Perhaps we'll ride out this correction/crash/bear/recession/depression?

Re: Perhaps we'll ride out this correction?

Uncle Festivus said:

Just when you thought it was safe to go back into the water......(Jaws music....) keep an eye on the Shanghai Composite?

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unless China loses 10-20% in a day I don't think the world gives a damn. Now after the last sell off was seen as nothing to worry about why would the rest of us care, just a few months back they had a correction while we rose no one gave a crap when we crashed they did not but no one really cared. I am starting to think they were a once off trigger to over bought situation.

But if they turned there economy off and refused to buy any thing that comes out of our ground that may cause a sell off but that has little to do with the SSE

Re: Perhaps we'll ride out this correction?

Trade_It said:

unless China loses 10-20% in a day I don't think the world gives a damn. Now after the last sell off was seen as nothing to worry about why would the rest of us care, just a few months back they had a correction while we rose no one gave a crap when we crashed they did not but no one really cared. I am starting to think they were a once off trigger to over bought situation.

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I agree, as you say it might depend on what degree they falter. At this rate, a decent correction could be a large number.

Re: Perhaps we'll ride out this correction?

dhukka said:

We're hearing this concept of de-coupling more and more often. While the argument in principle seems sound, I think the US still plays too much of a role in the world for integrated economies to fully de-couple themselves.

Europe is going to get hit hardest by a weakening US dollar. USA recession looks likely, Europe a possibility, if both go it's tough to see anyone getting out unscathed.

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dhukka,

firstly I really enjoy your posts.

If Europe and the US have a recession there will some kind of spill over to us for sure or can our resource affair with china really leave us immune?

Cheers

Re: Perhaps we'll ride out this correction?

kennas said:

All the systemic problems in the US are still there....aren't they?

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Yep,

Housing still in the doldrums (figures out in the US this week should confirm that)

Employment slowing

LBO's falling over - e.g. Harman

Corporate earnings peaking - Transports, Fedex and Knight issued profit warnings last week. Yesterday it was Target and Lowes = Consumer spending in trouble.

Aus economy still looking good, the all aboard is sounding on the Shane Oliver ASX200 express to 6700 by year end. Time to get on or time to get off?

Re: Perhaps we'll ride out this correction?

kennas said:

I agree, as you say it might depend on what degree they falter. At this rate, a decent correction could be a large number.

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That's true Kennas but I still think any large more won't become a long term thing. I think the world learnt a big lesson last Feb that the SSE is not the gauge of the Chinese economy. The scary aspect of the SSE is the amount of credit that is in it, I am guessing a lot of the credit holders have used there houses to obtain there lines so a mass exit could leave a few unhappy chaps. I still can't work out if it will have any effect. Kennas have you been to China and caught a train? Mate one thing they are good at is mass exits and entries! what i saw is only a few get left behind!

Re: Perhaps we'll ride out this correction?

Trade_It said:

Kennas have you been to China and caught a train? Mate one thing they are good at is mass exits and entries! what i saw is only a few get left behind!

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LOL Yes, a lot of Chinese 'punters' will loose some saving perhaps. But even if the figure of punters losing their house seems large to us, perhpas it'll be just a blip to them in reality. It's sometime hard to get my head around the numbers of people and the scale of development occurring in China. Sorry, old news...

Re: Perhaps we'll ride out this correction?

kennas said:

LOL Yes, a lot of Chinese 'punters' will loose some saving perhaps. But even if the figure of punters losing their house seems large to us, perhpas it'll be just a blip to them in reality. It's sometime hard to get my head around the numbers of people and the scale of development occurring in China. Sorry, old news...

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that's not old news at all that's a great point, I was trying to make this point in that china death to the world thread!

when u have up to 1/4 of a billion people buying and selling the movements will look wild to investors that invest on a exchange that has 5-6 million people. when that amount of people buy and sell is 5-10% that much? for us 5-10% is a mountain but is it a mountain in china?

*number figures are my estimates, true figures could be a lot more or less*

cheers

Re: Perhaps we'll ride out this correction?

Trade_It said:

dhukka,

firstly I really enjoy your posts.

If Europe and the US have a recession there will some kind of spill over to us for sure or can our resource affair with china really leave us immune?

Cheers

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Trade-it, I wish I had the answer to that one. You could argue that some states in the US are already in recession and that there has already been some spillover effects to Australia - e.g. Aussie hedge fund blowups, short-term funding drying up (RAMS), interest rates creeping higher, bad debts creeping higher (although still at reasonable levels).

No doubt there will be some spillover, the question is to what degree? The US had a short recession 5 years ago that we missed due to a strong economy. Personally I think the extent of the housing bubble in the US will see a longer recession this time round. Enough to pull Aus in recession? At this stage I doubt it. The evidence is not there..... yet.

I don't want to discount the resource boom with China. However the US and Europe are still their largest customers. Yeah, yeah domestic demand in China is also booming. However as a percentage of overall GDP Chinese domestic demand is decreasing. They are still heavily reliant on exports.

So in summary,no, not immune but to what degree we are affected, just too early to get a grip on it IMHO.

Re: Perhaps we'll ride out this correction?

dhukka said:

I don't want to discount the resource boom with China. However the US and Europe are still their largest customers. Yeah, yeah domestic demand in China is also booming. However as a percentage of overall GDP Chinese domestic demand is decreasing. They are still heavily reliant on exports.

So in summary,no, not immune but to what degree we are affected, just too early to get a grip on it IMHO.

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I never seem to get a satisfactory answer on this one, even though I've asked or pondered about it a billion times already!

If the US and Europe consumers do decrease their spending, how will it affect China demand for our resources? How long does it take for the "effect" to flow through?

Blah..why should I care now? I should just stick with my own strategies and attempt to profit both ways.

Re: Perhaps we'll ride out this correction?

dhukka said:

The US had a short recession 5 years ago that we missed due to a strong economy. Personally I think the extent of the housing bubble in the US will see a longer recession this time round. Enough to pull Aus in recession? At this stage I doubt it. The evidence is not there..... yet.

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Interesting article in Brisbane Times today. Hope our resource boom carries us through again.

Bond traders tip a US slowdown
Elizabeth Stanton | September 25, 2007

Traders in government bonds, who predicted six of the last seven recessions, say America's Federal Reserve will lower interest rates again before the end of the year as the US economy comes to a standstill.

Since the Fed last week lopped half a percentage point off the central bank's target for overnight lending between banks - the first orchestrated decline in so-called federal funds rate since 2003 - traders have pushed the yield on Treasury two-year notes to almost three quarters of a point below the designated 4.75 per cent funds rate. In the three previous occasions during the past 20 years when that has happened, policymakers have cut borrowing costs.

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http://www.brisbanetimes.com.au/new...p-a-us-slowdown/2007/09/24/1190486225724.html

Re: Perhaps we'll ride out this correction?

XAO and DJI making new all time highs.

Correction ridden out?

By definition, perhaps yes.


Now we just have to see how the credit crunch/housing downturn/US recession effects the world economy and Australia and how the markets respond.

At the moment the markets don't seem to be pricing in a recession for whatever reason. Are they betting on a non event, or are they just being greedy?

Or, maybe the next crunching is just around the corner? It seems to me that it would be hard to surprise the market at the moment. Everyone is well aware of the sub prime fiasco and have seen it's flow on effects. Citigroup announced a 60% fall in quarterly earnings today and the shares went up 2%. Perhaps the market was just expecting a worse result...Whatever the case, the bad results are well and truly expected right now and perhaps already factored in.

U.S. Stocks Gain, Sending Dow Average to Record; Lennar Rises
By Lynn Thomasson

Oct. 1 (Bloomberg) -- U.S. stocks rallied, sending the Dow Jones Industrial Average to a record, as investors speculated the worst may be over for banks and construction companies hurt by subprime mortgage losses.

Lennar Corp. and D.R. Horton Inc., the two biggest U.S. homebuilders, advanced after Citigroup Inc. said the industry's 53 percent decline this year has made the stocks attractive. Citigroup led financial shares higher after the largest U.S. bank said it expects ``a normal earnings environment'' in the fourth quarter and former Federal Reserve Chairman Alan Greenspan said the credit slump may be ending.

The Dow's record caps a six-week recovery from a slump that helped wipe out almost $2 trillion in U.S. market value. The 30- stock gauge added 183.87, or 1.3 percent, to 14,079.5 at 1:31 p.m. in New York, above the intraday high of 14,021.95 on July 17. The Standard & Poor's 500 Index increased 18.63, or 1.2 percent, to 1,545.38. The Nasdaq Composite Index gained 35.91, or 1.3 percent, to 2,737.41.

``The market has realized that yeah, we had some problems with subprime, but it's not the end of the world,'' said Lincoln Anderson, who helps manage $150 billion as chief investment officer of LPL Financial in Boston. ``With that behind us, you think, `Where do we stand?' Where we stand is with excellent fundamentals, and that's what's helping the market.''

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Or, perhaps these people are just muppets?

Re: Perhaps we'll ride out this correction?

Banks brush off subprime worries:
report15/10/2007 11:54AM AEST

The global credit crunch has not damaged the stable ratings outlook for Australian banks, although smaller lenders relying on securitisation funding will suffer, a Moody's report says.

Moody's has maintained its stable outlook for the banks since the credit crunch began despite their relatively heavy reliance on wholesale funding, Moody's senior vice president Patrick Winsbury said.

"This is due to the banks' successful adaptation to challenging market conditions, having increased their liquid assets and raised funds opportunistically to adjust their balance sheets," Mr Winsbury said.

By contrast, small, securitisation-dependent institutions may have to reduce their volume of new business if securitisation costs cannot be passed on to their customers, he said.

The Moody's report warns the cost-effectiveness of securitisation to fund lower-risk/lower-return type products may be substantially reduced.

Unless such small, securitisation-dependent institutions can successfully re-orient their business models, they risk seeing their franchises and earnings eroded, it said.

The retreat could potentially affect their bank financial strength ratings, it said.

Meanwhile, the impact of the crisis on Australian banks has been well contained because they have not engaged in high-risk mortgage lending practices, the report said.

Delinquency rates are likely to rise but that result is off a very low base.

Australian banks have almost no exposure to US sub-prime mortgages or leveraged loans.

Mr Winsbury said some larger banks are providing liquidity support to asset-backed commercial paper (ABCP) programs.

But the financial impact of such lending was manageable due to the banks' solid profitability and capitalisation, he said.

As well, there were no material credit concerns for the banks because the assets were funded by high quality conduits.

The report noted Australian banks' New Zealand subsidiaries are similarly isolated from many of the sub-prime-related issues.

Re: Perhaps we'll ride out this correction?

LOL

All looks to be going to script to me.

This little correction is unfolding exactly how the bears have predicted, and the bottom is yet in sight.

Maybe we are getting close?


For certain, world economies will recover, the permabears will be stuck in their little caves, and the long term investors will prevail!

Or, maybe, there's just too many people crowding up the planet! eeeek! The end of the world looms....

Re: Perhaps we'll ride out this correction?

The Dow Jones index slipped overnight so one would assume that Monday is going to be a shocker for the aussie market.