# Sharemarket Crash!!! What do you do now?



## insider (16 April 2007)

Last night I was thinking about an inevitable scenario... A SHARE MARKET CRASH... That's right it is inevitable, we have had a magnificent bull run since 2003, we are overdue for a recession in Australia, US markets are getting wobbly so what are you going to do about it... What are alternative ways of making money in these conditions?

Discuss


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## Kimosabi (16 April 2007)

insider said:


> Last night I was thinking about an inevitable scenario... A SHARE MARKET CRASH... That's right it is inevitable, we have had a magnificent bull run since 2003, we are overdue for a recession in Australia, US markets are getting wobbly so what are you going to do about it... What are ways to make money in these conditions?
> 
> Discuss




Pimping...


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## vishalt (16 April 2007)

US markets are hardly getting wobbly, companies are still producing record profits and the economy is (seemingly) growing at a moderate pace. 

But yeah i'm with you on the "inevitable" bit, but its a bloody hard one to judge. This commodities boom is obviously much more different from the tech bubble, China/India need all these materials because they really are trying to up their country's infrastructure and its gonna take a hell of a lot more time/supply to get it done. 

I'm thinking that this dream run will continue for a while yet (maybe till mining companies profits fall) - but I am expecting not a crash of 50%, but major corrections of 15-20% in the future.


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## Realist (16 April 2007)

If the sharemarket crashes the best way to make money is to buy shares.

If it keeps going up as quick as it has the past couple of years the best way to make money may be to leave it in the bank.  Property in Sydney is showing more value now though and rental yields are higher so maybe property.


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## insider (16 April 2007)

Realist said:


> If the sharemarket crashes the best way to make money is to buy shares.
> 
> If it keeps going up as quick as it has the past couple of years the best way to make money may be to leave it in the bank.  Property in Sydney is showing more value now though and rental yields are higher so maybe property.




I checked out house prices in the US and they are much better value than houses here in Australia... Real estate is definitely going to slide IMO


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## insider (16 April 2007)

vishalt said:


> US markets are hardly getting wobbly, companies are still producing record profits and the economy is (seemingly) growing at a moderate pace.
> 
> But yeah i'm with you on the "inevitable" bit, but its a bloody hard one to judge. This commodities boom is obviously much more different from the tech bubble, China/India need all these materials because they really are trying to up their country's infrastructure and its gonna take a hell of a lot more time/supply to get it done.
> 
> I'm thinking that this dream run will continue for a while yet (maybe till mining companies profits fall) - but I am expecting not a crash of 50%, but major corrections of 15-20% in the future.




I'm thinking of applying for an ING savings maximizer just for safe keepings... (unless ING go bankrupt) lol


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## Kimosabi (16 April 2007)

insider said:


> I'm thinking of applying for an ING savings maximizer just for safe keepings... (unless ING go bankrupt) lol




These accounts are great. Don't underestimate the power of Compound Interest, low risk, and, *no fees*...


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## Uncle Festivus (16 April 2007)

What do I do - buy GOLD! It's telling a story no one wants to acknowledge - central banks printing excess money. Until the crunch comes, go long banks & other money shufflers, but get out quick when it turns.

An insight to how much the US market is dependant on non productive money shufflers - 

"The investment bank and brokerage stocks are so crucial this quarter that if you stripped out the 7 companies that fall under that category, overall S&P 500 earnings growth would fall to less than 2 percent from 3.3 percent"


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## Kimosabi (16 April 2007)

Uncle Festivus said:


> What do I do - buy GOLD! It's telling a story no one wants to acknowledge - central banks printing excess money. Until the crunch comes, go long banks & other money shufflers, but get out quick when it turns.
> 
> An insight to how much the US market is dependant on non productive money shufflers -
> 
> "The investment bank and brokerage stocks are so crucial this quarter that if you stripped out the 7 companies that fall under that category, overall S&P 500 earnings growth would fall to less than 2 percent from 3.3 percent"




And then when you factor in the depreciating US dollar, it looks even sicker


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## professor_frink (16 April 2007)

insider said:


> Last night I was thinking about an inevitable scenario... A SHARE MARKET CRASH... That's right it is inevitable, we have had a magnificent bull run since 2003, we are overdue for a recession in Australia, US markets are getting wobbly so what are you going to do about it... What are alternative ways of making money in these conditions?
> 
> Discuss




If you don't want to sell and trigger CGT, you could always look into hedging.


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## wayneL (16 April 2007)

Uncle Festivus said:


> What do I do - buy GOLD! It's telling a story no one wants to acknowledge - central banks printing excess money. Until the crunch comes, go long banks & other money shufflers, but get out quick when it turns.
> 
> An insight to how much the US market is dependant on non productive money shufflers -
> 
> "The investment bank and brokerage stocks are so crucial this quarter that if you stripped out the 7 companies that fall under that category, overall S&P 500 earnings growth would fall to less than 2 percent from 3.3 percent"



The anecdotal evidence is that CBs are going to crank up the printing presses even more than they are now, hence agree with you here.

I would add that most commodities would do the same job as gold, possibly better as gold is such a (allegedly) manipulated market.

A quick scan across the long term chart of just about any commodity will show up the increase in money supply over the last 6 years.

Commodities will be where it's at. Rogers is right.


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## noirua (16 April 2007)

Here is a report in 1974 from "The Parliament of the Commonwealth of Australia" on the biggest mining boom the world had ever seen. It shows and reports the truth about the stock POSEIDON and how it rose from $1.10 to $280.00. How the mining boom got the extra fuel it needed, and how the Worlds Greatest Mining collapse began:  http://www.takeovers.gov.au/content/545/Download/rae_part1_vol1.rtf

"It's all different this time", they said in 1969.   "It's all different this time", they said in 2007?


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## Uncle Festivus (16 April 2007)

wayneL said:


> Commodities will be where it's at. Rogers is right.




Up to the point where input costs (commodity prices) reduce a companies profitability, which we may be approaching now. If analysts are correct then US companies earnings will be lower this qtr. Even allowing for the absurdly low consensus (around 3%), they could be still lower than the previous qtr. 

If you include oil as a commodity, the latest trade figures are either pointing to a sharp slowdown in the US or a rapid increase in fuel efficiency - vis - 

"The petroleum trade deficit was the smallest since June 2005, as crude oil import volume fell 21 percent to its lowest since February 2003"

So I wouldn't count on commodities providing the same percentage returns as the past 3 years, in fact each year lower prices are negotiated eg coal, eventually to be in equilibrium then decline.

The multi hatted commodity/currency called gold will always eventually rise or fall depending on global liquidity imbalances, in spite of central bank intervention, as shown recently when they swamped the market with tonnes of gold and the price actually jumped $10. There is a make or break battle going on at this very minute to suppres gold from breaking out. Maybe this is golds week?


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## wayneL (16 April 2007)

Uncle Festivus said:


> Up to the point where input costs (commodity prices) reduce a companies profitability, which we may be approaching now. If analysts are correct then US companies earnings will be lower this qtr. Even allowing for the absurdly low consensus (around 3%), they could be still lower than the previous qtr.
> 
> If you include oil as a commodity, the latest trade figures are either pointing to a sharp slowdown in the US or a rapid increase in fuel efficiency - vis -
> 
> ...



Fair comment.

I should add that, long term commodity buys should be at or close to inflation adjusted minimum value. A subjective measure, but for sure most commodities are well above that at the moment, as measured by long term charts and producers actions.

But, if they fit a supercharger to the printing machine in response to the sub-prime apocalypse as mooted, it will certainly get very interesting.


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## Uncle Festivus (16 April 2007)

wayneL said:


> Fair comment.
> 
> I should add that, long term commodity buys should be at or close to inflation adjusted minimum value. A subjective measure, but for sure most commodities are well above that at the moment, as measured by long term charts and producers actions.
> 
> But, if they fit a supercharger to the printing machine in response to the sub-prime apocalypse as mooted, it will certainly get very interesting.




Yes, the bears conundrum - jump on board an illogical bull or get left behind while waiting for the (logically) inevitable adjustment to fiscal liquidity equilibrium. I'm sitting on the chair closest to the exit, but still bidding at the action.

This ties in with your "capitalism broken" thread I think - overconsumption.


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## Julia (16 April 2007)

Kimosabi said:


> Pimping...




Kimosabi,

That's probably in questionable taste but it did make me laugh!
Thanks.


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## son of baglimit (16 April 2007)

this raises several questions...

1. what is a crash - from the recent media reports on the 'march correction' the 'hundreds of points, billions of $' lost were clearly a mere blip on the screens. but it was portrayed as a major crash in some segments - and plenty of 'naive traders' reacted accordingly. god bless em. the drop the market suffered from june 02 till mar 03 could be construed as a major correction, after the post 9/11 surge. as for crash, surely you need to go back to october 87 for any real major dump.

2. looking at a crash or major correction scenario, what stocks could be seen as crash proof to some extent. supermarkets (cos everyones gotta eat) are commonly seen as a nice oasis to park the cash. what other industries are considered safe from a major correction/crash. i have my thoughts on a particular area, but i'll be accused of ramping so i'll leave it for now.
any thoughts on these crash proof industries ???


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## Kimosabi (16 April 2007)

wayneL said:


> But, if they fit a supercharger to the printing machine in response to the sub-prime apocalypse as mooted, it will certainly get very interesting.




Mate, their already warming up printing presses...



> *Subprime bailout? $120 billion*
> 
> *More than 1 million borrowers may be at risk of defaulting on their mortgages. Assisting them all wouldn't come cheap.*
> 
> ...


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## wayneL (16 April 2007)

If they do that, I'm hocking myself up to the eyeballs and going on the dole.

What motivation for financial responsibility is there left? This is seriously bad news.


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## Kimosabi (16 April 2007)

wayneL said:


> If they do that, I'm hocking myself up to the eyeballs and going on the dole.
> 
> What motivation for financial responsibility is there left? This is seriously bad news.




Ha, I'm warming up my laser printer.

If it's good enough for the government to print money whenever they feel like it, why can't I?


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## Wysiwyg (17 April 2007)

Kimosabi said:


> Ha, I'm warming up my laser printer.
> 
> If it's good enough for the government to print money whenever they feel like it, why can't I?




The money would be counterfeit and penalties would be imposed.

On the subject of those people defaulting on their loans.....the lesson for them and others is that houses don`t come as fast as food, cars and women.


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## Kimosabi (17 April 2007)

Wysiwyg said:


> The money would be counterfeit and penalties would be imposed.




Who says that the money governments print is legitimate?

I know in North Korea, they are quite happy to print as many US dollars as their printing presses are capable off.

Obviously we should be blaming the North Korea's for deflating the US currency...


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## Uncle Festivus (17 April 2007)

From Marketwatch

 "With last week's rise, many of the markets are back to within a day or two of the yearly highs and with the promise of better than expected earnings, the markets are once again racing higher," said Paul Nolte, director of investments at Hinsdale Associates, in a note. 
                                                   "But racing might be a bit strong, if we look at *volume* as the speed at which everyone is willing to buy stocks," he said.                  

*                            Market gains have taken place on low volumes while declines have seen high volumes*, Nolte said, noting that this indicated more willing sellers than buyers in the market. 

                           "Our daily data is once again knocking on the door of being in dangerously high territory and any missteps in the earnings season could put the market in a defensive posture," he said.

Housing starts data out tonight!


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