It's a great report...a love a good bearish report.
Cheers
tech/a
19th-March-2005, 04:59 PM
Ah doom and gloom.
A seriously bullish indicator.
"Property Investor" Mag has article stating that leading lenders see the return of upward realestate pricing in 2005/6
When it turns bearish we will know.
Right now its bullish so thats the way it should be traded.
Have appropriate risk minimisation in place and enjoy the ride.
A loss in a market turn will be an inevitable cost of doing business!
wayneL
19th-March-2005, 05:57 PM
Ah doom and gloom.
A seriously bullish indicator.
"Property Investor" Mag has article stating that leading lenders see the return of upward realestate pricing in 2005/6
When it turns bearish we will know.
Right now its bullish so thats the way it should be traded.
Have appropriate risk minimisation in place and enjoy the ride.
A loss in a market turn will be an inevitable cost of doing business!
It's only bullish when EVERYBODY is bearish :)
But you are right, trade the direction of the trend. ASX is in full bull mode. But I continue to make the most money on shorts in the US.
Go figure.
tech/a
19th-March-2005, 07:15 PM
Wayne.
2 vastly different economies and Ill bet your doing very well.
Lots of liquidity and plenty to short and when they fall they drop.
What are you shorting stock or??
Who through and how much each side?
OR are you selling calls/both?
If calls how far out?
wayneL
22nd-March-2005, 01:27 AM
Wayne.
2 vastly different economies and Ill bet your doing very well.
Lots of liquidity and plenty to short and when they fall they drop.
What are you shorting stock or??
Who through and how much each side?
OR are you selling calls/both?
If calls how far out?
Tech,
Typical sort of chart I'm trading is EBAY below...
First short trade was a defensive synthetic backspread from the double top...unfortunately closed the trade before the gap...but I was still deliriously happy with it.
Second trade was a near dated bear vertical from the beginning of this month which expired with maximum profit.
Liquidity is huge so you can trade as many contacts as you want.
I never sell calls unless a part of an option spread. i.e. no naked or covered calls (unless on bottom drawer stock).
I like taking near dated spreads on stocks with relatively high IVs. The payoff diagram is similar to longer dated spreads on stocks with low IVs.
Cheers
reichstag911
22nd-March-2005, 01:53 AM
"Property Investor" Mag has article stating that leading lenders see the return of upward realestate pricing in 2005/6"
WASHINGTON (Reuters) — The budget deficit has overtaken terrorism as the greatest short-term risk to the U.S. economy, and concern about the current gap is rising, a survey of U.S. businesses shows.
reichstag911
26th-March-2005, 03:18 AM
I dont believe realestate is in serious trouble and dont seem to be alone in that veiw.
It will be when we get the deflationary depression : )
reichstag911
26th-March-2005, 03:19 AM
Bear friendly zone ==> http://www.moneyfiles.org/temp.html
Bears only!
Bulls not allowed!
LOL
Ha ha Ha !
Thanks dude.
krisbarry
26th-March-2005, 10:11 AM
Yes the housing market is in serious troubles...those who bought into the housing market within the last year, buying units/townhouses close to CBD capital cities have lost tens of thousands of dollars. Many people also bought into the market on 100% finance, offered by some banks/finance companies,since then property prices have fallen and they now owe more money than the price of their property.
Most homebuyers have been tempted to take up new products offered by banks and re-draw off their morgates to record amounts. Australia problem/obbession with credit is stripping profits away from the housing market and placing this into big-screen tv's,furniture,holidays etc. What they are left with is a house that is worth the same amount as the debt that they have borrowed. Now that the housing market is in a flat/downward period and the cost to service this loan will increase with intersest rate rises, it will only leed to one thing. CRISIS!
tech/a
26th-March-2005, 11:24 AM
Kris
Your describing a minority in my veiw.But sure they are there.
I bought a property 16 mths ago and have developed it with a 50% gain.
I hold 8 others, bought from 97 to 2002.
Property investors who have initially increased their good debt(income producing growing assets) only to then increase their bad debt (depreciating liabilities),arent investors at all.
While there is a great deal of education --sales of various products--there isnt satisfactory educatoin in the use of those products or infact in the art of investment,where one works toward a passive debt free income.
There are still great opportunities out there and some can still invest with confidence while placing risk management stratagies in place to buffer doom case scenarios.
There are always doom and gloom stories,if everyone (well actually 90 % of the population are) stuck their heads in the sand everytime one is bought up,there would be no financially secure!!
Do you really think that even with interest rates at 12% that ALL opportunities would disappear?
8% is CHEAP!
tech
Smurf1976
26th-March-2005, 03:54 PM
Do you really think that even with interest rates at 12% that ALL opportunities would disappear?
8% is CHEAP!
tech
Very good point! Present interest rates are REALLY cheap.
However, according to a former (left the industry about 12 months ago) real estate agent I know, practically NOBODY was considering interest rate rises of more than perhaps 0.5% and most weren't even considering that. Many people were really struggling financially to afford rates that were 0.75% lower than they are today.
A recent media report suggested that 41% of Australians were "under financial pressure" following the recent interest rate rise.
Seems like a lot of forced sales are on the way so rents ought to go up, property prices down.
From my conversations with real estate agents and through various forums, the state of the local (Hobart) market seems to be as follows. Seems to be much the same elsewhere (even overseas) too although there are exceptions. (I'm looking to buy in the next 18 months or so, hence the interest.)
1. Top end of the market is dead. It's gone. It was booming but that finished quite a while ago.
2. Overall sales are down around 50% over the past 18 months. Volume has dried up and it is not improving.
3. The level of buyer interest is down even more than sales - the days of numerous competing offers on a property are gone.
4. In 2003 houses were selling at or above the top of the quoted price range, now the bottom of the range is effectively the maximum anyone will pay.
5. The mainstream media is turning bearish on real estate for the first time in a very long time.
6. First home buyers are simply not buying. They can not, will not, even consider making an offer at present prices. There is thus a break in the "chain" of property transactions which makes it impossible to move up the "ladder" since nobody will buy what you have to sell.
7. I found several long term (months) empty properties in my immediate area. Some have been empty 6 months or more. They are still for sale with some now being "for sale or lease". Not a good sign in my opinion.
8. There are an increasing number of empty properties as those who are forced to sell (due to moving for work etc) simply can not sell at the price they were expecting.
9. Sellers are in denial about the market. They will not readily accept the prices buyers are offering. The gap seems to be quite large with buyers unable to move - they simply can not pay more so the sellers must either lower the price or not sell. Most are choosing the latter option at the present time.
10. Most auctions are failing. Private treaty sales following a failed auction are counted as a successful auction sale but even that leaves a failure rate approaching 60% in many areas of Australia.
11. Those sellers that are aware of the market are offering 4 bedroom properties below what most expect for 3 bedrooms. Offering brick below what those in denial expect for weatherboard. Those sellers who are willing to accept lower prices are still having great difficulty selling, if they can sell at all.
12. Overall, both ends of the market are in trouble - volume is dead. Due to the reliance on median averages for statistics and becuase there are still some sales, mostly in the middle price ranges, the statistics have not shown much change.
13. Real estate agents are increasingly under financial pressure due to the lack of sales. If "talking up" the market does not produce results then there is a need to find another means. In peactice, this appears to involve "conditioning" sellers to accept lower prices to get the market moving again.
14. A concept known as "gazundering" seems to be starting to appear. It is the reverse of "gazumping". Success of the method relies upon a general lack of buyers which is not a good sign of the market. (Mostly overseas and mainland states, doesn't seem to be happening locally.)
15. Banks are tightening credit with the maximum they will lend based upon a given income level having been lowered in may cases. This reduces the upper limit that buyers can pay with many buyers now literally locked out of the market unless prices fall.
16. At the present time rent is lower than the interest on a mortgage. If you add in the repayments, council rates, insurance etc. then the cash outlay of
renting is less than half that of buying.
17. Large unit developments in Melbourne especially are unoccupied to the point where developers pay people to draw curtains and switch on lights at night to create false impressions of occupancy.
So there you have it, the results of my real estate research. In short, it seems that there are very few who are able and willing to buy at present prices with increasing numbers simply unable to buy even on above average incomes. There is an increasing stock of empty properties.
Judge for yourself but I will not be buying property under the present circumstances. It might make sense for you, we are all in different situations, but it does not make sense for me.
tech/a
26th-March-2005, 06:16 PM
So there you have it, the results of my real estate research. In short, it seems that there are very few who are able and willing to buy at present prices with increasing numbers simply unable to buy even on above average incomes. There is an increasing stock of empty properties.
Smurf.
There in lies an opportunity does it not?
Where do they or will they live?
I agree that property isnt for everyone and nor is trading.
Infact serious wealth creation is beyond 95% of people as statistics tell us only 10% will retire without government assistance.
In all seriousness why do you or anyone else think this is the case? That 95% wont ever be financially free.
I personally think that THE reason is that the large majority dont have the ability to recognise an opportunity when its presented to them.
Further those in the 95% that DO recognise an opportunity dont have the COURAGE to take advantage of it!
Smurf1976
26th-March-2005, 07:55 PM
Smurf.
There in lies an opportunity does it not?
Where do they or will they live?
I do agree with your point there Tech/a, my point was that the property opportunity is not in owning lots of property in the hope of capital gain as the odds seem to be against that one. As you point out, the masses don't generally do too well financially but they are invested in property to the limit right now which I think says it all.
Of course the fact that the masses are in property, prices are high and interest rates are low means that there will at some point in the future be a good opportunity to buy property, just not right now. If we do end up with lots of forced sales in a worst case scenario then that's the perfect buying opportunity.
On the subject of buying opportunities, take a look at the US Dollar if you are into currencies. Classic sign of a bottom when everybody "knows" that it's headed into oblivion and even TV presenters joke about it. Also, I'm long term ultra bullish on oil but must point out the increasing physical stock levels right now and that just about everybody suddenly has an interest in the price of crude oil.
Apart from the obvious property opportunities like removalists benefiting from more renters, security firms and gardeners benefiting from empty homes and so on a real opportunity would seem to be a carry trade involving rental property.
Without commenting on the actual market here, let's just assume that you expect rents to rise due to increased demand. Go and sign long term leases on a large number of properties with the cost fixed (try and scare the owners about a real estate crash) or indexed to CPI at worst. Then go and rent them out with 6 monthly rent reviews. Assuming that rents do increase above CPI you ought to make a rather nice profit.
Lots of opportunities, just not where the masses are.
reichstag911
26th-March-2005, 08:50 PM
A freebie from Faber:
14-Mar-05
Low Volatility pointing to some “Big Moves” in Investment Markets
On the subject of buying opportunities, take a look at the US Dollar if you are into currencies. Classic sign of a bottom when everybody "knows" that it's headed into oblivion and even TV presenters joke about it.
Yep couldn't agree more - i've been USD bullish since Nov 04 and from a TA perspective (which is all i do ) it's going to have a choppy rally for some time...
Cheers.
krisbarry
27th-March-2005, 09:56 AM
My preditcion is that many of the baby-boomers over the next few years will be selling their investment properties and cashing in their super accounts to retire into a retirement village unit. Hence the reason why I have bought my slice of the action in L.V. Living Limited (LVL)
wayneL
30th-March-2005, 07:40 AM
ROTFLMAO
...and the prize for the most bearish article on the US goes to......
------------------------------ ------------------------------
Khaled Abu Toameh, THE JERUSALEM POST Mar. 29, 2005
------------------------------ ------------------------------
A thorough analysis of the Koran reveals that the US will cease to exist in the year 2007, according to research published by Palestinian scholar Ziad Silwadi.
The study, which has caught the attention of millions of Muslims worldwide, is based on in-depth interpretations of various verses in the Koran. It predicts that the US will be hit by a tsunami larger than that which recently struck southeast Asia.
"The tsunami waves are a minor rehearsal in comparison with what awaits the US in 2007," the researcher concluded in his study. "The Holy Koran warns against the Omnipotent Allah's force. A great sin will cause a huge flood in the Atlantic and Pacific oceans."
Silwadi, who is from the village of Silwad near Ramallah - the home of Hamas leader Khaled Mashaal - is not a world-renowned scholar. He said he decided to publish the findings of his research "out of a sense of responsibility because what is about to happen is extremely shocking and frightening."
His fear, he said, is that the world economy, which relies heavily on the US dollar, would be deeply affected by the collapse of the US.
"It would be fair to say that the world would be better off with a US that is not a superpower and that does not take advantage of weak nations than a world where this country does not exist at all," he added."The world will certainly lose a lot if and when this disaster occurs because of the great services that American society has rendered to the economy, industry and science."
Silwadi said his study of the Koran showed that the US would perish mainly because of its great sins against mankind, including the Native Americans and blacks.
"As soon as the Europeans started arriving in the new world discovered by Christopher Columbus in 1492, they declared a war on the so-called Red Indians, the legitimate owners of the land," he wrote. "Then they began enslaving and humiliating Africans after kidnapping them from their
countries and bringing them to America. Millions of blacks were brought to the US and treated with unprecedented harshness. Those who became ill during the journey were thrown overboard to feed the fish."
Silwadi pointed out that the US continued to commit war crimes and "ethnic cleansing" against humanity by becoming the first country to use nuclear weapons during World War II.
"International law penalizes such crimes," he said. "If these laws were not applied then, they are certainly implemented in heaven. If no one on earth is capable of punishing [the US], Allah was and remains able to do so. All these actions have been documented by Allah in a big archive called the
Koran."
Silwadi said he reached the conclusion that several suras (chapters) in the Koran that talk about punishment for those who perpetrate heinous sins actually refer to the US.
As an example, he quotes in his study verse 40 of the Spider Sura, which states: "So each We [God] punished for his sin; of them was he on whom We sent down a violent storm, and of them was he whom the rumbling overtook, and of them was he whom We made to be swallowed up by the earth, and of them he whom We drowned; and it did not beseem Allah that He should be unjust to them, but they were unjust to their own souls."
Drawing parallels between Pharaoh and the US, who share the same "sin" of arrogance and excessive pride, Silwadi noted that the Koran mentions at least 12 times the fact that Pharaoh was punished by drowning for his evil deeds.
The Narrative Sura, he noted, clearly suggests that the US will drown in the sea: "And Firon [Pharaoh] said: O chiefs! I do not know of any god for you besides myself; therefore kindle a fire for me And he was unjustly proud in the land, he and his hosts, and they deemed that they would not be brought back to Us. So We caught hold of him and his hosts, then We cast them into the sea, and see how was the end of the unjust [verses 38-40]."
Explaining his theory about the approaching extinction of the US, the scholar went on to analyze many numbers and letters mentioned in the Koran. He said a careful reading and analysis of words appearing in the Opening and Yusuf suras show that the US will exist for only 231 years.
How did he reach that number? Silwadi said that by combing a number of suras hinting at US sins he reached the numbers 1776 (the year the US achieved independence) and 231. He added the two numbers and the result was 2007, the year when the US is expected to disappear.
In his lengthy study, which is being circulated in many Muslim countries, Silwadi noted that the US has often been compared to a tree that grows very quickly and bears fruit, but has no roots.
In an attempt to find a reference to this metaphor in the Koran, Silwadi said he counted 1776 verses from the beginning of the Koran until he reached verse 26 of the Ibrahim Sura, which states: "And the parable of an evil word is as an evil tree pulled up from the earth's surface; it has no stability."
reichstag911
1st-April-2005, 01:34 AM
Not bearish enough Wayne : P
(geologists reckon the east coast of usa going to get a nice tsunami from the canary islands sometime in the next 100 years...)
Well we've been looking at all the theories and articles, the charts seem to be speaking loudly at the moment, wonder if it's a false alarm or is that bear about to ROAR!! A very interesting week coming up...
GreatPig
17th-April-2005, 12:34 AM
Off topic, but I like the name of that Yahoo group mentioned above: "investorsexchange".
Looks more like "investor-sex-change" than "investors-exchange". :D
Which is probably quite accurate. The market does seem to be changing from :boy: to :girl:.
GP
phoenixrising
18th-April-2005, 12:20 AM
Thanks GP.
Thought the same myself.
Maybe Freudian.
Cheers :)
wayneL
18th-April-2005, 07:44 PM
The bears are slashing the guts out of the European exchanges this evening and a lot of traders on MIRC are openly using the big "C" word :-O
Range analysis says support at 1125 on the s&p500.....or big trouble
My absolutely baseless feeling is that we see green tonight.
HMMMMM
Looking ugly though and thinking I should have been hedging my bottom drawer stocks
Cheers
doctorj
18th-April-2005, 07:51 PM
Off topic, can you recommend some mirc servers/channels for US/Euro/Local traders?
wayneL
18th-April-2005, 10:02 PM
Mirc servers are
Financialchat
Othernet
There's a whole bunch of rooms on those two servers.
Aussies hang out mainly at #trade on othernet.
or #omtrade at financialchat
Mez1953
19th-April-2005, 06:53 PM
The bears are slashing the guts out of the European exchanges this evening and a lot of traders on MIRC are openly using the big "C" word :-O
Range analysis says support at 1125 on the s&p500.....or big trouble
My absolutely baseless feeling is that we see green tonight.
HMMMMM
Looking ugly though and thinking I should have been hedging my bottom drawer stocks
Cheers
Geez, I really wish I could empahise... but the value of my stocks haven't changed at all this week ( gone up if anywhere! )...still double to three times the purchase price of 2-3 years ago. The difference between you & me - I invested in medical technology!! Yes, the Bio-medicals...bless their little cotton sox! BTW has anyone ever told you what a bunch of macho wankers you are? No...allow me to be the first...and hopefully not the last!
doctorj
19th-April-2005, 07:04 PM
Geez, I really wish I could empahise... but the value of my stocks haven't changed at all this week ( gone up if anywhere! ).
Good for you. A balanced portfolio would have gone down this week, its part of the job. However, if you were soley in say, small cap speculative resource stocks, in all likelihood you would have lost more than the market. Just because you avoided the events past, doesn't mean you will avoid the events of the future. In the end, those with risk management generally come out on top.
If you are interested learning about risk management and position sizing, use the search function. There are several informative threads on the topic.
BTW has anyone ever told you what a bunch of macho wankers you are? No...allow me to be the first...and hopefully not the last!
A big call for your first post. You might find yourself more at home here. (http://www.******************)
wayneL
19th-April-2005, 07:31 PM
Geez, I really wish I could empahise... but the value of my stocks haven't changed at all this week ( gone up if anywhere! )...still double to three times the purchase price of 2-3 years ago. The difference between you & me - I invested in medical technology!! Yes, the Bio-medicals...bless their little cotton sox! BTW has anyone ever told you what a bunch of macho wankers you are? No...allow me to be the first...and hopefully not the last!
Thanks for the enlightenment Mez! Maybe you can tell us all where we have gone wrong...why the way we make money is no good. Do you work for a living? I don't LOL
But I think your post says more about you than us...think about it.
Cheers
Joe Blow
19th-April-2005, 07:45 PM
BTW has anyone ever told you what a bunch of macho wankers you are? No...allow me to be the first...and hopefully not the last!
Dear Mez1953,
I'm going to give you the benefit of the doubt because you are obviously new to Aussie Stock Forums but things like personal insults that are okay on other forums are not okay here. You might like to review our code of conduct, which you can find here: http://www.aussiestockforums.com/forums/code.html. Please pay particular attention to #2.
2. All members will treat other members with the utmost respect at all times. This means insults, name calling, personal attacks and the abuse of other members in any way are strictly forbidden. Please, treat other members as you yourself would wish to be treated. Offenders will be warned once and then have their account suspended from Aussie Stock Forums for a period of time to be determind by the administrator.
DTM
19th-April-2005, 09:30 PM
Geez, I really wish I could empahise... but the value of my stocks haven't changed at all this week ( gone up if anywhere! )...still double to three times the purchase price of 2-3 years ago. The difference between you & me - I invested in medical technology!! Yes, the Bio-medicals...bless their little cotton sox! BTW has anyone ever told you what a bunch of macho wankers you are? No...allow me to be the first...and hopefully not the last!
XHJ's down a few hundred points since only a few days ago.
Hard to find any biotechs that have done well over the last few days let alone in the year. Which ones were you talking about? :confused:
wayneL
22nd-April-2005, 03:12 AM
Greenspan Warns Deficits
Endanger Economy
By Glenn Somerville
4-21-5
WASHINGTON (Reuters) - Federal Reserve Chairman Alan Greenspan warned on Thursday that unless lawmakers come to grips with spiraling U.S. deficits, the economy was at risk of stagnation "or worse."
"Under existing tax rates and reasonable assumptions about other spending ... projections make clear that the federal budget is on an unsustainable path, in which large deficits result in rising interest rates and ever-growing interest payments that augment deficits in future years," Greenspan told the Senate Budget Committee.
He said that while the U.S. economy was "doing well," the danger was that deficits would keep rising as a percentage of total national output.
"Unless that trend is reversed, at some point these deficits would cause the economy to stagnate or worse."
The early questioning from lawmakers focused narrowly on budget issues, rather than on the economic outlook or oil prices. Bond and stock markets showed little early reaction to Greenspan's remarks.
Much of the Fed chairman's testimony echoed prior cautions he has made to Capitol Hill lawmakers. He stressed that steps to fix the problem were essential.
"As the latest projections from the (Bush) administration and the Congressional Budget Office suggest, our budget position is unlikely to improve substantially in the coming years unless major deficit-reducing actions are taken," the Fed chief said.
GET CONTROL
Greenspan reiterated his call for some type of automatic government spending controls.
"In my judgment, the necessary choices will be especially difficult to implement without the restoration of a set of procedural restraints on the budget-making process," he said.
Bush has pledged to cut the budget gap in half by 2009. The Congressional Budget Office has estimated the 2005 budget shortfall will come in around $400 billion, including funding for military operations in Iraq and Afghanistan.
The Fed chief has long urged renewal of so-called pay-go provisions that compel lawmakers to show how they will fund any spending initiatives or tax cuts.
Greenspan said the approaching surge of American retirees added urgency to the need to deal with budget constraints in light of uncertainty about the scale of looming medical and retirement costs.
"These uncertainties -- especially our inability to identify the upper bound of future demands for medical care -- counsel significant prudence in policy-making," Greenspan said, adding that policy-makers "need to err on the side of prudence when considering new budget initiatives."
Greenspan said the U.S. economy was growing at a reasonably good pace but noted "the positive short-term economic outlook is playing out against a backdrop of concern about the prospects for the federal budget."
Ronald Simpson, a managing director of Action Economics LLC in New York, said it seemed like a less-enthusiastic take on the economic outlook than that in the statement issued after the policy-setting Federal Open Market Committee met on March 22, when it said national output was growing solidly.
"(It) sounds like a bit of a downgrade from the last FOMC statement which sounded a little more upbeat," Simpson said.
Greenspan repeated that the United States may already be in a position where it cannot meet commitments made to the baby boom generation and urged benefit cuts, if needed, be made as soon as possible.
"If existing promises need to be changed, those changes should be made sooner rather than later," he said.
At the tail end of any asset bubble, people who have watched the bubble grow from its inception kick themselves for having missed out. While it may be true that for them, they stayed on the sidelines too long in a truly once-in-a-lifetime opportunity, they don’t shrug it off and say, "Lots of other people missed out, too. So what? Something else will come along." Instead, they climb aboard on what they think is the last train out...........
http://www.lewrockwell.com/north/north366.html
Investor
26th-April-2005, 10:06 PM
Interesting article (I have known about such phenomena for many years, having gone through three economic cycles - relatively unscathed).
This time around, household sector debt is sky high.
One particular caption from that article that seemingly distills the lesson:
"In every mania, there are late-comers who buy in at the top. Manias end when the late-comers cannot afford to buy in. That marks the top."
I believe the Sydney residential market has been to the top (at ridiculous P/E of 40 or net earnings yield of 2%) and has been falling fast in recent months. Weekend AFR had some coverage.
The Economist (an economics journal) warned in mid 2004 that residential property prices in Australia were 20% to 35% overvalued (depending on capital city). That warning was repeated in Jan. 2005 in The Economist.
Time tested measures of earnings yield and average house price to average household incomes, were used for analysis.
Not news to me. I have considered the res. property markets to have been in irrational exuberance territory for the past few years. If interest rates rises another notch or two, slides might get more escalated. Three rises would probably make it a done deal.
wayneL
27th-April-2005, 01:40 AM
Stephen Roach, Morgan Stanley 25/4/05
"I am not a believer in conspiracy theories. But the Fed’s behavior since the late 1990s is starting to change my mind."
It could be that Alan Greenspan has limited downside risk of the bubble bursting during his watch as he is retiring soon and also he is no longer a young man.
By keeping the global "sea of liquidity afloat" (the carry trade) for so long with the greatest expansion of M3 money supply the world has ever seen, asset bubbles have been allowed to grow all over the world.
When bubbles burst, it is a bit like the tide going out. We get to see how much mud there is on the sand. Same for economic recessions, we get to see how many skeletons have been hidden in the corporate closets (aka creative accounting) and how much dust have been swept underneath the carpets (off balance sheet liabilities).
Warren Buffett had a view that was aptly put, in the book "Warren Buffett speaks", on page 109:
"Our riches are our curse in our attempts to attain a trade balance. If we were less well-off, commercial realities would constrain our trade deficit. Because we are rich, however, we can continue to trade earning properties for consumable trinkets. We are much like a wealthy farm family that annually sells acreage so that it can sustain a lifestyle unwarranted by its current output. Until the plantation is gone, it's all pleasure and no pain. In the end, however, the family will have traded the life of an owner for the life of a tenant farmer."
We have the same problem in Aussie land. The debt problems (addictions) are huge, bearing in mind that 1/3 of households are debt free.
As the article suggests, interest rate rises would eventually lead to the bursting of the bubbles. Knowing this is the easy part. Picking when is difficult. Most burstings are precipitated by several interest rate rises.
Investor
28th-April-2005, 02:05 PM
There is a saying: "Easy availability of credit leads to a false sense of wealth".
The latest issue of BRW (released today) has a cover story called "Rough ride ahead for shares and property." It explains what has been happening in global markets, what might be ahead; and starts with the following:
"It was fun while it lasted: stockmarkets and property have boomed over two decades. But the world economy has changed and history will not repeat itself.......For the first time since he began investing, Warren Buffett holds more cash (US$43 billion) than shares. Buffett has cashed out. If he is right, the party has ended."
Here in Australia, some investors have already commenced the flight to safety, whether it is a move from small caps to ASX 100 or a move from shares to cash or simply paying off the mortgage at a faster rate.
Page 27 of the same BRW has Access Economics showing three charts and a commentary on why the housing market is due for a severe correction. In Sydney, it is already underway. If the running of the herd builds momentum selling, either in property markets or equity markets or both, a crash could occur. Forced selling by lenders would accelerate the correction.
Fear (in bear markets) can be a stronger emotion than greed (in bull markets). Time will tell. It will become clearer over the next 3 to 9 months.
ghotib
28th-April-2005, 10:08 PM
..."It was fun while it lasted: stockmarkets and property have boomed over two decades. But the world economy has changed and history will not repeat itself.......For the first time since he began investing, Warren Buffett holds more cash (US$43 billion) than shares. Buffett has cashed out. If he is right, the party has ended."
Not to rain on the journo's parade or anything, but I've been reading for at least 18 months that Buffet has cashed out. I don't know whether he has or not, but I seriously doubt that he waited till last month to make some massive move. Buffet's investment strategy is not, repeat NOT, driven by share price or market movements.
Page 27 of the same BRW has Access Economics showing three charts and a commentary on why the housing market is due for a severe correction. In Sydney, it is already underway. If the running of the herd builds momentum selling, either in property markets or equity markets or both, a crash could occur. Forced selling by lenders would accelerate the correction.
"Forced selling by lenders"? Lenders can't sell property until they foreclose; they don't own it. Which is not to say that overstretched owners aren't selling at panicky prices and accelerating the correction, but let's keep our panics straight.
Cheers,
Ghoti
Investor
29th-April-2005, 10:13 AM
....
"Forced selling by lenders"? Lenders can't sell property until they foreclose; they don't own it. Which is not to say that overstretched owners aren't selling at panicky prices and accelerating the correction, but let's keep our panics straight.
Ghoti
During the economic recession in the 1980's, I had to do some force selling (foreclosures of residential and commercial properties) when I was working in a bank. It was terrible work because of the human emotions involved and I decided to find another job function soon after.
If borrowers missed repayments, the bank sent a reminder letter. If overdue repayments continue unpaid, phone calls were made. Some borrowers could not meet repayments due to reasons like loss of job, fall in business income or business failure. At that time, I would discuss the financial situation with the borrower and see if interest only payments for six months to a year might help. If the borrower cannot meet interest only payments, for three months, a Notice of Demand had to be issued. Then, the bank proceeded to foreclose on the property and appoint an agent to sell the property. The property is auctioned as a Mortgagee Sale.
During the recession in the early 1990's, I worked in Head Office and, luckily due to previous promotions, did not have to do the numerous forced mortgagee sales that ensued. Still, I saw the effects. Many houses were being sold at 20% to 30% less than the 1989 peak valuations held on file. Some borrowers, in their discussions with the bank, decide to do the selling themselves and avoid the mortgagee auction. This way, they might be able to get a better price. The price falls (for houses) during that recession were presented in a chart in the recent weekend Australian Fin. Review. Commercial and industrial properties fell even more, some by 50% of 1989 peak valuations held on file. Vacancy rate was high and vacant properties do not yield any income to offset loan repayments.
That was a severe recession. Unemployment rose to 12%. Many businesses (of various sizes) collapsed, leaving workers unemployed and creditors unpaid. The domino effect happened. Businesses that lost money from unpaid trade debtors found financial problems all of a sudden. Less income in the economy led to less spending. I saw a few friends, who lost their white collar jobs, leave to work overseas. They sold their houses at whatever price they could get, even if a capital loss was incurred. Retrenchments were by the thousands. I saw many work colleagues being retrenched. It was terrible. It encouraged me to save money and invest in the sharemarket (mainly ASX 100 companies) even more, to achieve financial freedom.
Forced selling by margin lenders for shares happened during the tech wreck a few years ago and could be happening yesterday and maybe today.
I am not suggesting panic. Good solid businesses either listed or unlisted, would survive any economic conditions. The stockmarket will continue on irregardless. Just that some businesses will close and other new businesses will take their place (as has happened before). During that process, some investors could lose money.
Just to say what I have seen before. This forum could be about sharing information. For readers who might not have operated through a recession before, is it not worthwhile to know in advance, what can happen in a recession? If it is not worthwhile, then just ignore my post. No problem.
A few businesses (ION - in administration, Collins Bookstore in administration, a construction company - was it Walker or Walter?) have already had difficulties recently (even looking around the suburbs, some businesses have closed, leaving vacant shops).
Profit downgrades (PBB, PMP, FPA, GUD, FMG, Repco, AMC) have been frequent during the past few weeks. PaperlinX announced a 20% profit downgrade after close of trading yesterday.
There are a few indications taking place.
TjamesX
29th-April-2005, 11:50 AM
Investor
Do you believe these profit downgrades are demand or cost driven?. I know that AMC have seen a rise in their costs of doing business, leading to the profit downgrade - but I don't know much about the others.
This forms part of my reasoning as to why we haven't seen a top in XAO in this cycle... yet.
This is really just my own thoughts and speaking in very general terms, but when you have had growth run such as in Aus, I would think a tell tale sign of the end is that in the chase for profits, businesses invest $$$ even when their expenses and costs of doing business are rising fast. Aus employment market is at full capacity (you have to pay more $$$ for the right person), and I know from the co I work for - any suppliers we use are at full capacity, suppliers have pushed up prices. Essentially this all leads to the cost of doing business rising - hurting the PL statement. Now ofcourse every industry has its own dynamics, I'm speaking generally.
To me this is not the scary part, the cost part of the equation is hurting businesses at this stage of the cycle - but from my view of the world, we haven't seen the demand side hurt....... yet. I think this is inevitable and will lead to the next recession soon (1 - 2.5 years).
I was talking to my hairdresser last night, she spends $9 per strand of hair for hair extensions, she gets 100 strands done. I said 'how long does this last for', answer 3 months. She said she pays for 100 strands every 3 months!!! I said 'how many people get this done', answer - out at the cubs/pubs she said there's heaps of girls with them!!!
Maybe I didn't hear it all right but $900 every 3 months!! I haven't seen people start to zip up their wallets yet, but when they do......:eek:
I need to find some companies that have demand 'locked in' get revenue from non discretionary spending and do well in a downturn... any ideas?
TJ
TjamesX
29th-April-2005, 11:57 AM
Not to rain on the journo's parade or anything, but I've been reading for at least 18 months that Buffet has cashed out. I don't know whether he has or not, but I seriously doubt that he waited till last month to make some massive move. Buffet's investment strategy is not, repeat NOT, driven by share price or market movements.
Isn't that the scary part though??? He's driven by fundamentals..... and longer term, everything reverts to the fundamentals
ghotib
29th-April-2005, 12:38 PM
Hi Investor,
Thanks for the reminder that real people on all sides get hurt in downturns. I nearly dropped my mortgage in the 80s, and I don't mean to downplay the current risks of recession or the pain it will bring if it comes. But this particular article felt to me like beatup (beatdown?), and I guess that brought out my pedantic streak.
My real point is that emotions are an even worse guide to actions when the bears are running than they are when the bulls are out, precisely because fear is such a strong emotion. I completely agree with you that knowing what's happened before is useful, both in dealing with the emotion of fear and in figuring out what might be happening now.
All the best
Ghoti
Investor
29th-April-2005, 03:33 PM
Investor
....I need to find some companies that have demand 'locked in' get revenue from non discretionary spending and do well in a downturn... any ideas?
TJ
Yes. I have already implemented such fundamentals in my portfolio. Some of the companies I selected (expected to be held forever) have hardly fallen at all in recent weeks, some have risen in price (amazing as it sounds). I will have to consider whether I want to demonstrate, lest I get accused of ramping. :)
Might get back to you.
Aussiejeff
30th-April-2005, 08:51 AM
Yes. I have already implemented such fundamentals in my portfolio. Some of the companies I selected (expected to be held forever) have hardly fallen at all in recent weeks, some have risen in price (amazing as it sounds). I will have to consider whether I want to demonstrate, lest I get accused of ramping. :)
Might get back to you.
I presume you are indicating a preference towards essential service stocks such as utilities (gas, electricity etc)? No need to name specific companies..
I have biased my portfolio for now into such stocks.
Cheers,
AJ
TjamesX
30th-April-2005, 09:54 AM
Yes. I have already implemented such fundamentals in my portfolio. Some of the companies I selected (expected to be held forever) have hardly fallen at all in recent weeks, some have risen in price (amazing as it sounds). I will have to consider whether I want to demonstrate, lest I get accused of ramping. :)
Might get back to you.
I think this is the sort of analysis we need, investors and even traders need to be prepared for a demand slow down in our economy (whenever this occurs). I for one know the 'types' of businesses that I want to invest, but I don't have years of experience in the market in knowing exactly what these companies are and which have the best track record and management to carry it through.
I would greatly appreciate if you could 'demonstrate' and explain why these particular companies have businesses that will continue to profit - in another thread perhaps, probably in the stock chat forum. I'll get the ball rolling
TJ
clowboy
30th-April-2005, 02:41 PM
I would have to say ALN fits well.
Strong managment etc etc
My only hesitation with ALN is how well the share price has done since listing (400+% in 5 years).
clowboy
30th-April-2005, 02:43 PM
I also like Australian Renewable Fuels as a speccie (not listed yet).
At least at this stage people still need fuel.....
Investor
30th-April-2005, 04:14 PM
Hi Investor,
... But this particular article felt to me like beatup (beatdown?),...
Ghoti
G'day Ghoti,
I should have stated that the author of that cover story is Gerry van Wyngen, an investment banker and Chairman of CPI Group.
I have been reading his articles in the BRW and Financial Review since the 80's and have a lot of respect for what he says. In 1989, he warned that a severe economic recession was on its way. At the time, I had already known that. Getting 15% p.a. risk free on bank term deposits worked for me then. Commercial lending rates of 20% p.a. in 1989 would bring any economy down.
Regards.
wayneL
3rd-May-2005, 03:27 AM
Hey peeps,
More bad signs for the share market
QQQQ has been placed on the 'Threshold Securities Lists' It is therefore a regulatory requirement that it cannot be shorted.
In other words the maximum permissable number of short sold shares has been reached.
For those who don't know QQQQ is an exchange traded mutual fund that tracks the NASDAQ, and one the most heavily traded stocks on the Nasdaq.
Cheers
DTM
3rd-May-2005, 12:01 PM
Looking at last Friday on the ASX, it seems like the smart money got out. So much volume with the banking sector in Oz and the price didn't move that much.
Investor
3rd-May-2005, 12:53 PM
.... So much volume with the banking sector in Oz and the price didn't move that much.
Scary version would be if the smart money moved out while the not so smart money moved in.
Be a bit careful with this sector. Many brokers are recommending retail investors move into this so called defensive sector, but the institutional players could be moving out simultaneously (but I am merely guessing). Could be a poker game.
The banking sector, to me, is not a defensive sector. It is the highest geared sector in the ASX. Australian banks have the highest foreign borrowings as a % of their liabilities, in the whole world and has one of the lowest Tier 1 capital adequacy ratios in the whole world. It is a high risk sector, to me (IMO).
RichKid
6th-May-2005, 08:52 AM
Scary version would be if the smart money moved out while the not so smart money moved in.
Be a bit careful with this sector. Many brokers are recommending retail investors move into this so called defensive sector, but the institutional players could be moving out simultaneously (but I am merely guessing). Could be a poker game.
The banking sector, to me, is not a defensive sector. It is the highest geared sector in the ASX. Australian banks have the highest foreign borrowings as a % of their liabilities, in the whole world and has one of the lowest Tier 1 capital adequacy ratios in the whole world. It is a high risk sector, to me (IMO).
The sector is a good example of the fact that there are more falls to come imo, the banks themselves admit that the best is behind us, any panic by the little people will see some carnage as when the crowd panics it spreads to other areas of the market, wouldn't trust the fundies, they may just be doing what you suggest Investor.
Investor
7th-May-2005, 10:15 PM
Yes RichKid,
Here is an indication. In today's Financial Review, JP Morgan's banking analyst, Brian Johnson, stated:
"Everyone thinks banks are defensive, but when your debt to equity gearing is 20 to one and you lend to the rest of the economy, I'd say you are more cyclical than anything else.......Having spoken to a lot of overseas investors in the past 24 hours, they are saying, "Why are banks going up when housing starts are falling and Mirvac Group has delivered a profit warning on development risk? Why would you be buying this?"
Remember Barings Bank. It was also the bank to the Royal Family in England. It collapsed due to a rogue trader called Neeson (single handedly).
Investor
11th-May-2005, 05:02 PM
...It collapsed due to a rogue trader called Neeson ...
Ooops. A typo. That should have been typed as Nick Leeson.
Investor
11th-May-2005, 05:04 PM
In the news today:
"Treasurer Peter Costello forecast a bleak outlook for house prices last night.
He tipped a further dampening of the property market, compounded by a "substantial slowdown" in household wealth.
Mr Costello revealed property owners' bricks and mortar -- whether it be people's homes or investments -- could be worth even less next financial year, as less people entered the market and prices continued to slide.
Leaving no doubt that the property market is now in a downturn, Mr Costello said the number of people investing in property would fall by 2 per cent in 2005-2006.
He attributed the decrease to the plateauing of soaring property prices during the boom and the recent interest rate rise.
"Dwelling investment fell in the second half of 2004 and forward indicators of activity in the housing sector, such as dwelling approvals, suggest that this modest downward trend will continue," Mr Costello said.
Another indicator pointing to lower activity was the number of monthly finance commitments for the construction or purchase of new dwellings by owner-occupiers, which is down 15 per cent on its last peak in October 2003.
With a glut of apartments languishing on the market, it will come as no surprise that the investor sector is expected to be hardest hit.
Mr Costello said much of the speculative activity in the investor market had passed.
He said rental yields on investment properties were still very low, "suggesting that house prices may fall further in real terms".
Mr Costello warned: "There remains a risk that a prolonged period of falling or flat house prices may lead to rein in consumption expenditure more than expected."
However he said the dampening of the market was merely "the current housing market unwinding in an orderly manner" -- a soft landing with the risk of a sharp fall in house prices abating.
He said solid underlying demand for new dwellings and a strong workforce would keep investment simmering.
Although the economy was expected to record solid growth, he said the recent interest rate rise and high petrol prices would restrain consumption.
With the tax cuts expected to lead to a rise in inflation there could be further pressure on the Reserve Bank to increase interest rates before the end of the year."
DTM
28th-June-2005, 10:07 AM
An interesting read showing a looming bear market.
That's a great site DTM, it's one of the few I really pay attention to. In terms of cycles I recently read in a Larry Williams's book that Gold, contrary to public opininon, does not rally when markets crash (ie not a safe haven in that sense), it actually goes sideways or down- shown in the charts. Just thought I'd mention it. Lovely graphs in that article too, I like the fact that he hasn't tried to make predictions but is just observing trends and cycles. Thanks again for posting the link.
excalibur
30th-June-2005, 04:21 AM
An interesting read showing a looming bear market.
I love the quaint American investment writing style, like something from the 50's a la Ben Graham or Edwards & Magee.
I wonder if anyone will blame Mr 'Irrational Exuberance'? or will he escape as Henry Kissinger has in other spheres despite his naughty deeds? As one of the articles suggest, if the US economy was a company all the directors would have been fired by now.
Reminds me of some of the stuff Investor posted, if he is still around he would have liked this stuff- c'mon mate, when are you coming back? Drop in for a chat...
A quote extracted from the second link:
Dr. Kurt Richebächer:
“A bubble economy implicitly accumulates two growing problems: debt excesses and structural distortions. The most striking, and most important, features of the structural distortions in the U.S. case are the virtual abolishment of domestic saving and the exploding current account deficit. Generations of policymakers and knowledgeable economists would have been horrified by such macroeconomic self-destruction. In today’s America, they cause no more than a yawn.”
(“The Richebächer Letter”, no. 383, May 2005)
DTM
13th-July-2005, 12:17 AM
Wow.... three more years or less before we're all down the gurgler.. :goodnight
RichKid
13th-July-2005, 12:27 AM
An interesting read showing a looming bear market.
This comment ties in nicely with the technical charts discussed in the link DTM posted ("Bubbles cast long shadows after they burst"). The comment is from the second article I posted in post #62
“… history tells us that major asset bubbles have long and lasting consequences that are not easily remedied by conventional policies. While the painful experience of the 1930s is the most obvious example in modern times, Japan’s persistent deflation fully 15 years after the bursting of its bubble is hardly a lesson to be taken lightly. Nor, unfortunately, is the state of the US economy as it faces what may well be yet another pitfall in its own post-bubble journey.”
(Stephen Roach, “Global Daily Economic Comment”, May 2, 2005)
TjamesX
13th-July-2005, 11:40 AM
Good articles Rich,
I personally believe in a lot of what they say, maybe not to the same extent, but in general I think thats where the big boats heading. It does make it hard to hold equities when you believe in this stuff... sort of like playing with knives. The only reason I'm still in for the upside ATM is the US housing boom.... I think this effectively results in;
1) Hitting a delay on any reality check and giving the most important consumers in the world a shot in the arm.
2) Ensuring that when reality does hit it'll probably be much worse than it could have been.
The problem with economics and especially macroeconomics is it can generally outline the SEQUENCE of events reasonably accurately, but it gives no indication of when the events will occur. I think thats whats happening now, macroeconomics says its out of whack so it needs to find an equilibrium - the financial markets are rebutting with no.... not yet.
TJ
TjamesX
12th-August-2005, 05:22 PM
Two articles that I found particularly important at the moment;
An economist with the Commonwealth Bank, Michael Workman, said NSW's economy probably shrank in the June quarter as it did in March, meaning the state was technically in recession. "It's a pretty good chance of it happening when the data is released on September 7," he said. "You're lucky if you've got a full-time job in NSW."
Sydney house prices have fallen 7 per cent since December 2003 and NSW building approvals by 23 per cent.
Population figures show that for every four immigrants arriving, three people leave NSW. Retail sales are also among the weakest in the country.
"I ask myself every day what's going on, but I know every shop in the street is struggling," said Kristy Jones, owner of Gate-One, a streetwear shop in Newcastle. She said her Darby Street precinct was booming 18 months ago but had recently grown "pretty lonely".
link http://www.smh.com.au/news/national/job-boom-turns-gloomy-for-nsw/2005/08/11/1123353449455.html
The second link is about data from the UK Department of Industry and Trade, apparently individual insolvancies are at an all time high in England, Scotland and Wales (up from peak in 1993)
Why did these resonate with me.....
These two markets experienced the housing boom earlier than most. WayneL can correct me if i'm wrong but the UK housing market boomed before Aus, and specifically Sydney boomed before most Aus cities (and boomed most severly).
Window into the future - who knows
TJ
wayneL
13th-August-2005, 06:06 AM
LOLOLOL
Aussiejeff
13th-August-2005, 09:20 AM
Hahaha! Good find that one, WayneL! A classic ;o)
On a serious note though (no pun intended!), all these references to how things are shaping up like the 30's depression for the US economy dont seem to take into consideration the massive scale of some of the other world economies ... eg China, Japan. These both seem to be on a big rebound at the moment and I wonder how much (if they keep heading north for now, that is) they might soften the landing for any major downturn in the US? Obviously in the 30's, there were no other huge, growing economies outside the US. The European economies at that time were minnows in a stagnant pond in comparison to the US.
I just happen to think the current world economic situation is significantly different to the 30's (almost instant "corrections" via internet trading, vastly better accesss for millions of traders to economic and company data etc) and that some bearish pundits might be barking up the wrong tree to some extent. For all our financial futures, I'm hoping I'm proved right on that! ;o)
Mind you, the potentially looming oil supply crisis might throw a bit of a spanner in the works. It won't take much of a problem to the supply side to send fuel prices spiking way up overnight. I've hopefully hedged against that scenario by investing significantly in energy and utilities stocks. I thought the main US currency was $BOO - Barrels Of Oil - anyway..... ;o)
Cheers,
AJ
waratah
13th-August-2005, 09:53 AM
Todays quote from http://www.prudentbear.com/
Quotable
"It's only when the tide goes out that you learn who's been swimming naked. "
- Warren Buffett
Smurf1976
13th-August-2005, 02:09 PM
Regarding the NSW economy, let's just get one thing straight.
In general property market slumps lead to recessions, NOT the reverse.
Why? Because all of a sudden consumers feel less wealthy when they see the value of their primary asset, their house, go into reverse. And then they get worried, realising that they will actually have to save for their retirement etc. and that their house isn't going to do the whole job for them. And then they stop spending in the shops...
Just something to remember whenever some real estate "expert" decides to blame Sydney's housing market on the state of the economy. Saying that, as I'm sure they will, is like saying that the once dry, now wet, washing that you left hanging on the line caused it to rain when the reverse is clearly true.
US President George W. Bush released a remarkable statement a short time ago. The remark has not been highlighted in the world media yet, although there is every reason to do so. Bush virtually acknowledged that the USA was experiencing a serious economic crisis. Moreover, the US government was taking immense efforts to avoid a massive outbreak of social uneasiness, the American president believes......
DTM
16th-August-2005, 01:51 AM
Hahahahaha.....LOL
Now they're going the way of Japan ie Spending so much on infrastructure to ensure every little village in Japan is accessible by a massive motorway. All it ended up doing was giving the friends (building companies) of the LDP (ruling party) massive contracts and nothing for anyone else.
Now the end is near for sure.
TjamesX
24th-August-2005, 12:39 PM
Stocks closes down in New York last night after a bigger-than-expected drop in home sales raised concerns about consumer spending and the outlook for the economy. All three indexes were weak early, slipping after the National Association of Realtors said existing home sales fell 2.6% in July from a record pace in June.
The Dow Jones slid 50.31, or 0.47% to 10,519.58, while the S&P 500 dropped 4.16, or 0.19% to finish at 1,217.59 and the Nasdaq fell 4.16, or 0.34% to end at 2,137.25.
The market was expecting a downturn, but a much smaller one, which had many concerned that the housing boom is nearing its end. With a downturn in home sales, construction companies and home improvement retailers tend to see business slide.
Not good news for all concerned, once the housing boom plays itself out in the US, DOW DOWN DOWN DOWN. I think these figures are a bit premature in signalling the end of the housing boom IMO, but it does show how sensitive the market is.
wayneL
30th-August-2005, 05:54 AM
Dumping of US dollar could trigger 'economic September 11'
There is a potentially fatal flaw at the heart of the global economy: the strong possibility of financial meltdown following a collapse of confidence in the greenback, Clyde Prestowitz tells Bruce Stannard
Milk Man
30th-August-2005, 07:01 AM
So what would be a good idea in your opininion to hedge against such a disaster?
Shorting sounds too dangerous IMO because there could be an '87 style blowoff top; bye bye money.
What stocks could possibly go up? I was thinking gold producers otherwise ones with gold reserves (how do you know if they have gold reserves?). What else could benefit from a "global economic meltdown"?
Just on gold, does anyone know who owns the Kalgoorlie superpit?
Hanrahan
30th-August-2005, 08:09 AM
The bears will tell you that the only safe haven for this scenerio is gold, the metal. I reckon some would be a good insurance.
Maybe it would be possible to buy gold and give it to the bank as collateral for a loan (free storage?) otherwise not many of us would have much left to invest.
H
Aussiejeff
30th-August-2005, 09:16 AM
The bears will tell you that the only safe haven for this scenerio is gold, the metal. I reckon some would be a good insurance.
Maybe it would be possible to buy gold and give it to the bank as collateral for a loan (free storage?) otherwise not many of us would have much left to invest.
H
Well, "ultimately" the safest haven is to own your own totally self-sustaining farm(let) with a stash of gold coins hidden in the ground nearby! I bet few in this forum have such a nice safe fallback position to retreat to! I certainly don't!!
Me, I'm trading ONLY in high volume ranging energy/resource and utilities stocks ATM. I see no reason to risk on discretionary shares that have no intrinsic long term DEMAND factor built in. If there is an overnight finance markets meltdown, cars still need to run on fuel and people still need gas and electrical power and energy sources. I remember an old saying that "all that glitters is not gold". Maybe we will find out sooner or later there is some truth in that?
I can also see a scenario where if you have all your emergency gold in the bank and the finance markets crash, you might just have a few heart flutters (or worse) trying to prise that gold out of panicking banks that will be sinking under a human wave demanding access to their gold/cash hoardings! Also, heaps of gold is now held in the form of shares/warrants etc - maybe in an overnight finance markets meltdown those holdings would be about as worthless as "fools gold"...
I take all these "bear" warnings that gold is the "only" salvation with a few big nuggets of salt. A diet of only gold would become a bit tastless after a while....
Cheers,
AJ
Milk Man
30th-August-2005, 05:09 PM
Resource and energy stocks would more than likely cop a hit though, wouldn't they? Maybe not as much as some but still; with an economic slowdown there would be less demand for all non essential goods, therefore the resources that they are made from and the energy that powers their factories. Oil prices should fall given the weakened demand. Maybe anything that uses oil heavily and won't see a big decrease in demand would go up.
If our currency de-values against third world countries and europe and america can't afford to pay massive subsidies to their farmers; maybe agriculture? Maybe i'm just biased because I milk cows. Anything not heavily exported to the US or possibly europe and not heavily geared should be good buying. You can buy my share of the farm if you want. :D
What countries' currencies are likely to improve against ours?
Aussiejeff
30th-August-2005, 07:40 PM
Resource and energy stocks would more than likely cop a hit though, wouldn't they? Maybe not as much as some but still; with an economic slowdown there would be less demand for all non essential goods, therefore the resources that they are made from and the energy that powers their factories. Oil prices should fall given the weakened demand. Maybe anything that uses oil heavily and won't see a big decrease in demand would go up.
If our currency de-values against third world countries and europe and america can't afford to pay massive subsidies to their farmers; maybe agriculture? Maybe i'm just biased because I milk cows. Anything not heavily exported to the US or possibly europe and not heavily geared should be good buying. You can buy my share of the farm if you want. :D
What countries' currencies are likely to improve against ours?
Of course! Don't the Watusi tribe live on a diet almost exclusively of milk/curds? ;o)
Staple foods sure would be in demand I would think....
AJ
Hanrahan
31st-August-2005, 10:56 AM
Well, "ultimately" the safest haven is to own your own totally self-sustaining farm(let) with a stash of gold coins hidden in the ground nearby!
If I had to grow food to feed the family, we'd starve. I'm thinking of a farm up north with 1,000 tallow wood trees on it. Reckon I can use a chainsaw and timber will be in even more demand Post Oil.
wayneL
20th-September-2005, 01:38 AM
From a speech given by Hon. Ron Paul, a US congressman....
"....We face a coming financial crisis. Our current account deficit is more than $600 billion annually. Our foreign debt is more than $3 trillion. Foreigners now own over $1.4 trillion of our Treasury and mortgage debt. We must borrow $3 billion from foreigners every business day to maintain our extravagant spending. Our national debt now is increasing $600 billion per year, and guess what, we print over $600 billion per year to keep the charade going. But there is a limit and I’m fearful we’re fast approaching it....."
Hurricane Rita looks poised to strike Texas. With high temps in the gulf, watch for her to increase in intensity. There's a lot of oil and gas resources in her path too apparently.
Short USD, long gold and resources (obviously not with assets in the gulf) IMO.
wayneL
27th-September-2005, 02:39 AM
French claim Fed chairman admits US has lost control of budget
By Philip Thornton, Economics Correspondent in Washington
Published: 26 September 2005
Bitter disagreements over global economic policy broke out into the open yesterday as the French Finance Minister claimed that Alan Greenspan had admitted America had "lost control" of its budget while China warned the US to drop demands for radical economic policy changes.
In an extraordinary revelation after a meeting between Thierry Breton and Mr Greenspan, M. Breton told reporters: "'We have lost control,' that was his [Mr Greenspan's] expression.
"The US has lost control of their budget at a time when racking up deficits has been authorised without any control [from Congress]," M. Breton said.
"We were both disappointed that the management of debt is not a political priority today. The situation that is creating tension today on the currency market ... is clearly the American deficit.".......
31st of Jan is a date to mark down on your calendar - its the Date that US Fed Alan Greenspan retires.
When Greenspan first tookover in August 1987, within two months the stockmarkets crashed. He was lucky, at that time fundamentals were on the improve after two decades of intermittent recessions so a recovery was on the cards. Bernanke is not in the same position - the US has only experienced 1 recession in the last 20 years (1991), and there are many factors which point to the good times fundamentally coming to an end.
Some exerpts from an author I read a lot of;
Bernanke will inherit all the problems created by Greenspan's 18-year legacy of loose money, problems that are finally building toward some kind of crisis. But what he won't inherit is Wall Street's overwhelming faith that Greenspan will defuse any potential market bomb before it blows up. The financial markets, while wishing Bernanke success, will be nervously waiting for him to foul up. Nervous markets, of course, have a tendency to turn a minor blip into a major crisis of confidence.
.............
The Greenspan put
There is another way of looking at this record. Greenspan is handing over to Bernanke a problem that the financial markets jokingly call the Greenspan put. In the options market, a put is the right to sell a stock or other financial instrument at a specific price. It has a value if the current price of that asset falls below the selling price guaranteed by the put. And when the current price falls through the floor, a put can suddenly become very valuable. Think how much you'd pay for the right to sell a stock at $75 when it has fallen to $40.
The Greenspan put is the market's name for a belief, based on all those market interventions by Greenspan's Fed, that the Federal Reserve will always act as the buyer of last resort. If prices fall fast and hard enough, the Fed will supply cash to prop up the market.
The Greenspan put has two long-term effects. First, in the short term, it calms the markets; there's less need to panic if Wall Street and its counterparts around the globe believe the Fed will ride to the rescue. And, second, it encourages careless risk taking. If the Fed will bail out the market, why worry about the consequences of very risky financial behavior? If the Federal Reserve will intervene to prevent the failure of Long-Term Capital Management, why not make risky bets in very volatile markets? If the Federal Reserve will intervene to limit the exposure of other financial companies to the bankruptcy of commodities brokerage Refco, why bother to perform careful due diligence on the companies that you do business with?
The increase in risky behavior as a result of the Greenspan put would be dangerous enough by itself. But its effects are exacerbated by the growth of the derivatives markets. Much of the explosive growth of the derivatives market -- and the market for credit derivatives had grown, as of June 2005, by 128% in 12 months -- is a result of banks, pension funds, insurance companies, hedge funds and other financial institutions seeking a way to insure themselves against the riskier investments that they've been making. Like the Greenspan put, the derivatives market encourages investors not to worry about risk. Instead of avoiding credit-quality problems, for instance, by not buying the bundles of riskier interest-only mortgages now flooding the market, insurance companies and pension funds can load up on the higher yields of these mortgages and insure themselves against the risk by buying a derivative insurance product.
...........
A looming crisis
As we learned earlier this year when the downgrades of General Motors (GM, news, msgs) and Ford Motor (F, news, msgs) took the bond markets by surprise, derivatives work just fine until they don't. And the more volatile the financial markets are, the higher chance that some asset class will zig when the financial models used to create derivatives are predicting they zag. And then Bernanke will be facing his first financial crisis. All of Wall Street will, of course, be watching to see if he's really up to filling Greenspan's shoes.
I think the odds are that this crisis isn't too far down the road.
I think we'll see the turning point of three long-term trends in the next 12 to 18 months:
* The era of rapidly rising housing prices that sustain consumer spending and economic growth seems to be ending, either with a whimper or a bang.
* The era of cheap money is ending: Not only the Federal Reserve, but also the Bank of Japan and the European Central Bank are likely to raise rates in 2006.
* And the era of controlled inflation seems to be ending: The annual inflation rate isn't really 4.7%, because September's numbers reflect a post-hurricane spike in oil, but higher energy prices are spilling over into higher prices for just about everything.
Full article http://moneycentral.msn.com/content/P133283.asp
After finishing my assignment on Global Markets yesterday I am coming to the conclusion that there is just too much risk out there to the downside.
Either way, the next 6 months are going to be crucial
wayneL
10th-December-2005, 04:34 AM
Just had to post this one :D
tech/a
7th-March-2006, 08:03 AM
Aust looking to open trade with India.
Bears are overlooking opportunity.
Fortunately the Govt isnt.
Aust is in the fortunate position of becoming an economic leader in the region with its wealth in Commodities.
The US may crash in Australia it will eventually be a matter of "Who cares".
Watch the investment pour in as companies fall over themselves to get a piece of the action.
Now only Asia and China to go.
wayneL
7th-March-2006, 10:26 AM
The US may crash in Australia it will eventually be a matter of "Who cares".
If the US crashes, it will hurt. Make no mistake.
The US crashing will be felt far and wide. Here, India, China, Timbuktu.
Cheers
phoenixrising
7th-March-2006, 11:10 AM
Agree with you Tech in the long trerm the changes will come.
Meanwhile in the short term there will be some pain to go thru, with the US trying to hold on with all it's got. As Wayne says we are all linked, we can't avoid it.
tech/a
7th-March-2006, 11:17 AM
Wayne.
While I agree,in the initial short term have you actually considered the positive effects a crash in the US of A could have (actually a solid downturn prolonged would be enough) on not only emerging economies but Australias while everyone falls over themselves to fill holes the US will leave.
Any crash in the US $ will have Aus looking pretty good for investment.
wayneL
7th-March-2006, 11:24 AM
Wayne.
While I agree,in the initial short term have you actually considered the positive effects a crash in the US of A could have (actually a solid downturn prolonged would be enough) on not only emerging economies but Australias while everyone falls over themselves to fill holes the US will leave.
Any crash in the US $ will have Aus looking pretty good for investment.
Absolutely Tech. A good cleansing recession would be a fantastic thing long term.
I look at it this way: the bush is overgrown diseased and struggling against itself. It needs a bloody good pruning. Chop off all the dead wood, trim it back hard AND WATCH IT GROW THEN. :)
It' nature....we need a recession .... a good one!
michael_selway
7th-March-2006, 11:41 AM
Absolutely Tech. A good cleansing recession would be a fantastic thing long term.
I look at it this way: the bush is overgrown diseased and struggling against itself. It needs a bloody good pruning. Chop off all the dead wood, trim it back hard AND WATCH IT GROW THEN. :)
It' nature....we need a recession .... a good one!
Guys 2008 after Beijing Olympics, thats when the Big Recession starts imo...
nizar
7th-March-2006, 12:12 PM
Guys 2008 after Beijing Olympics, thats when the Big Recession starts imo...
what makes u think that a recession would wait for the olympics...??
metals and DOW looking shaky at the moment...
michael_selway
7th-March-2006, 12:20 PM
what makes u think that a recession would wait for the olympics...??
metals and DOW looking shaky at the moment...
We are talking about a big recession bear market
not a short term "correction" which happens anytime and more frequently
Why Beijing Olympics? Because the huge China Demand currently is driven by that atm imo, so after that it may slow alot, while supply is increasing as everyone trying to increase production to cash in on the high commodity/energy prices.
Btw an interesting article
http://www.gold.org/value/news/article/3474
Value News
China hungry for gold
14:25:23 GMT, 14 February, 2006
Shanghai Gold Exchange president Wang Zhe believes that China could become one of the world's biggest gold importers.
The country's gold trading volume increased by 36 per cent in 2005, and Mr Zhe said China "has the potential to be one of the biggest gold markets in the world," according to the Financial Times.
His views are supported by recent consumer spending in the world's most populous country.
The Old Phoenix jewellery store in Shanghai has been selling a large number of $2,000 gold bars embossed with the Beijing Olympics logo.
A salesman said that "there will be a new bar every year until 2008 and many people want the complete set".
The situation is vastly different from even a few years ago – up to 1982, individuals in the country were not allowed to own gold.
However, the country is now poised to become a significant gold importer.
"Commodities will have a strong investment case in the year ahead because of the strong Asian growth," said Michael Hartnett of Merrill Lynch.
Gold in particular has a strong case as global growth gains momentum in the second half of 2006.
So I wonder what happens to GOLD after Beijing Olympics in 2008?
wavepicker
7th-March-2006, 12:32 PM
Absolutely Tech. A good cleansing recession would be a fantastic thing long term.
I look at it this way: the bush is overgrown diseased and struggling against itself. It needs a bloody good pruning. Chop off all the dead wood, trim it back hard AND WATCH IT GROW THEN. :)
It' nature....we need a recession .... a good one!
I agree with you 100% wayne. Sometimes in order to move forward we need to move back first. As you say it is natural law. A classic example was Keatings "recession we had to have " although IMO we would have had it irrespective of what keating said or did.
The All Ordinaries has traditionally correlated well to Wall St movents in the past 100 years. Why should it be any different this time? The simple answer is that it won't.
tech/a
7th-March-2006, 01:12 PM
Again I agree wayne.
However I feel there are enough growth factors within the region directly affecting our economy that a duplicate longterm following of any strong down turn in the US wont occur.
Sure there will be reaction but not to the same extent as would be expected had there not been extended continuing growth in the three majors (India,China,Asia).
Olympics--China is bigger than Bejing.
I still believe the influence of these expanding economies has been way underestimated.
When China wanted Steel a year or so ago supplies in Australia ran out!
Demand from these 3 hasnt even registered on the Richer scale!
dutchie
7th-March-2006, 05:09 PM
G'day tech/a
I agree with you in that we will be tied to and should be looking at the CIA in the long term.
However, I think we are still very influenced by the US market and if and when it goes down then we will hurt for the same time that it does, but hopefully not to the same degree (because of our CIA markets).
I'll get on my old hobbyhorse now and stress that we should keep control of our commodities and not sell them off to the Chinese etc for a short term gain.
The Chinese are smart in that they see that if they own the companies that mine our countries assets they can control the prices.
At the moment these assets are the best thing Australia has got going for itself, especially since we will never compete in manufacturing.
Demand for all raw materials will be greater than the available supply in the long run and Australia should postion itself to maximise the gains from the ensuing higher prices.
We don't need to mine all our raw materials now. The longer they stay in the ground the more valuable they become in the future.
We should do just as the Chinese do - plan for the long, long term and not waste what we have for short term gains.
Ahhhh - that's better!
Cheers
Dutchie
professor_frink
7th-March-2006, 05:46 PM
G'day tech/a
I agree with you in that we will be tied to and should be looking at the CIA in the long term.
However, I think we are still very influenced by the US market and if and when it goes down then we will hurt for the same time that it does, but hopefully not to the same degree (because of our CIA markets).
I'll get on my old hobbyhorse now and stress that we should keep control of our commodities and not sell them off to the Chinese etc for a short term gain.
The Chinese are smart in that they see that if they own the companies that mine our countries assets they can control the prices.
At the moment these assets are the best thing Australia has got going for itself, especially since we will never compete in manufacturing.
Demand for all raw materials will be greater than the available supply in the long run and Australia should postion itself to maximise the gains from the ensuing higher prices.
We don't need to mine all our raw materials now. The longer they stay in the ground the more valuable they become in the future.
We should do just as the Chinese do - plan for the long, long term and not waste what we have for short term gains.
Ahhhh - that's better!
Cheers
Dutchie
well said dutchie. couldn't agree more.
problem with western governments though- that will never happen. Furthest out any Australian govt cares is the next election in my opinion :(
hopefully that will eventually change, but I wouldn't hold my breath waiting for it!
Smurf1976
7th-March-2006, 06:00 PM
It amazes me how shortsighted we are when it comes to commodities.
For example, natural gas. We've got plenty at the moment but seem determined to sell virtually the whole lot over the next few decades at relatively low prices. Then around 2030 it's expected that Australian gas production will enter its' terminal decline with even much of the post-peak production being exported. Dumb. Absolutely dumb. Gas is already seriously depleted in North America, Western Europe (except Norway) and New Zealand. So we're determined to end up the same within the lifetime of most on this forum.
North-West Shelf - mostly for export apart from a 25 year supply reserved for current rates of use in WA.
Timor Sea - practically all for export.
Cooper basin - already in decline.
Bass Strait - already about half depleted (gas) and 90% depleted for oil.
Meanwhile we'll need more gas in future than now as a replacement for oil. Already we're planning to import it from PNG but that hasn't stopped us from moving to waste it generating electricity for which alternatives (coal, renewables) are cheaper anyway (Queensland has what amounts to a subsidised (by consumers) scheme to encourage more gas use for electricity generation) whilst NSW has other policies which encourage a very similar outcome. Hmm... :(
There are several commodities I could have chosen to make the point, not just gas although that's one of the more immediate problems.
tech/a
7th-March-2006, 07:27 PM
Dutchie.
Make a commodity rare enough and there will be an alternative (Not the commodity) found by those needing it.
If Oil became as rare as RHourseS then you bet they would find a way to run on water (been done I think).
Sure be tactical but dont let opportunity pass you by.Find the balance.
With so much Nuclear waste I'm supprised a recycling alternative hasnt been found---when it is those who have stored it will be Extremely wealthy in and out!
nizar
7th-March-2006, 08:02 PM
The All Ordinaries has traditionally correlated well to Wall St movents in the past 100 years. Why should it be any different this time? The simple answer is that it won't.
this may be so...
but look at dow and s&p500 for the last 2 years and compare to asx200 and all ords...
that said... the 4 most dangerous words in investing are: "Its different this time"
wavepicker
7th-March-2006, 08:15 PM
this may be so...
but look at dow and s&p500 for the last 2 years and compare to asx200 and all ords...
that said... the 4 most dangerous words in investing are: "Its different this time"
You are very correct nizar. The magnitude in terms % gain is much higher for the ASX200, however the direction is the same as the Dow and S&P500.
In my opinion this is because during the 90's our market did not move with as much magnitude as the Dow. Subsequently the Dow and S&P500 entered a secular bear market in 2000, while the ASX200 had one more leg up after 2002 to complete it's bull campaign. If things do change to the downside then we may have a bearish alignment of most world markets.
Time will tell
phoenixrising
8th-March-2006, 12:08 AM
If the US and/or US dollar tanks then the Oz dollar is going to rise substantially against US$.
My concern is already we have a trade balance problem. Whilst our commodities boom is great, it's also contributing to a hi dollar, which in turn is not good for a whole lot of other industries. Eg farming (Iraq wheat aside) manufacturing, tourism.
I personally know a person who works in the film industry, and can't get work for love nor money atm, had to sell his house. Why, because it's cheaper to do it elsewhere, lot's now in NZ. This is not just movies, it's adds,TV, etc.
So my point/question, will a high Ozzie dollar be that good for us really, will the non US world adjust accordingly, can we progress from a country of quarries,farming and tourism to??????
wavepicker
8th-March-2006, 07:12 AM
Pheonixrising,
I think the rally that the US dollar started early last year is far from finished. At least for another year anyway. Don't be surprised to tee the Aussie buckaroo back to 64-65c by this time next year.
wayneL
8th-March-2006, 09:40 AM
Pheonixrising,
I think the rally that the US dollar started early last year is far from finished. At least for another year anyway. Don't be surprised to tee the Aussie buckaroo back to 64-65c by this time next year.
This is something that's not in my ideal model, but I agree.
Us treasuries are driving lower and our nongs intent on holding rates (as are the accursed pommy central bankers) = cash heading for the USD.
ducati916
8th-March-2006, 11:24 AM
I think the rally that the US dollar started early last year is far from finished. At least for another year anyway. Don't be surprised to tee the Aussie buckaroo back to 64-65c by this time next year.
While this statement may well prove to be true, there were some strong fundamental reasons for the strength exhibited in the US$ that are, and may be absent in 2006.
1...Tax liabilities that were calculated at 0% for the repatriation of US Corporate foregin earnings expired December 31 2005.
Therefore the flood of foregin currency being converted to US$ will not be present.
2..The Yen *carry trade* door is closing, with the signalling from the BOJ that the negative real rates are coming to an end, and this arbitrage, is for all intents and purposes coming to an end. A 300 basis point spread might keep it alive a while longer, but, capital may well be starting to cycle out, and thus volatility will be on the increase.
3...Balance of Investment income ratio, may well turn negative.
4...Unilateral transfers are currently negative.
However, currencies are notoriously difficult to value, and really are the wildest of speculations in any timeframe.
jog on
d998
noirua
8th-March-2006, 11:41 AM
Perhaps the bullish market in oil and mineral stocks are reaching choppy waters, and that includes much of Asia, excluding China. China has not really done that well in terms of share prices despite having chunks of publicity.
wavepicker
8th-March-2006, 12:32 PM
This is something that's not in my ideal model, but I agree.
Us treasuries are driving lower and our nongs intent on holding rates (as are the accursed pommy central bankers) = cash heading for the USD.
To be honest with you Wayne, having worked in the manufacturing industry for 23 years I would welcome it. Manufacturers in Aussie have been doing it really tuff the last 3-4 years. Although the China factor will always be there, a lower dollar would hopefully improve the balance sheets a little.
The Aussie buck has been attempting to rally since early last years. For every rally it makes it just keeps getting beaten back down and is really struggling. If it breaks under 72c I beleive it will really pick up some downside momentum. The US Dollar Index on the weekly chart has a textbook inverted head and shoulders developing. IF this pattern materializes then we will get a fast move up between now and the end of the year.
I went short the aussie against the US Dollar @79.5c in Feb last year and I am still hanging onto that position, although it has been a very slow ratcheting decline.
