find at 5% or more, and made the easiest money you could ever make. Even better, as well has profiting from the interest-rate differential, you could also profit from exchange-rate fluctuations.
It was so easy, and so much fun, rumour has it as a favourite pastime of Japanese housewives…until it went all wrong and they lost everything, and more. But hey, it was fun whilst it lasted.
The carry trade is all the rage again today. This time, the US dollar is the favoured currency…simply borrow US dollars at 1% and pump it into shares, high-yielding currencies such as Australian and New Zealand dollars, or commodities such as oil.
You could do the same with sterling. Borrow at 1% and away you go… speculate to your heart's content and your portfolio is full of the riskiest assets you can find.
But there is a catch.
2010… Party Over
The party will end. You just don't know when it will end. It could be tomorrow. It could be January. It could be the end of 2010. But end it will. And if you've partied too hard, fuelling your binge buying with borrowed pounds or dollars, the hangover will make the period to March 2009 feel like a walk in the park.
Still, don't let me stop the party while the music is pumping. As ex-Citigroup CEO Charles Prince said back in the go-go days of July 2007, when the share price of the US bank was around $50, “As long as the music is playing, you've got to get up and dance…we're still dancing.”
Citigroup shares today trade at around $4. Easy come, easy go.
More on the economy and the markets:
> If you're in the market for buying shares, consider opening an online broker account with The Motley Fool's Share Dealing Service. You can buy and sell shares in real time for a flat rate of just £10. Click here to find out how you can open an account for free today. There is no obligation to trade.
> Bruce Jackson likes a party, but doesn't fancy playing Russian roulette or being a currency speculator. He doesn't have an interest in any of the companies mentioned in this article.
