Market Correction

I was surfing radio channels this morning when I overheard this quote from a market commentator: "...thank god for the resource boom - its masking our incompetence." As our markets are in uncertain times - Having the recent market crashes and the possibility of a recession in the United States. (I haven't been following the figures - but when are they going to call it?) [Aside: In macroeconomics, a recession is a decline in a country's gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year.] Where are we headed?

Is it time to bust? A time for market readjustment. I mean, its been a while since the last major crash... Anyway, the Reserve Bank of Australia (RBA) have accused the financial markets in their short sightedness in their factoring in risk and that a significant readjustment may be coming. We have had a long bull run - a long run of stable global growth and inflation. And this situation may have given investors a false sense of security given that global bond yields are well short of their long-term averages. The RBA recently released a quarterly financial stability review and in it they stated: "While the current environment of very low volatility may continue, experience suggests that when economic outcomes are consistently favourable over a run of years, investors tend to underestimate, and thus underprice, risk. It would therefore be surprising if there were not at least some element of this type of myopia in financial markets currently."