# The worst is yet to come



## hitmanlam (2 March 2007)

2 May 2007

FTSE 100 is down by -80 points.  US futures suggest market would be down -100 points.

Australia might follow overseas markets tommorrow and it looks like it's going to be another down day for tommorrow.

http://www.cnbc.com/


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## borat (2 March 2007)

here we go again, DOW down 200 on open... bit of rough weather to were yet while sensitivity is aloof...


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## theasxgorilla (2 March 2007)

hitmanlam said:
			
		

> Australia might follow overseas markets tommorrow and it looks like it's going to be another down day for tommorrow.




Note to self, 'go to bed now so you can get up in time to be at a computer screen at 10am ready to place pre-decided short orders'.


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## dhukka (2 March 2007)

hitmanlam said:
			
		

> *2 May 2007*
> 
> FTSE 100 is down by -80 points.  US futures suggest market would be down -100 points.
> 
> ...




Thanks for the heads up about 2nd May hitman, doesn't hurt to be prepared.


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## hitmanlam (2 March 2007)

OOOUUUUCHH. US just opened, Dow Falls - 200 points.  FTSE just dropped another 20 points on news of the US fall.  Looks like ASX is going to get hammered tommorrow.

I knew it!  Correction never last just for one day!!!


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## Kimosabi (2 March 2007)

There was also renewed concern that the yen carry trade, which has been a major source of funding for investors globally, might be subsiding. 

In addition, rumors that a big lender was in distress were floating around the market, according to research firm Action Economics.  
Amid concerns over the health of the mortgage lending market, SunTrust Banks (STI : SunTrust Banks, Inc) revised down its fourth-quarter earnings to $498.6 million, or $1.39 a share, from the previously reported $523.6 million, or $1.46 a share, following the resolution of a previously reported large non-performing loan. 

Also, the latest news on U.S. inflation, showing a 0.3% rise in core inflation, confirmed the Federal Reserve's view that inflation remains a critical risk to the economy. See full story. 

"Investors are worried about the strength in the economy and the Fed's assumption that housing has hit bottom," said Pado. 

At 10 a.m. Eastern, another important indicator is due for release, the Institute of Supply Management's manufacturing gauge for February, which may have rose to the 50% mark from 49.3% in January. 

Before that data wave, the dollar dropped about 1% against the Japanese yen, after the International Monetary Fund reiterated concerns about yen carry trades, while the buck was up about 0.1% on the euro. 

Gold futures rose $1.40 to $673.80 an ounce. Oil futures slipped 14 cents to $61.65 a barrel. 

http://www.marketwatch.com/news/sto...x?guid={ADD60353-5360-4F20-BFC4-F5CBF960D81E}


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## chris1983 (2 March 2007)

67 points down now..like a yoyo


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## noirua (2 March 2007)

Some may consider a healthy pull back in the ASX 200 to be about 30% of the 4 year gain - 5,100 approx.


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## Freeballinginawetsuit (2 March 2007)

It will hold off as long as it can.....greed, could be some forced to squeel yet.


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## Kimosabi (2 March 2007)

Maybe this is the new world order, the US Stock Market follows China's lead...


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## wayneL (2 March 2007)

Kimosabi said:
			
		

> Maybe this is the new world order, the US Stock Market follows China's lead...



Haha! Interesting thought. They do seem to be hand feeding economic power to the Chinese.

Treasonous I would have thought.


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## ducati916 (2 March 2007)

chris1983 said:
			
		

> 67 points down now..like a yoyo





The return of volatility, hallmark of the bear lurking in wait.

jog on
d998


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## Freeballinginawetsuit (2 March 2007)

ATM China don't have any  market or dynamics to provide a lead.....really!, a good while to go yet. Think the big picture.

Anyway may present some opportunities trading wise and ATM it hasn't effected squat over here in the scheme of things.....

Look at the charts of what youre holding....plenty of downside to even get close to knocking a third off a ridiculous decent long position of the last 6 months.


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## chris1983 (2 March 2007)

Never know it could go green.  The recession everyone is talking about seems to still be a fair bit away yet.


_"NEW YORK - Wall Street tried to stage a comeback Thursday, with the Dow Jones industrials erasing much of an earlier 209-point drop after a stronger-than-expected reading of the Institute for Supply Management’s assessment of manufacturing activity in February.

Investors showed their relief about manufacturing by buying some of the stocks that were pummeled in Tuesday’s drop that sliced 416 points off the Dow. Fears about the U.S. economy contributed to that plunge, and a halfhearted rebound on Wednesday followed soothing words from Federal Reserve Chairman Ben Bernanke.

The ISM figure of 52.3 was stronger than the 50.0 reading analysts had been expecting. The index is an important measure of a part of the economy that has given investors headaches in recent months. Manufacturing has struggled and at times given off signals that a recession might be in the offing. A reading at 50 and above indicates expansion, while anything below 50 signals contraction."_


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## Kimosabi (2 March 2007)

Freeballinginawetsuit said:
			
		

> ATM China don't have any  market or dynamics to provide a lead.....really!, a good while to go yet. Think the big picture.
> 
> Anyway may present some opportunities trading wise and ATM it hasn't effected squat over here in the scheme of things.....
> 
> Look at the charts of what youre holding....plenty of downside to even get close to knocking a third off a ridiculous decent long position of the last 6 months.




I was joking, the chinese just triggered the "Sell-off we had to Have!"


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## Freeballinginawetsuit (2 March 2007)

A lot of people playing with little real money but leveraged to the hilt = the derivative market coming unstuck. Not sure on the leverage rate but Its astronomical

Low interest rates and low inflation ATM why is this necessary?. Its not but add a bit of automation and big ego's in control of fantasy levarage that they haven't worked an iota for and any sign of distress and they will squeel.


I will stick to my real stocks, in a real market, driven by real fundamentals with my own money and market forces will come to the fore.....they are to strong in commodities .


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## wayneL (2 March 2007)

Freeballinginawetsuit said:
			
		

> A lot of people playing with little real money but leveraged to the hilt = the derivative market coming unstuck. Not sure on the leverage rate but Its astronomical
> 
> Low interest rates and low inflation ATM why is this necessary?. Its not but add a bit of automation and big ego's in control of fantasy levarage that they haven't worked an iota for and any sign of distress and they will squeel.
> 
> ...




You must recognize then, that it is the kiddies playing with leverage (and hedge funds doing the same) that has driven the price of your investments up.

By happily accepting the benefit of such when things are bullish, you should likewise accept the downside as we are seeing now without complaint.

If you can see yourself holding these _ad infinitum_, I don't understand why you are worried.

Write some calls on them until you think the next leg is going to happen, make the pieces of overpriced crap work for you!


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## Freeballinginawetsuit (2 March 2007)

Still waiting for the dust to settle but I have dipped my toes in and have happily posted Wayne. 

The reason my investments have gone up is the fundamentals that have driven them and a squillion little asians needing said commodities. As with anything you can only fake it so long and the Stockmarket is just one big magnifying glass that wants to see the bottom line at some point......usually reporting season 

The vast majority of my stocks have been entered before all the leveregd freebies jumped on the bandwagon........certainly admit to trading a few of the nice jumps the leveregd persuasion provide. Just keeping it all as simple as possable>cause really its as simple as selling for more than you bought!. Despite how complicated some seem to make it.

No doubt they will come back on the bandwagon in the not to distant future because the same fundamentals are still their....they just need to deal with this mad scramble and be the first ass out the door before.......not the last greedy pig. The man with the real money won't be happy then.

And as you know Wayne, Hedge funds arent necessary....they are just another example of greed, like the derivative players....they will come unstuck too. Simple supply vs demand in the current marketplace on its own to drive up prices in commodities.


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## wayneL (2 March 2007)

Freeballinginawetsuit said:
			
		

> And as you know Wayne, Hedge funds arent necessary....they are just another example of greed, like the derivative players....they will come unstuck too. Simple supply vs demand in the current marketplace on its own to drive up prices in commodities.




To an extent yes, but speculation has driven it a lot harder than it desreved. Not just in the commod markets themselves but in the end user markets.

Be careful what you wish for though. If the hedge funds blow up _en masse_, it will be truly an ugly thing for investors.

BTW Whats wrong with derivative players? We're not all greedy. Just cutting an honest living  Not all derivatives players are adrenalin junkies ah-lah Amaranth/Nick Leeson out to make a billion by tommorrow or go down in flames trying. (Though there are plenty of those about, but they're usually playing with OPM)

They were in fact created to hedge risk.


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## Freeballinginawetsuit (2 March 2007)

wayneL said:
			
		

> To an extent yes, but speculation has driven it a lot harder than it desreved. Not just in the commod markets themselves but in the end user markets.
> 
> Be careful what you wish for though. If the hedge funds blow up _en masse_, it will be truly an ugly thing for investors.
> 
> ...





In full agreement


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## krisbarry (2 March 2007)

This thread is very active for this time of the morning, must be a few stressed out traders, siting on massive losses


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## money tree (2 March 2007)

look at the chart for XJO Sept 12-20 2001.


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## chris1983 (2 March 2007)

Stop_the_clock said:
			
		

> This thread is very active for this time of the morning, must be a few stressed out traders, siting on massive losses





I think its mostly people in Perth bumping the thread?  We like to stay up late   Anyway the DOW finished well IMO.  Panic again on the open.  Huge losses incurred for some people.. most likely for nothing.  This whole thing will settle.


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## greggy (2 March 2007)

chris1983 said:
			
		

> I think its mostly people in Perth bumping the thread?  We like to stay up late   Anyway the DOW finished well IMO.  Panic again on the open.  Huge losses incurred for some people.. most likely for nothing.  This whole thing will settle.



Commonsense advice.   I'm debt free and cashed up. I'm using this "correction" to add to my portfolio.
DYOR


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## money tree (2 March 2007)

let me know when dividend yields get back to 8%, until then, be short


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## CanOz (2 March 2007)

Freeballinginawetsuit said:
			
		

> In full agreement




I gotta say, you two having civil discussion makes for better entertainment than your arguments.   

Cheers,


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## nioka (2 March 2007)

Freeballinginawetsuit said:
			
		

> A lot of people playing with little real money but leveraged to the hilt = the derivative market coming unstuck. Not sure on the leverage rate but Its astronomical
> 
> Low interest rates and low inflation ATM why is this necessary?. Its not but add a bit of automation and big ego's in control of fantasy levarage that they haven't worked an iota for and any sign of distress and they will squeel.
> 
> ...



Thanks for saying exactly what I would have said, but I decided not to post. But now I have!!!!


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## Out Too Soon (2 March 2007)

nioka said:
			
		

> Thanks for saying exactly what I would have said, but I decided not to post. But now I have!!!!




Too true,   all the same it is happening & we can't complain cause all this fake money = more volatility = better opportunity to make profits.

PS: wish I had my own money to play with not the banks.   
PPS: anyone out there want to loan me a cool mill, I dont have the cash to take advantage of present conditions. (quid pro quo!)


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## nizar (2 March 2007)

greggy said:
			
		

> Commonsense advice.   *I'm debt free * and cashed up. I'm using this "correction" to add to my portfolio.
> DYOR




Umm yeh youve said that a few times.
Dunno why though.

Id just like to add that im debt free as well lol


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## YOUNG_TRADER (2 March 2007)

I too have some debt thats free too a good home,

Any takers?  :


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## Halba (2 March 2007)

some value here i did an attempted bottom pick on ZFX

reasons:

zinc price solid

dividends

umicore spin out

other m&A


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## Magdoran (2 March 2007)

money tree said:
			
		

> let me know when dividend yields get back to 8%, until then, be short



I have to say I fully agree with you MT.

Congratulations on your play too.  Well done!


Mag


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## Out Too Soon (3 March 2007)

Magdoran said:
			
		

> I have to say I fully agree with you MT.
> 
> Congratulations on your play too.  Well done!
> 
> ...




But when did BHP *ever*  make an 8% div payment?


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## Magdoran (3 March 2007)

Out Too Soon said:
			
		

> But when did BHP *ever*  make an 8% div payment?




My agreement was with the "be short" aspect.  Maybe you should direct your question to MT.


Mag


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## Out Too Soon (3 March 2007)

Magdoran said:
			
		

> My agreement was with the "be short" aspect.  Maybe you should direct your question to MT.
> 
> 
> Mag




OK, cool.  
So MT when did BHP *ever* make an 8% div payment?    
we could be waiting a looong time


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## Out Too Soon (3 March 2007)

ouch! sorry didn't mean to shout that & didn't get a chance to edit it this time. &^%^()* computers.


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## nizar (3 March 2007)

Out Too Soon said:
			
		

> OK, cool.
> So MT when did BHP *ever* make an 8% div payment?
> we could be waiting a looong time




Moneytree was saying that prices need to fall much more to value can be found in the markets.

And in reply to this thread topic - yeah i think the worse is yet to come.

This is such plagiarism from Kennas and GP in the other thread, but i just felt like drawing a chart (for once) and im sure theyll forgive me.


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## bean (3 March 2007)

To the Last reply - that would be true EXCEPT ALL WORLD MARKETS ARE CORRECTING -  SUPPORT LEVELS -- IF IT FAILS DOES IT NOT THEN BECOME RESISTENCE --- THE CURRENT TREND FOR WORLD MARKETS  ----OURS INCLUDED ---MAY ONLY BE A DAY OR TWO AWAY FROM BEING DOWN  -  FOR MONTHS OR YEARS


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## nizar (3 March 2007)

bean said:
			
		

> To the Last reply - that would be true EXCEPT ALL WORLD MARKETS ARE CORRECTING -  SUPPORT LEVELS -- IF IT FAILS DOES IT NOT THEN BECOME RESISTENCE --- THE CURRENT TREND FOR WORLD MARKETS  ----OURS INCLUDED ---MAY ONLY BE A DAY OR TWO AWAY FROM BEING DOWN  -  FOR MONTHS OR YEARS




You may well be right, my friend.
This could be the beginning of the end ie. of the bullmarket.


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## Out Too Soon (3 March 2007)

nizar said:
			
		

> Moneytree was saying that prices need to fall much more to value can be found in the markets.
> 
> And in reply to this thread topic - yeah i think the worse is yet to come.
> 
> This is such plagiarism from Kennas and GP in the other thread, but i just felt like drawing a chart (for once) and im sure theyll forgive me.




Thanks NIzar, that graph is very enlightening the result also agrees with what Alan Kohler came up with the other day although he used historic graphs of previous corrections to come up with the same figure, around 5200-5300. The 200 dma looks like something it's worth keeping an eye on. 
   Every day I learn something new on this forum.  I hope my ignorant posts dont upset ppl too much but if I didn't participate I wouldn't learn & this forum is so much better than some of the others out there.


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## 2020hindsight (3 March 2007)

Out Too Soon said:
			
		

> Every day I learn something new on this forum.



ditto
as for whether it's the beginning of the end or not,
anyone remember Winston, when he said (after Battle of Britain I imagine)
"this is not the end, 
     nor even the beginnning of the end, ..
            but friends, 
                     it is the end of the beginning!!"   

relevance - buggered if I know (but I suspect we're all guessing anyway lol)


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## wintermute (3 March 2007)

Personally I doubt we are in for a bear market (yet), the market was due to correct (based on Technical analysis, I posted a graph before showing RSI and it's correlation to previous corrections) however I think there is too much money around and people will view this current blip as the correction we had to have, and it now being safe to re-enter with a gusto. The market will quickly rebound and continue on to stratospheric heights, THEN will come a crash and it will be largely unexpected, because people will think "but we already had the correction!!". 

Alan Koher on the ABC news the other night made the interesting comment about $30 billion dollars that will be going to shareholders of Qantas and Coles Myer which is going to need to find a home.  I think this was just before the current down turn.  The events in China that triggered this in IMO have no consequential effects, the worlds markets were just on a hair trigger and anything was going to set them off.  I believe that once people realise that the only thing that has happened in china is that some speculative/gambling money has been drained out of the market, and that there is no real effect on their economy, that the Bull market will resume. 

I do think the chances of a crash are reasonably high but I don't believe just  now.... give it another 6-12 months IMO. 

Of course I could be way off the mark  as this is an oppinion only and I certainly don't have a great knowledge of economics, world events, or other such things, just going with a gut feel 

Tony.


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## bunyip (3 March 2007)

Many of you will know of Bill McLaren, whose claim to fame is that he's considered one of the foremost authorities in the world on Gann analysis.

Bill recently spoke at an ATAA meeting I attended. His take on the markets was that 2007 will be a bearish year that sets up a bullish year in 2008.
As I understood it, his view was based on long term cycles using Gann analysis.

I have no idea if this year or next year or any other year will be bullish or bearish or flat or whatever. And from my perspective it doesn't matter much one way or the other. As a trader I can profit from both rising and falling markets, as long as I can find stocks that are strongly trending. And in my more than 12 years of market experience, that's never been a problem. Regardless of market sentiment, there are ALWAYS strongly trending stocks offering good profit opportunities for astute traders.

If I was a longer term buy/hold/accumulate type of investor, (which I am in a small number of stocks), then here again the state of the market shouldn't cause me undue concern. Plunging stocks prices mean that quality assets are available at discounted prices....surely this is not such a bad scenario for someone with a long term investment horizon. Afterall, quality companies should be worth more in the future.....IF you can hold them long enough.

I guess there's one type of investor who might might cop some grief from a plunging market.....anyone using margin loans to buy stocks, and who has no risk control in place, could find him/herself on the end of some nasty losses due to margin calls.

Bunyip


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## ice (3 March 2007)

I think bunyip sums it up pretty well. 

If you're a short or even medium term trader, who cares what the market will do in the distant future?
The market we have to deal with is the one we have today....well, Monday.
All the rest is just froth and bubble.

ice


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## money tree (3 March 2007)

In March of 2003 bank stocks were yielding in excess of 8% including franking credits. 

As I recall, resource stocks bottomed around June 2003 (I remember buying BHP @ $8 and getting stopped out on RIO @ $27.80) not sure what the yields were, but must have been high. 

I wont buy a stock unless it is self-funding. ie, the divs are high enough to pay the interest on the loan.


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## money tree (5 March 2007)

Dow down 120 Fri night

must be some nervous newbies.....


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## ROE (5 March 2007)

Keep dropping I dont mind.. I'm ready to load up for the right price..
A few stocks I got my eyes on and as it continue to drop, more buying power for me.

Wouldnt mind if it goes back to 5000 or 4000


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## money tree (5 March 2007)

Nikkei more than 2% down


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## Wysiwyg (5 March 2007)

ROE said:
			
		

> Keep dropping I dont mind.. I'm ready to load up for the right price..
> A few stocks I got my eyes on and as it continue to drop, more buying power for me.
> 
> Wouldnt mind if it goes back to 5000 or 4000




I agree with this comment...my mistake with previous corrections was jumping in too soon.


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## Dukey (5 March 2007)

My punt is an absolute bottom of 5400ish xao. 
Unless it smashes through there - I'll be bargain hunting.

Whats on the shopping list guys??

I'm watching OXR especially. Seemed to have just turned up nicely when this correction kicked in. Pretty good results + Agincourt gold T/O.

But... not..... yet....
Gotta wait for some better signs from the market....
-dukey


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## Struzball (5 March 2007)

Dukey said:
			
		

> My punt is an absolute bottom of 5400ish xao.
> Unless it smashes through there - I'll be bargain hunting.




Same.  I bought the day of the crash and the day after, but I'll put the money lost down to a lesson learnt.  But when (if?) it gets to 5400-5450 I'll be buying some more, if I'm not broke by then.


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## money tree (5 March 2007)

5400 = 10% drop

come on, thats barely a correction.   

we will see 4500's

we have come from 2700 but 5400 is the worst you think it can get?

consider this:

Australia just announced a record trade deficit. Thats during the biggest resources boom ever, ie when we are exporting our butts off. What happens when China slows down? Or the U.S enters recession?


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## Dukey (5 March 2007)

Moneytree - you could well be right - and if xao falls through 5400ish - you probably will be on the money (and I won't be going shopping for a while longer) . The long term average is certainly way down there somewhere.  I guess I'm not yet subscribing to 'Rabid Bear' & I dont think those kindof of levels will happen just yet. But who knows.
Somethings gotta give....????


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## Techbuy (5 March 2007)

I just lock down when things get bad and get prepared for a slow recovery. in 100 years of history the market comes back, some times quickly and some shares take more time but generally no more that a couple of years to get back to the same levels or higher.
No doubt some will go to the wall and I hope I have missed most of those.
All the doom and gloom about where the market will drop to does not help but make better buying oportunities for many that can read the market movements and are prepared to buy in when the SP is at a level they see value.


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## nizar (5 March 2007)

Dukey said:
			
		

> My punt is an absolute bottom of 5400ish xao.
> Unless it smashes through there - I'll be bargain hunting.




I agree with 5400.
But if it falls through that, then this 4 year bullmarket is over?
I would definately NOT be buying.


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## CanOz (5 March 2007)

This has got to be the worst intraday chart I've ever seen, theres no support what so ever.  

Sorry I can't post the XJO.


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## professor_frink (5 March 2007)

CanOz said:
			
		

> This has got to be the worst intraday chart i've ever seen, theres no support what so ever.
> 
> Sorry i can't post the XJO.



As bad as that looks, we are still performing better than the rest of Asia today   
It's looking very ugly right now for anyone still long


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## nizar (5 March 2007)

professor_frink said:
			
		

> As bad as that looks, we are still performing better than the rest of Asia today
> It's looking very ugly right now for anyone still long




The Nikkei is getting hammered bad.


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## professor_frink (5 March 2007)

nizar said:
			
		

> The Nikkei is getting hammered bad.



yep.
Hang Seng is even worse-- they just went to lunch down nearly 600


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## gordon2007 (5 March 2007)

Well I must consider myself extremely lucky. I've been reading and reading for 2 months now. Finally bought into hlx a few weeks ago during it's run. Sold out and made a nice $10K profit. My one and only trade. I was going to buy into other things but well we all know what happened. I'll probably get killed on taxes but I'm not wise enough in the market right now to know how to handle a short or long term correction, so I'll just sit this out and hope to learn from it for future corrections.


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## CanOz (5 March 2007)

gordon2007 said:
			
		

> Well I must consider myself extremely lucky. I've been reading and reading for 2 months now. Finally bought into hlx a few weeks ago during it's run. Sold out and made a nice $10K profit. My one and only trade. I was going to buy into other things but well we all know what happened. I'll probably get killed on taxes but I'm not wise enough in the market right now to know how to handle a short or long term correction, so I'll just sit this out and hope to learn from it for future corrections.




I'm with you mate!


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## Fab (5 March 2007)

Looks like the bottom to me but then corrections often run further than they should, a bit the same when there is a bull run


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## CanOz (5 March 2007)

I really think things are just getting started.  

http://www.bloomberg.com/apps/news?pid=20601087&sid=aEQtozU6XLEQ&refer=worldwide


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## Magdoran (5 March 2007)

CanOz said:
			
		

> This has got to be the worst intraday chart I've ever seen, theres no support what so ever.
> 
> Sorry I can't post the XJO.



Oh, I thought it was a “beautiful” chart – just a matter of perspective though...  Shorts don’t get much better than this!


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## professor_frink (5 March 2007)

Fab said:
			
		

> Looks like the bottom to me but then corrections often run further than they should, a bit the same when there is a bull run



At this stage, tomorrow looks like it's going to be pretty bad. Nikkei is about to close down 600+
The Hang Seng is down nearly 600, and they are at lunch- there is still the sfternoon session to come.
The dow is below 12,000 before Europe has even opened, and the Dow is down 160+ pts from Friday's European close, which isn't going to help the European open today.

It ain't looking very good at all.


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## professor_frink (5 March 2007)

Magdoran said:
			
		

> Oh, I thought it was a “beautiful” chart – just a matter of perspective though...  Shorts don’t get much better than this!



It's a daytrading paradise  

:dance:


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## CanOz (5 March 2007)

Magdoran said:
			
		

> Oh, I thought it was a “beautiful” chart – just a matter of perspective though...  Shorts don’t get much better than this!




Yeah i know, just after i posted it i thought "i guess it depends on if your trading the slide or not", but i'm not. 

The only way to consistantly profit in the markets is with the double edged sword. I must learn to short the market.

Cheers,


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## CanOz (5 March 2007)

CanOz said:
			
		

> I really think things are just getting started.
> 
> http://www.bloomberg.com/apps/news?pid=20601087&sid=aEQtozU6XLEQ&refer=worldwide




http://www.bloomberg.com/apps/news?pid=20601084&sid=ahOZSOxDgDzg&refer=stocks

bonds eh?


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## Magdoran (5 March 2007)

CanOz said:
			
		

> Yeah i know, just after i posted it i thought "i guess it depends on if your trading the slide or not", but i'm not.
> 
> The only way to consistantly profit in the markets is with the double edged sword. I must learn to short the market.
> 
> Cheers,



Puts in a down market tend to outperform calls in a bull market on average because of the volatility, if you know what you are doing...  Much prefer the short side.


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## wayneL (5 March 2007)

XJO Wow!

Anyone been watching the yen? Up strongly against everything again.

Just be careful out there folks, this could turn really nasty... seriously.


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## wayneL (5 March 2007)

wayneL said:
			
		

> XJO Wow!
> 
> Anyone been watching the yen? Up strongly against everything again.
> 
> Just be careful out there folks, this could turn really nasty... seriously.




The last couple months of yen:


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## constable (5 March 2007)

wayneL said:
			
		

> XJO Wow!
> 
> Anyone been watching the yen? Up strongly against everything again.
> 
> Just be careful out there folks, this could turn really nasty... seriously.



Seems like we should all be buying yen. Is there any way I can get a stock in the asx that is connected closely to its price movement? 
I wouldnt have a clue about trading the forex!


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## professor_frink (5 March 2007)

wayneL said:
			
		

> XJO Wow!
> 
> Anyone been watching the yen? Up strongly against everything again.
> 
> Just be careful out there folks, this could turn really nasty... seriously.



Yeah it's looking slightly scary ATM.

Does anyone have an idea of how high it will need to go before it creates a very, very serious problem?


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## wayneL (5 March 2007)

Magdoran said:
			
		

> Puts in a down market tend to outperform calls in a bull market on average because of the volatility, if you know what you are doing...  Much prefer the short side.




Could be VIX boomage tonight... what are OZ IV's up too?


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## ducati916 (5 March 2007)

constable said:
			
		

> Seems like we should all be buying yen. Is there any way I can get a stock in the asx that is connected closely to its price movement?
> I wouldnt have a clue about trading the forex!




The answer to your question is in part why things have spiralled so quickly.
In the US you can buy a *Yen ETF the FXY*

There is a major short squeeze in process at the moment.
Stock traders can in essence play the FX market without all the aggravation of the usual bs.

Traders are all over this baby like a rash.
This is going to potentially bust the market wide open.

Don't even think about the long side for a *hold*
Scalping only baby!

jog on
d998


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## Kimosabi (5 March 2007)

Well, I want to to know what happens if there are a number of defaults on Yen Carry Trades?


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## ducati916 (5 March 2007)

Check it out........

jog on
d998


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## wayneL (5 March 2007)

Kimosabi said:
			
		

> Well, I want to to know what happens if there are a number of defaults on Yen Carry Trades?



Apocalypse Now!


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## ducati916 (5 March 2007)

The Yen carry trade is *guestimated* at US $1 Trillion
Long way to go yet.

jog on
d998


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## Dukey (5 March 2007)

Quote from myself!!!!!!! (earlier today)

'I'm not yet a rabid bear..."

Well the bears are scratching at my door now....:hide::bazooka:


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## Bush Trader (5 March 2007)

Hello fellow speculators

This following article has had the effect of taking a valium for me (not that I've ever taken it before).  I would be interested in your thoughts, I might wait until the morning to read them as I am a buy/accumulate and hold 12 month "real equities" trader, I managed to free up some strongly profitable long positions in Jan and Feb and was sitting on a fair bit of cash, however now even my conservatively geared "Blue Chip" margin loan looks very sick and it appears that the vet is shut. My cash portfolio is full of speculative gas and gold stocks so you can imagine the hiding it's had since last week.  T

That's why I was amazed to read last Tuesday on this forum, the crazed so called bargin buying activity that was going on.  "What did you buy, how much, what volume" etc, especially PDN - that got to hurt. I thought I was samrt buying them in Jan for $8 during a mini-pullback. Anyway corrections never last a day, you are lucky if the only go for a week.  The sucker rally on Wednesday must really have hurt some of the punters.  Hope this helps.

Anyway here's the article it's GaveKal's take on the Yen Carry Trade, a different view from what we've all been reading of late.

Cheers - Sleep well!

*Where To Now?

Source FN Arena News - March 05 2007 
By Greg Peel*

Is economic growth really slowing across the globe? If so, investors should sell stocks and buy bonds. Is the yen carry trade being unwound? If so, investors should buy Japanese bonds and sell everything else. Is the earnings growth of recent years coming to an end? If so, investors should sell stocks.
If the opposite is true, investors should buy stocks, and risk assets.
These are the questions facing very nervous financial market investors this week. Investment consultants at GaveKal have given a lot of thought to the answers over the past few days.

To understand how we got to this point it is necessary to recap.
Markets in the US and around the world have been surging ahead since the lows of June last year. The peak close in the Dow Jones occurred on February 20. It needs to be remembered that the index fell for four consecutive days before the Chinese market did its thing. Asian markets were similarly weak following the return from the Lunar New Year celebrations. The scene was set.

The reason for the four days of weakness in the US was mostly concerns over sub-prime lending defaults. Financial stocks began to underperform despite falling bond yields, and this was a bit of an alarm bell. The price of credit default insurance shot up markedly in that time, and GaveKal suggested last Monday that risk-taking seemed to be waning. The analysts questioned the magnitude of their own bullishness from a short term perspective.

At the same time, economic data for February were not holding up as well as they had done in January. The US dollar began to weaken once more, and the oil price was threatening to break up Ã¢â‚¬“ another source of concern.
When China came out and announced new measures in curbing market speculation Ã¢â‚¬“ just another in a seemingly endless series of such announcements - the Chinese market took it rather badly. Had the announcement occurred in January, who knows? Maybe the Chinese reaction would not have been so severe, or if it had been, maybe the US would have been more likely to simply shrug.

But there was a discomforting feeling of nervousness in the air on the morning of February 27. We all know what happened next.
Equity market reaction aside, the unsettling response was a rise in the value of the yen against popular carry trade currencies such as the Aussie, Kiwi and real. Next the yen began rising against all currencies, including the strong euro. The Swiss franc Ã¢â‚¬“ popular destination in times of trouble Ã¢â‚¬“ also began to rise.

The call was then made Ã¢â‚¬“ the carry trade is being unwound.
Given longstanding speculation and warnings about what would happen to financial markets if the yen carry trade was to be unwound, the market became spooked. However, GaveKal would like to put the realities of the yen carry trade into perspective.

GaveKal has held the view that Japanese interest rates would remain at low levels for the foreseeable future, despite a growing market belief to the contrary. This view was underpinned by the most recent statement from the Bank of Japan. The BoJ has more or less guaranteed no abrupt tightening in 2007, and GaveKal believes Japanese rates will remain below 1.00% until at least the end of the decade.

So apart from a bit of short term panic, what could really cause the yen carry trade to be turned around in a big way?
It is important to note, GaveKal warns, that the carry trade is not just about greedy hedge funds looking for a quick buck. It is more about Japan's wealthy, ageing population and the vast amount of savings that population has accumulated. If an ageing Japanese saver wanted to buy an annuity to provide for retirement, where would he buy it?

Working off the 20-year JGB rate of 2.1%, if our retiree invested the equivalent of US$1 million at home, he would receive an annuity payment of US$60,478 per year. If he invested in the US, the 20-year US treasury rate of 4.7% provides for US$75,000 per year Ã¢â‚¬“ 23% more.
This means that the retiree would only be worse off investing in the US if the US dollar fell by an average of 23% against the yen over the twenty year period. Taking today's US dollar rate as JPY121, it would have to depreciate to JPY65 by 2027. While this is not inconceivable, the US dollar has never been below JPY81 and hasn't been below JPY100 since 1995.

GaveKal's conclusion is that we haven't seen any meaningful unwinding of the yen carry trade as yet, and nor are we likely to in the foreseeable future. If we had, then rates around the world would be rising, as they did mid last year, not falling, as they are tending to do now. It is not the end of the world as we know it just yet.

In the case of the sub-prime mortgage scare in the US, that, too, needs to be put in some perspective. A recent Bloomberg article suggested that households with variable-rate mortgages Ã¢â‚¬“ both prime and sub-prime Ã¢â‚¬“ would experience around US$10 billion in additional payments if rates adjusted up over 2007-08. This figure is only about 0.1% of the US$9 trillion US consumers spent in 2006.

So returning to the questions at the beginning of this article, GaveKal suggests the answer to each of them should be "no". The question then is: how long will it take a nervous market to stop being spooked by its own shadow? The yen was previously ridiculously undervalued against the euro, and now it is only slightly less so. Investors just need something which will spark a return to confidence. Perhaps stronger earnings, more massive M&A deals, or a fall in the oil price.

In the meantime, it's a case of waiting out the panic. Or, for the bold of heart, taking advantage of the dips.


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## kransky (5 March 2007)

ducati916 said:
			
		

> The answer to your question is in part why things have spiralled so quickly.
> In the US you can buy a *Yen ETF the FXY*




WTF? can you please be a little clearer for us noobs.. sorry.. but just a few more english words amongst the symbols might be enough  for some of us  

can we buy Yen here in aust?


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## CanOz (5 March 2007)

Good to hear a different perspective, a bit bullish. Thanks Bushy.


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## kransky (5 March 2007)

thanks bushy.. think i'll get off the ledge now


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## wayneL (5 March 2007)

kransky said:
			
		

> WTF? can you please be a little clearer for us noobs.. sorry.. but just a few more english words amongst the symbols might be enough  for some of us
> 
> can we buy Yen here in aust?




ETF = *E*xchange *T*raded *F*und... Like a mutual fund but can be bought and sold on a stock exchange like a share.

FXY is simply the ticker symbol for the Yen fund that Duc was refering to.

Cheers


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