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



## Sean K (19 August 2007)

Lots of doom and gloom in the threads the past week with every man and his dog jumping on the crash bandwagon. 

Does any one have some potentially good economic news that might be cause for optimism, or is just all carnage and destruction?

Perhaps this is a correction and the long term bull is still in tact? 

Perhaps loans in the US will be re-engineered, a short term reduction in rates will ease fears and get people out of the poop, while new lending policies will be put in place to stop bad practices continuing? Perhaps the lesson will be learnt and rates will gradually increase again and US will stop printing money? 

Perhaps the 'credit crunch' will create better lending practices around the world, perhaps the US consumer will start just buying two plasmas instead of three, while the Australian economy continues to canter along nicely fuelled by Chindia 10% growth over the next 20 years?

Perhaps I'm dreaming? 

Perhaps I'm a muppet? :



> *Economy will ride out global jitters: PM *
> 
> By Jeff Turnbull | August 18, 2007
> 
> ...


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## Flying Fish (19 August 2007)

*Re: Perhaps we'll ride it out?*

Yes well Mr Howard, and all pollies are muppets. It all boils down to supply and demand. China can pump out as much cheap goods as it likes, not much use if no one is buying.


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## Purple XS2 (19 August 2007)

*Re: Perhaps we'll ride it out?*



Flying Fish said:


> Yes well Mr Howard, and all pollies are muppets. It all boils down to supply and demand. China can pump out as much cheap goods as it likes, not much use if no one is buying.




I agree that China is the key as to whether we come out of this squish any time soon, not so much because there's a threat to the demand for Chinese manufactured product (which I assume will remain strong), rather my concern is: what is the capacity of the Chinese financial system to avoid catching the meltdown? WHEN there's a run on Chinese stocks is when the poo hits the fan. Prior to the current mess I held the assumption that this will occur by the middle of 2008; now I wonder why it isn't happening yet.

China is grossly over-heated, and its economic health is utterly opaque. There are quite literally millions of small investors whose modest life-savings are due to evaporate further and faster than anything the world has seen since 1929. When it goes awry there will be massive social and political upheaval in China; the consequent meltdown in world stock markets will dwarf what we're seeing now.

Right now I'm inclined to believe that whatever damage China is suffering will be absorbed (and in fact hidden). Current events will give their government the opportunity to treat this as a dress rehearsal, but it also gives warning to the corrupt and cynical elements to get ready to run far, and run fast.

Unhappily, I suspect that the most corrupt and cynical elements in their investment bubble are in fact also in their government.

So I'm holding, not buying. Some cautious buying in a few weeks perhaps.

As for 2008, I'm selling everything in April, assuming we're still functioning.

PS: my favourite stocks have been harder than many recently, which may give fair indication of the quality of my powers of prediction: AVX, UXC, OEC

Regards, P


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## dhukka (19 August 2007)

*Re: Perhaps we'll ride it out?*



kennas said:


> Lots of doom and gloom in the threads the past week with every man and his dog jumping on the crash bandwagon.
> 
> Does any one have some potentially good economic news that might be cause for optimism, or is just all carnage and destruction?




Geez, you're getting desperate now aren't you kennas citing politicians to support your arguments? 

Good economic news? I guess US inflation is looking fairly tame right now. Retail sales may get a reprieve in August as back to school sales kick in - however that's a big maybe and anyway will be short- lived. US house prices are rising in an increasing number of areas.  



> Perhaps loans in the US will be re-engineered, a short term reduction in rates will ease fears and get people out of the poop, while new lending policies will be put in place to stop bad practices continuing?




We are going to find out how irrelevant the Fed really is in times like these over the next few months. What do you mean by re-engineering loans? You mean renegotiate all those ARM's so these fools that signed up for mortgages they can't afford  can keep their homes? Doesn't sound like a bad idea in theory but can't see it happening.  



> Perhaps the lesson will be learnt and rates will gradually increase again and US will stop printing money?




You've got to be kidding right? You would think if the idiots who run things were going to learn the lesson of creating credit bubbles they would have learnt it by now.  The South Sea Bubble was over *300* years ago yet we still repeat the same mistakes. 

It might be worth remembering the words of Ludwig von Mises in times like these:


> "There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."






> Perhaps the 'credit crunch' will create better lending practices around the world, perhaps the US consumer will start just buying two plasmas instead of three, while the Australian economy continues to canter along nicely fuelled by Chindia 10% growth over the next 20 years?




Tightening of lending practices has already begun, no doubt new regulation will be put through congress to stop predatory lending practices. Then in a few years when everybody has forgotten about the credit crisis the opportunistic thrifts will begin again. 

Again with the Chindia argument. Old news, the best case scenario which is China continuing onwards and upwards is already priced in. Are the risks to the upside or the downside? Considering the shoddy financial framework the Chinese economy is built on and it's dangerously overheated stock-market it's a bubble in itself waiting to burst.


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## dhukka (19 August 2007)

*Re: Perhaps we'll ride it out?*

Long but very interesting article from Roubini explaining why whatever the Fed does will not prevent huge amounts of insolvencies. Too long for one post so I'll put it in two. 



> Nouriel Roubini's Blog
> Worse than LTCM: Not Just a Liquidity Crisis; Rather a Credit Crisis and Crunch
> Nouriel Roubini | Aug 09, 2007
> 
> ...


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## dhukka (19 August 2007)

*Re: Perhaps we'll ride it out?*

Nouriel Roubini's Blog
Worse than LTCM: Not Just a Liquidity Crisis; Rather a Credit Crisis and Crunch
Nouriel Roubini | Aug 09, 2007 con't





> These low default rates are driven in part by solid corporate profitability and improved balance sheets. In Altman’s view, however, they have also been crucially driven - among other factors - by the unprecedented growth in liquidity from non traditional lenders, such as hedge fund and private equity. Until recently, their demand for corporate bonds kept risk spreads low, reduced the cost of debt financing for corporations and reduced the rate of defaults. Earlier this year Altman argued that this year "hot money" from non traditional lenders could move to other uses for a number of reasons, including a repricing of risk. If that were to occur, he argued that the historical patterns of default rates - based on firms’ fundamentals - would reassert itself. I.e. we are not in a new brave world of permanently low default rates. He said: "If we observe disappointing returns to highly leveraged and rescue financing packages, some of the hedge funds may find it difficult to cover their own loan requirements as well as the likely fund withdrawals. And broker-dealers who are not only providing the leverage to the hedge funds but whom are also investing in similar strategy deals will recede from these activities." The same could be said of the consequences of the unraveling of some leveraged buyouts. Altman suggested that triggers of the repricing of credit risk could also be "disappointing returns to highly leveraged and rescue financing packages". So he argued that the unraveling of the low spreads in the corporate bond market could occur even in the absence of changes in US and/or global liquidity conditions.
> 
> 
> 
> ...


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## Sean K (19 August 2007)

*Re: Perhaps we'll ride it out?*

Hi FF,



Flying Fish said:


> It all boils down to supply and demand. China can pump out as much cheap goods as it likes, not much use if no one is buying.



Well, that's part of the equation for the Australian economy. Perhaps people will keep buying their trinkets?


Thanks for the replies dhukka. 



dhukka said:


> Geez, you're getting desperate now aren't you kennas citing politicians to support your arguments?



 Well, it was the only positive article I could find!

Howard and Costello are politicians, but they have also been known to know a thing or two about economic issues. I give them more credit than simply trying to save their political @rses. Part of saving their @rse is to actually get some things right. Perhaps, since they're practically lame duck administrators, they don't care any more. Unlikely. 



dhukka said:


> Good economic news? I guess US inflation is looking fairly tame right now.......



The world economy seems great. It was Goldilocks just a few days ago. 



dhukka said:


> What do you mean by re-engineering loans? You mean renegotiate all those ARM's so these fools that signed up for mortgages they can't afford  can keep their homes?



 I think they will do everything they can to sort it out. Why just lay down and except defeat? It's certainly not the American way. Perhaps. 



dhukka said:


> You've got to be kidding right?



No. I don't have any direct examples, but I have the feeling that there may have been numerous economic reforms and advancements over the years to systems to ensure national and world economies advance onward and upward. I suppose the danger at the moment is that through globalisation we are far more interrelated than ever before, so I'm not sure if system developments over the previous decades are precisely suited for todays environment. I'm no economist though, and are taking stabs here. 



dhukka said:


> Again with the Chindia argument. Old news, the best case scenario which is China continuing onwards and upwards is already priced in.



I don't think it's completely priced in yet. 




I'm hoping to fill this thread with some more counter arguments to _the great crash bear catastrophe_, if only to keep some balance. 

Personally, I am in the bear den, but I like to provide an alternative opinion now and then, as some may have noticed!


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## dj_420 (19 August 2007)

*Re: Perhaps we'll ride it out?*



dhukka said:


> Nouriel Roubini's Blog
> Worse than LTCM: Not Just a Liquidity Crisis; Rather a Credit Crisis and Crunch
> Nouriel Roubini | Aug 09, 2007 con't




everyone is predicting a global meltdown on an astronomical scale. yet many economists think that the global economy is very healthy.

people have been arguing the same old argument for the last couple of years, the bull run is over yada yada yada. then the market continues up after a healthy consolidation period.

the world is not going to grind to a halt, we are still going to need material goods and services. does everyone think that global demand will completely disappear? this is what happens, demand increases supply increases, supply meets demand demand decreases, the healthy companies running on good margins survive the slight downturn and the process starts over. companies that cannot operate on small margins get squeezed out. the STRONG survive.

so what will be the result of the subprime real estate fallout???

so do we get tighter credit access, surplus of real estate as many mortgages are foreclosed. lending is tighter? then the US housing market falls through? people are still going to need houses! US housing starts have been off for a long time, everyone has known how sick US housing market has been for last 2 years its nothing new. so when this subprime stuff comes to surface complete mayhem and the sky is falling.

what about in our own markets when we have had all these companies fall through who guaranteed certain % returns. our markets didnt have the a$$ fall out.

i think we are going through a correction, maybe more prolonged and painful than others but a correction nevertheless. someone tell me why our market should collapse? our companies have great earnings, economy going strong, low unemployment rates etc etc etc.

i have seen people compare this to dotcom bubble, there was no earnings then BUT there is now. i just think there should be balance to the argument.

IF the world did completely meltdown i can guarantee there would still be demand for oil and natural resources.


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## IFocus (19 August 2007)

*Re: Perhaps we'll ride it out?*

Hi Kennas



> Does any one have some potentially good economic news that might be cause for optimism, or is just all carnage and destruction?




I thought the current issue affecting markets is the uncertainty surrounding how far and what areas the lending fiasco is going to extend. While this remains the pricing / measurement of risk will have deep reaching consequents.

Realistically there is a high probability that there are plenty of cockroaches to still appear.

Focus


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## Sean K (19 August 2007)

*Re: Perhaps we'll ride it out?*



IFocus said:


> Hi Kennas
> 
> Realistically there is a high probability that there are plenty of cockroaches to still appear.
> 
> Focus



Focus, I agree, there is a chance of this. If just a couple of little creapy crawlers come out of the walls of a big name, then . Potential major knee jerking going on I think....

But will they?

It's not in the bag.

And, even if/when the roaches do surface, how long before the market moves on to good news, and is back to its inevitable climb again. Inevitable....I must stress. Even when there are potentially diabolical holes in the US financial system....I know I'm young enough to see all time highs again. Unless there's a worse earthquake tonight!


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## dhukka (19 August 2007)

*Re: Perhaps we'll ride it out?*



kennas said:


> Howard and Costello are politicians, but they have also been known to know a thing or two about economic issues. I give them more credit than simply trying to save their political




Maybe I should give them more credit but I don't.



> The world economy seems great. It was Goldilocks just a few days ago.




Wouldn't totally agree with that. The two largest economies in the world which add up to around *45%* of world GDP have been fair to below average. Yes there are pockets of exceptional growth such as BRIC. 

The Australian economy has been looking pretty good for a while, low unemployment, contained wages growth, high corporate profitability and business investment. Housing has been a drag as was the rural sector last year but otherwise fairly robust. 

Things can also change quickly, look at RAMS and the few hedge funds that we've heard about. Nothing fundamentally has changed with the economy but fear and a lack of confidence is not good for business. 



> I think they will do everything they can to sort it out. Why just lay down and except defeat? It's certainly not the American way. Perhaps.




No it's not the American way if Vietnam and Iraq are any indication they will continue blundering onwards. 



> No. I don't have any direct examples, but I have the feeling that there may have been numerous economic reforms and advancements over the years to systems to ensure national and world economies advance onward and upward. I suppose the danger at the moment is that through globalisation we are far more interrelated than ever before, so I'm not sure if system developments over the previous decades are precisely suited for todays environment. I'm no economist though, and are taking stabs here.




I wouldn't trust your intuition on this one. Since Nixon in 1972 we have seen a gradual cutting away of regulation and safeguards that were put in place over the previous 50 years. Reagan and Thatcher in Europe accelerated the process in the 1980's. Don't get me wrong some of this deregulation was badly needed. 

But come on seriously, how about the worthless 'self regulation' legislation put in place after Enron and a host of other corporate scandals. How has that worked out? We have ratings agencies that have been complicit in spreading toxic debt that should never have been allowed to all corners of the world. It is little more than organized corruption. 



> I don't think it's completely priced in yet.




Guess we'll have to wait and see on that one. 



> I'm hoping to fill this thread with some more counter arguments to _the great crash bear catastrophe_, if only to keep some balance.




I hope you can, makes for lively discussion, although you'll have to do better than the liberal party muppets.


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## dhukka (19 August 2007)

*Re: Perhaps we'll ride it out?*



dj_420 said:


> the world is not going to grind to a halt, we are still going to need material goods and services. does everyone think that global demand will completely disappear?




I don't think anyone is forecasting the world to come to a halt. The title of the thread says 'perhaps we'll ride it out?' There is no doubt we will - as we always do. The question is at what cost to the economy and what price level in the markets? 

Why is it that those in the bull camp latch onto anything negative and exaggerate it to the point of armageddon?  



> i have seen people compare this to dotcom bubble, there was no earnings then BUT there is now.




There were plenty of earnings back in the dotcom bubble just not in the tech stocks. Just as now there is good corporate earnings growth amongst good companies but nothing amongst speculative resource stocks which until recently had a dotcom like run. Look at the likes of *GDN* and *URA*.


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## nioka (19 August 2007)

*Re: Perhaps we'll ride it out?*



dhukka said:


> Why is it that those in the bull camp latch onto anything negative and exaggerate it to the point of armageddon?




And I thought that was the job of a bear. A bull goes charging ahead regardless. I'm sitting here looking for a china shop to attack in the morning. Glad I did some buying Friday. Remember "buy Fridays sell monday or tuesday."


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## wayneL (19 August 2007)

*Re: Perhaps we'll ride it out?*



dhukka said:


> Why is it that those in the bull camp latch onto anything negative and exaggerate it to the point of armageddon?




The old straw man tactic.


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## numbercruncher (19 August 2007)

*Re: Perhaps we'll ride it out?*

What ive noticed with many of the perma bulls is that they latch onto what they personally want to happen rather than analyse the evidence at hand.

ie/ If it walks like a duck and talks like a duck then perhaps its a Swan.

Where as most of the Bearish sentiment comes from people whom seem to have profited throughout the Bull run as well, but make sense of the available evidence and position themselves accordingly.

ie/ If it walks like a duck and talks like a duck then chances are its a duck.


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## black_bird2 (19 August 2007)

*Re: Perhaps we'll ride it out?*

Fascinating reading folks! I am too inexperienced in this side of my investing life and can't add any value but I am learning a heap. Keep it up - PLS!!


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## Bushman (19 August 2007)

*Re: Perhaps we'll ride it out?*



numbercruncher said:


> ie/ If it walks like a duck and talks like a duck then chances are its a duck.




From what  I have read, both sides latch on to what makes bolsters the agenda they wish to propagate. 

Bull - walks, talks like a duck, must be the goose that lays the golden egg. 

Bear - walks, talks like a duck but what dangers lies beneath in the water of the pond?  

For all those bagging the Yanks, they have had a 60 year run pulling first Japan/Europe and now China/India up with them. Why will this stop now? This does not give the American market credit for its innovation and resilience, no matter what has been used to fund the booms and trigger the busts. American regulators will learn a lesson from the sub prime mess. The stakes are too high not too. Yankee bashing is all good and well but the deep cynicism directed towards America from Australian commentators cloud the fact that the historical performance of the US has been excellent.


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## wayneL (19 August 2007)

*Re: Perhaps we'll ride it out?*



Bushman said:


> From what  I have read, both sides latch on to what makes bolsters the agenda they wish to propagate.
> 
> Bull - walks, talks like a duck, must be the goose that lays the golden egg.
> 
> ...



... and Brittania used to rule the waves, before them the Ottomans, before them the Romans and so on.

The USA will continue to be an important economy in the foreseeable future, but that does not preclude recession/depression intervening. The USA is absolutely ripe for recession at least. It the cycle, it's how free enterprise works... when it's free.

The trouble is that Big Al started created a MASSIVE intervention with ultra-accommodative monetary policy which has thrown the cycle out of whack. This has been very unhealthy and in some way, the cycle will be restored. The only way forward is pain.


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## IFocus (19 August 2007)

*Re: Perhaps we'll ride it out?*



> Potential major knee jerking going on I think....




Yep if I understand you correctly, a fear driven market bouncing around  I think traders have three options to ride out this period.

1.	Sell every thing, don’t trade go on holidays ie hang out at Miraflores (I remember the girls there on weekends from 87 hope nothing has changed)
2.	Day trade the bigger ranges on down days if you can pick the money on the floor in the corner trades.
3.	Hold on to existing portfolio and look through  to next year but you had better have the right stocks which is a problem what will be affected by a credit crunch?

Number one I think is the better option… Kennas you are half way there LOL


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## Bushman (19 August 2007)

*Re: Perhaps we'll ride it out?*



wayneL said:


> ... and Brittania used to rule the waves, before them the Ottomans, before them the Romans and so on.




I am well versed in the rise and fall of empires over the ages. What of a global empire though? The global economy is unprecedented in history. What will cause this to fail? It wont be sub prime mortgages, that's for sure. Since when does ripping off the poor cause capital markets to fail. Capital markets are determined on those holding capital making money at the expense of keeping the wolves from the door.

My thoughts only, but we will not have a catastrophic depression unless; 
1. Hyper inflation takes hold in the US and fatally erodes the value of the USD i.e. a complete collapse of monetary policy in the US;
2. China once more embraces isolationism and returns to its socialist ideals;
3. The oil economy goes bankrupt before a viable energy and industry alternative can be found; or
4. Climate change leads to a catastrophic and continued loss of physical assets and asset values across the world. 

These are the shocks that I worry about. I cannot see another world war happening in my life time. Mutually assured nuclear annihilation changed warfare forever.  

Feel free to criticise or disagree.


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## numbercruncher (19 August 2007)

*Re: Perhaps we'll ride it out?*

5. Deadly worldwide Pandemic.


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## insider (19 August 2007)

*Re: Perhaps we'll ride it out?*



Purple XS2 said:


> I agree that China is the key as to whether we come out of this squish any time soon, not so much because there's a threat to the demand for Chinese manufactured product (which I assume will remain strong), rather my concern is: what is the capacity of the Chinese financial system to avoid catching the meltdown? WHEN there's a run on Chinese stocks is when the poo hits the fan. Prior to the current mess I held the assumption that this will occur by the middle of 2008; now I wonder why it isn't happening yet.
> 
> China is grossly over-heated, and its economic health is utterly opaque. There are quite literally millions of small investors whose modest life-savings are due to evaporate further and faster than anything the world has seen since 1929. When it goes awry there will be massive social and political upheaval in China; the consequent meltdown in world stock markets will dwarf what we're seeing now.
> 
> ...




You know I don't expect the bull run to last forever like some do : But I was thinking of getting out for good early April next year too... Scarey... Maybe get out in may in case everyone was thinking the same thing


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## wayneL (19 August 2007)

*Re: Perhaps we'll ride it out?*



Bushman said:


> Since when does ripping off the poor cause capital markets to fail. Capital markets are determined on those holding capital making money at the expense of keeping the wolves from the door.
> 
> My thoughts only, but we will not have a catastrophic depression unless;
> 1. Hyper inflation takes hold in the US and fatally erodes the value of the USD i.e. a complete collapse of monetary policy in the US;
> ...



Two points.

1/ Ripping off the poor is the the cause of the credit problem, it is merely a symptom of the overall mispricing of risk. This is where everybody misses what is actually going on with this credit crunch. Sub-prime is just where the pus exploded on the surface, there is a whole rotting and festering core still waiting to reveal itself. There are more shocks on the horizon.

2/ Depression is a word that is often over-dramatized in order to create a straw man. Depression need not be catastrophic. The 1929 version was, because of a number of exacerbating decisions and circumstances. The coming depression, though painful (and catastrophic for some) will actually be of benefit in a few key ways. 

It will be positive:
* in repricing of risk
* in repricing value
* in re-establishing community values
* in the re-evaluation of recourses
* in cleansing some of the predatory financial practices common ATM

One need only position themselves for the eventuality (if possible) and it will be smooth sailing. Those most hurt will be the Ostriches.


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## theasxgorilla (19 August 2007)

*Re: Perhaps we'll ride it out?*



Bushman said:


> I am well versed in the rise and fall of empires over the ages. What of a global empire though? The global economy is unprecedented in history. What will cause this to fail?




I still don't think we're are as globalised and all-loving and homogenised through business-orientation as many people like to think.  Everyone is still practising reserved capitalism.  The US and Europe protects its industries with subsidies and tarrifs and China won't float its currency.  The more you look at the current wave of prosperity the more it looks like a Nash Equilibrium...but under the surface, we still don't all love one another.

Thomas Friedman came up with his McDonalds theory which said a country with a middle class big enough to support McDonalds francise never goes to war with another country in a similar position.  Of course, this can be proved false and you need to make all kinds of exceptions to the rules to keep it true.  Its a fair and prudent expectation that at some stage in the future national borders will snap back into place, along with racial and cultural identity.


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## insider (19 August 2007)

*Re: Perhaps we'll ride it out?*



wayneL said:


> Two points.
> 
> 1/ Ripping off the poor is the the cause of the credit problem, it is merely a symptom of the overall mispricing of risk. This is where everybody misses what is actually going on with this credit crunch. Sub-prime is just where the pus exploded on the surface, there is a whole rotting and festering core still waiting to reveal itself. There are more shocks on the horizon.
> 
> ...




Yeah the Media does like to use "over Weight Words"... Compare: Crash, Collapse, Plummeted... with retrace, lowered, consolidated... They try their best to create headlines don't they


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## robandcoll (19 August 2007)

*Re: Perhaps we'll ride it out?*

I am a country lad who has over the years produced and sold. Its quite simple really. USD up and AUS down. Metals down. Correct me if I am wrong but does this mean China gets our resources at a cheaper price and then the USA gets what china produces at a cheaper price. USA spending and growth then has an increase and Chinas profit goes up anyway because they are getting a discounted metal.

Keep the answers simple.


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## IFocus (19 August 2007)

*Re: Perhaps we'll ride it out?*

Hi Kennas

If you haven't already I recommend John Mauldin's free weekly news letter where he generally gives a balanced view

His last one about the current situation is quite good not quite the total doom as being suggested by others for good reason.

http://www.frontlinethoughts.com/gateway.asp

Focus


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## sam76 (19 August 2007)

*Re: Perhaps we'll ride it out?*

A little more upbeat.... 

WITH the wild fluctuations on global and local sharemarkets, many investors have been too preoccupied to give much thought to the reporting season.

However, with confidence ”” temporarily, at least ”” restored to the markets following the US Federal Reserve's surprise move to cut the lending rate it charges banks, focus can now turn to the more fundamental questions of profit and loss.

About 45 major companies have so far reported, with another 57 to come under the microscope in the next week or two. To date, the results have been slightly above market expectations, said Citi Investment Research director Graham Harman.

"It has been a good season so far," he said. "We are having positive surprises coming in a little bit ahead of the number of companies disappointing."

This follows a solid US reporting season that, like Australia's, has been largely overlooked.

Profit growth is about 15 per cent, slightly higher than the US's 11 per cent, though as little as six weeks ago the American market was expecting growth of a mere 3 to 4 per cent.

"At some point, if and when things settle down, people will be able to look back on these results and say, 'Ah, we were a bit harsh on that stock,' but it's not going to be a consolation on a one or two-week view," Mr Harman said.

AMP Capital Investors' head of strategic investment, Shane Oliver, said outlook statements had generally been strong.

"Cost controls remain good and, out of 45 major companies to have reported so far, 56 per cent have come in better than expected and only 4 per cent have come in below expectations," he said.

Still, that has not stopped the market from marking down companies for no apparent reason.

Construction giant Leighton Holdings posted a 65 per cent increase in second-half profit to $260 million, a swelling order book and the extension of its contract with long-time chief executive Wal King, only to see its share price fall 4.7 per cent.

"Once the dust settles from the current market turmoil, the profit-reporting season will provide a strong base for a bounce-back in the Australian sharemarket," Mr Oliver said.

With the S&P/ASX200 Index down about 12 per cent from its peak, the average price-to-earnings ratio used to value stocks is down to about 13 times ”” lower than the 15-year average.

"We know profits are strong," said CommSec's Craig James.

"Any investor who doesn't take the opportunity of these wonderful times to be buying stocks ”” in a year's time they are going to be kicking themselves."


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## nioka (19 August 2007)

*Re: Perhaps we'll ride it out?*



robandcoll said:


> I am a country lad who has over the years produced and sold. Its quite simple really. USD up and AUS down. Metals down. Correct me if I am wrong but does this mean China gets our resources at a cheaper price and then the USA gets what china produces at a cheaper price. USA spending and growth then has an increase and Chinas profit goes up anyway because they are getting a discounted metal.
> 
> Keep the answers simple.



 A lot of sale contracts are in USD so if the USD goes up it costs China more and if the AUD goes down we get paid more so it is another reason to be bullish. The USD went up against the AUD but i'm not sure of the change in it's relationship with chinese currency which doesn't float like the AUD.


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## dhukka (20 August 2007)

*Re: Perhaps we'll ride it out?*



IFocus said:


> Hi Kennas
> 
> If you haven't already I recommend John Mauldin's free weekly news letter where he generally gives a balanced view
> 
> ...




Thanks IFocus, a good read.


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## Broadway (20 August 2007)

*Re: Perhaps we'll ride it out?*

Good discussion.

Perhaps we did hit bottom last week. US financials lead the markets down, and now they were bought fairly well on friday night, most up 3-4%.

They might lead the markets back out of this.

Good hunting tomorrow.


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## Sean K (20 August 2007)

*Re: Perhaps we'll ride it out?*



IFocus said:


> Hi Kennas
> 
> If you haven't already I recommend John Mauldin's free weekly news letter where he generally gives a balanced view
> 
> ...



Cheers. I've signed up. I might learn a thing or two.


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## Sean K (20 August 2007)

*Re: Perhaps we'll ride it out?*

Past performance is no indication of future blah blah, BUT!



> *BlueScope doubles net profit to $686m*
> August 20, 2007 - 9:09AM
> 
> BlueScope Steel Ltd has doubled its annual net profit and says the forecast for global steel demand is positive.
> ...






> *Seek finds 62.8% increase in profit*
> August 20, 2007 - 9:09AM
> 
> Online job advertiser Seek Ltd has reported 62.8 per cent net profit increase and remains confident of future employment conditions and growth prospects.
> ...



Yep, depression is just around the corner.


----------



## numbercruncher (20 August 2007)

*Re: Perhaps we'll ride it out?*



kennas said:


> Past performance is no indication of future blah blah, BUT!
> 
> 
> 
> ...





Woot !! No more systematic collapse of the banking system , no more children starving in the streets , no more 50pc unemployment !


Who was it calling a Depression anyways ?


----------



## Sean K (20 August 2007)

*Re: Perhaps we'll ride it out?*



numbercruncher said:


> Who was it calling a Depression anyways ?



Today's definition of depression is only one plasma per RV!


----------



## noirua (20 August 2007)

*Re: Perhaps we'll ride it out?*

Todays article about problems in NSW over sub-prime mortgages in the US shows the problems are very widespread:  http://compareshares.com.au/show_news.php?id=410617


----------



## Sean K (20 August 2007)

*Re: Perhaps we'll ride it out?*



noirua said:


> Todays article about problems in NSW over sub-prime mortgages in the US shows the problems are very widespread:  http://compareshares.com.au/show_news.php?id=410617



You trying to ramp OneSteel with that noirua?


----------



## noirua (20 August 2007)

*Re: Perhaps we'll ride it out?*



kennas said:


> You trying to ramp OneSteel with that noirua?





???????????*****I'm even more confused, as link goes to NSW*****????????


----------



## Sean K (20 August 2007)

*Re: Perhaps we'll ride it out?*



noirua said:


> ???????????*****I'm even more confused, as link goes to NSW*****????????



 When I clicked on it the first time it went to an article about OneSteel and Smorgan..... 

Well, I was trying to keep this bullish, but this article doesn't fill me with cheer:



> *Americans can't spend *
> COMMENT: Geoff Elliott | August 20, 2007
> 
> GLOBAL markets rallied over the weekend and the local bourse should bounce today. But be warned: the crisis in the US economy isn't over by a long shot.
> ...





They are the only bearish articles allowed today. No more please! Thank you. 

THE MARKET'S UP 3%: BUY, BUY, BUY!!  

Or, is a great opportunity to SELL, SELL, SELL!!


----------



## tcoates (20 August 2007)

*Re: Perhaps we'll ride it out?*

From your snippet about requiring 20% - that actually makes sense. (Forget the percentage or the amount,) if you can't afford payments then why are you buying in the first place.) It was the ability to borrow without any proven saving history (ignoring documentation) that got us (the world) into this mess anyway. (There are/were a lot of other factors as well!)

Tim


----------



## Sean K (20 August 2007)

*Re: Perhaps we'll ride it out?*

Another economist with his head in the sand, or will global growth remain strong?



> 0958 [Dow Jones] RBA unlikely to loosen tightening bias in response to Fed's cut in discount rate last week, National Australia Bank chief economist Rob Henderson says. NAB has not changed outlook for Australian interest rates, expects RBA to hold rates at 6.50% until end of 2008. Adds outlook for global growth likely to remain strong even if Fed cuts official cash rate.(SRH)


----------



## Kauri (20 August 2007)

*Re: Perhaps we'll ride it out?*

Read somewhere that Wednesday is the last day to get in redemption (withdrawl) notices to hedge funds for the current quarter. If there is a mass of them will it lead to the funds selling down more marketable assets ( shares, gold, oil, metals etc) to cover the withdrawls/calls???   .. Possibly an interesting week..   
 Cheers
..........Kauri


----------



## Awesomandy (20 August 2007)

*Re: Perhaps we'll ride it out?*



Kauri said:


> Read somewhere that Wednesday is the last day to get in redemption (withdrawl) notices to hedge funds for the current quarter. If there is a mass of them will it lead to the funds selling down more marketable assets ( shares, gold, oil, metals etc) to cover the withdrawls/calls???   .. Possibly an interesting week..
> Cheers
> ..........Kauri




With the market recovering last Friday and today, I think most investors might just hold on to their redemption orders for a little longer.


----------



## CanOz (20 August 2007)

*Re: Perhaps we'll ride it out?*

There is only one thing that is for certain....the volitility will continue!


----------



## numbercruncher (20 August 2007)

*Re: Perhaps we'll ride it out?*



> Two days before the Federal Reserve stunned markets with a cut in the Discount Rate, governor William Poole said that nothing short of "calamity" would cause the bank to make an unscheduled change in policy. So do we now face calamity, or was Mr Poole being flippant?




http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/08/20/ccview120.xml&CMP=ILC-mostviewedbox


----------



## Awesomandy (20 August 2007)

*Re: Perhaps we'll ride it out?*



numbercruncher said:


> http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/08/20/ccview120.xml&CMP=ILC-mostviewedbox




Reading that reminds me of an article I read a few months earlier about some sort of cycle. It goes like, interest rate rises, then a housing slump, then a share market slump, and the economy would go nowhere... then interest rate drops to promote economic growth, then housing rises, and share market rises, then interest rate goes up again to slow things down, etc, etc... Well, it was a lot more detailed than that, but that's all I can remember from it at this stage. Can't look it up now... I'm at work.


----------



## UPKA (20 August 2007)

*Re: Perhaps we'll ride it out?*



Kauri said:


> Read somewhere that Wednesday is the last day to get in redemption (withdrawl) notices to hedge funds for the current quarter. If there is a mass of them will it lead to the funds selling down more marketable assets ( shares, gold, oil, metals etc) to cover the withdrawls/calls???   .. Possibly an interesting week..
> Cheers
> ..........Kauri




most of them are done on the 15th, so it was last wednesday.


----------



## Kauri (20 August 2007)

*Re: Perhaps we'll ride it out?*



UPKA said:


> most of them are done on the 15th, so it was last wednesday.





  Upka,
          My mistake... I was working on the idea that the final cut-off date for redemptions was 6weeks---42 days... from the end of the quarter.  
 Cheers
........Kauri


----------



## Temjin (20 August 2007)

*Re: Perhaps we'll ride it out?*

Here is another good site / article for everyone to read,

http://www.marketoracle.co.uk/Article1866.html



> [FONT=Verdana, Arial]Last week saw extreme volatility on the markets as the central banks fought to stave off a collapse in the financial markets in response to the ongoing credit crunch.[/FONT]
> 
> [FONT=Verdana, Arial]On Friday the battle was temporarily won by the Central Banks with the US Feds decision to effectively cut interest rates by 0.5% on the discount rate, which included the unprecedented step of changing the financing terms from overnight to 30 days.[/FONT]
> 
> ...



[/FONT]

I am still wary of how those two issues will play out in the next few months. Remember, the previous ARM reset that caused the sub-prime mortgage crisis, that subsequently caused the liquidity and credit crisis (and the stock market) was relatively "less" in comparsion to the coming major resets.

Personally, I cannot assume the next series of ARM resets will cause LITTLE to NO HARM to the already weaken mortgage market in the US and that this wouldn't negatively affect the global equity market. I really have to be REALLY optimistic to believe in that...

I'm not trying to beat down the bull's arguments here. Everyone KNOW the Aussie economy are still doing well, etc, etc, etc. But to assume that all future bad news will be "absorbed" without negatively affecting anything else is a bit too naive. Unless the current price has already reflected the future expected massive ARM resets, which I doubt so.


----------



## Sean K (21 August 2007)

*Re: Perhaps we'll ride it out?*

More bad news for the Aussie market:



> *Acquisitive QBE lifts 56pc for half *
> August 20, 2007
> 
> QBE Insurance has posted a 56 per cent lift in first half earnings and says it is looking a making further acquisitions.
> ...




Who's to know how much they've really made though due to Hogwarts accounting principles, or what effect the credit crunch will have on future earnings....


----------



## Sean K (22 August 2007)

*Re: Perhaps we'll ride it out?*

Some other headlines:

Macq Office records 115% profit increase
Real estate trust

Pacific Brands eyes double digit growth
Clothing and bedding retail

Mincor posts record profit
Resources

Removal company Wridgways set for growth
Service/transport/logistics

GDP could hit 4.5% next year: Macq Bank
The economy


----------



## Sean K (22 August 2007)

*Re: Perhaps we'll ride out this correction?*

*Signs of stability as stocks improve *
August 21, 2007 

THE stock market finished higher today with signs some stability might be returning to a market rocked by concerns over US subprime mortgages.

At the 4.15pm AEST close, the benchmark S&P/ASX200 index lifted 56.8 points to 5989.4 on a muted lead from Wall Street and mixed commodity prices. 

The All Ordinaries index gained 52.1 points to 5978.6. 

On the Sydney Futures Exchange at 4.17pm AEST, the September share price index contract added 80 points to 5982 on a volume of 34,586 contracts, according to preliminary calculations. 

Bell Potter Senior adviser Stuart Smith said there were signs some stability had returned to the local stock market, despite a choppy day's trade. 

"You had sellers from yesterday, and you had buyers from yesterday not finished," Mr Potter said. 

"If you've got a mixture of the buyers and sellers yesterday competing and the buyer's winning, yes I'd agree there's stability and therefore confidence." 

Mr Smith said the market was still very cheap and was likely to attract speculators, while market investors would wait a little longer. 

"Our average PE for the S&P200 as of last Friday was 13.26 and that's the lowest its been in 12 months. 

"You've got to say that's good value."


----------



## dhukka (22 August 2007)

*Re: Perhaps we'll ride out this correction?*

Still trapped in the past I see kennas. What is the point of posting results that were largely known and happened over the preceding 12 months and thus are largely priced in? 

If you believe as I do the markets are forward looking, you need to look beyond earnings. You could argue that the fallout of the credit crisis is also largely priced in however that's a big assumption given the lack of transparency about the degree of opaque financial instruments out there waiting to implode. 

Even if companies are forecasting excellent future earnings it's still no basis to support the claim that stock prices will continue to rise. The 1987 correction of almost *40%* coincided with record earnings.


----------



## Sean K (22 August 2007)

*Re: Perhaps we'll ride out this correction?*



dhukka said:


> Still trapped in the past I see kennas.



 LOL. Yep, way in the past.  Are pe's done on future earnings?  I'm no economist.


----------



## numbercruncher (22 August 2007)

*Re: Perhaps we'll ride out this correction?*

This my help with the PE query 



> Now, to the issue of P/E ratios based on forward operating earnings. As noted above, it's clear that forward operating earnings are generally much higher than the record level for trailing net earnings to-date, and of course, record earnings are always equal to or higher than raw trailing earnings.
> 
> Investors are used to the idea that “normal” P/E ratios are typically in the range of 14 to 16. But as Cliff Asness of AQR has repeatedly stressed, those norms are based on raw trailing earnings. If you calculate P/E ratios based on earnings figures that are higher, you clearly obtain lower P/E ratios.
> 
> ...




http://www.hussmanfunds.com/wmc/wmc070820.htm


----------



## dhukka (22 August 2007)

*Re: Perhaps we'll ride out this correction?*



kennas said:


> LOL. Yep, way in the past.  Are pe's done on future earnings?  I'm no economist.




The generally accepted method these days is to use forecast earnings one year out from the present for P/E multiples. That is the basis for those such as Dr Shane Oliver of AMP's claim that stocks are not overvalued. The excerpt that numbercruncher has posted comes from a larger article which lays out amongst other things the floors in using forward P/E's to justify over or undervaluation. 

I recommend you read the whole article for a better understanding:

*Long-Term Evidence on the Fed Model and Forward Operating P/E Ratios*


----------



## Sean K (22 August 2007)

*Re: Perhaps we'll ride out this correction?*



dhukka said:


> The generally accepted method these days is to use forecast earnings one year out from the present for P/E multiples.
> 
> I recommend you read the whole article for a better understanding:
> 
> *Long-Term Evidence on the Fed Model and Forward Operating P/E Ratios*



I can't make heads or tails of this article. (one man's opinion - perhaps he's Dr O?)


----------



## stoxclimber (24 August 2007)

*Re: Perhaps we'll ride out this correction?*



dhukka said:


> Still trapped in the past I see kennas. What is the point of posting results that were *largely known* and happened over the preceding 12 months and thus are largely priced in?




Actually this earnings season has been above expectations.


----------



## Sean K (25 August 2007)

*Re: Perhaps we'll ride out this correction?*

Probably all in the past again, but this is in the future from when this thread was created. Hmmmmm 



> *Stocks End Week Sharply Higher On Signs of Stronger Economy*
> 
> Stocks closed sharply higher, with the Dow posting a triple-digit gain, after stronger-than-expected housing and durable goods data overshadowed lingering concerns about the credit markets.
> 
> ...




Bears will eventually have their day, of course.


----------



## Sean K (25 August 2007)

*Re: Perhaps we'll ride out this correction?*

Don't shoot the messenger.



> *Most Aussie stocks won't be hurt by US downturn, analysts claim *
> Geoffrey Newman | August 25, 2007
> 
> INVESTOR worries about a US-sourced domino effect on Australian industrial stocks are overblown, even if the US does slip into recession, according to analysts.
> ...


----------



## theasxgorilla (25 August 2007)

*Re: Perhaps we'll ride out this correction?*



kennas said:


> Bears will eventually have their day, of course.




How long can they wait though??  5 years, 10 even?  Plenty of space left under that rug me thinks.  Keep sweeping.


----------



## Sean K (25 August 2007)

*Re: Perhaps we'll ride out this correction?*

That damn old Chindia news just keeps resurfacing......old news?? 



> *China's metals demand to grow even if US slows down: analysts *
> 
> Rowan Callick, China correspondent | August 25, 2007
> 
> ...




Of course, the authors and interviewees have vested interests in keeping the bull alive, as well as keeping their jobs by getting it right I suppose.....


----------



## Sean K (1 September 2007)

*Re: Perhaps we'll ride out this correction?*

Well, when I started this thread I was shot down pretty quickly, even if I was actually thinking the bears were going to have their day.

There were a lot of 'perhaps's' listed in the first post, and 'perhaps' some of them are actually coming to fruition.

Perhaps the US are going to engineer a way out of what seems like a real pile of financial poo. 

XAO cracking 6200, and DOW leaping last night means the break will be supported IMO. It's not a 100%, in the bag, continuation of the bull, but very unexpected to many, including me. 

As embarrassing as it is to put an article here with Dubya as the chief protagonist, it's a symbol of what degree the US will go to to sort out the sub prime mess. Maybe they'll manage to do it? 



> *Bush Tries to Calm Markets With Mortgage Plan*
> Reuters | 31 Aug 2007 | 02:54 PM
> 
> President Bush speaks during a news conference at the White House Friday.
> ...


----------



## KIWIKARLOS (1 September 2007)

*Re: Perhaps we'll ride out this correction?*

I've always thought that if they wanted to survuve as the one remaining superpower and to not lose ground to both Russia or China they would do anything to remain economically afloat. Esspecially when trying to fight a war.

I must admit though i was still freakin out a little but i managed to pick up what i feel are some really good bargins (FWLO, MPO, EDEO). I still want to pick up some MAE at a reasonable price if i can monday.


----------



## dhukka (1 September 2007)

*Re: Perhaps we'll ride out this correction?*



kennas said:


> Well, when I started this thread I was shot down pretty quickly, even if I was actually thinking the bears were going to have their day.
> 
> There were a lot of 'perhaps's' listed in the first post, and 'perhaps' some of them are actually coming to fruition.
> 
> ...




Kennas,

Dubya's move seems more politically motivated than any broad based solution to the sub-prime debacle. He's been coping it from the Democrats for the last 3 weeks to do something. So he finally offers relief to 80,000 households out of 2 million resets expected. The waiving of IRS penalties is probably a bigger step. 

That doesn't mean they won't do more. You can bet the Democrats will be all over this saying it's not enough. So yes your initial feeling that the government won't sit idly by was well founded, however the current measures are more of a band-aid than a solution.

Maybe today's measures mean that the government is willing as Bernanke keeps saying the Fed is, to do "whatever is needed". Will it be the American taxpayers coming to the rescue again as they did in the S&L crisis? 

However the idea of throwing more money at a problem that was brought about by an excess of money doesn't add up. Bubbles need to be deflated not propped up. 

Calling a *0.9%* rise in the Dow a leap is pushing it. I was surprised at the relative lack of conviction in the rally compared to when Bernanke dropped the discount rate. Maybe the traders took the afternoon off for the labor day weekend?


----------



## Sean K (1 September 2007)

*Re: Perhaps we'll ride out this correction?*



dhukka said:


> Calling a *0.9%* rise in the Dow a leap is pushing it.



Yep, sorry, that was a bit of a ramp wasn't it? LOL

While we're on the DJI, it looks to have almost broken back up, after diving on the H&S breakdown. Now, like the XAO an inverse H&S has formed and it looks like it might break up. Interesting, even if you are a funnymentalist you shouldn't ignore the factors that are less subjective. (maybe less subjective)

XAO already has broken up perhaps.

Or, perhaps I'm still living in the past, on old news....

(I'm still more in the bear den dhukka, but there are solutions to any problem)


----------



## Nick Radge (1 September 2007)

*Re: Perhaps we'll ride out this correction?*



> continuation of the bull, but very unexpected to many, including me.




I think you need to break down the pieces a lot better. The market evolves each and every day and offers new information. Take a read of Mark Douglas' book "Trading In The Zone". Read it 10 times and absorb what is being said.

There was a lot o evidence, both domestically and in the US that a reasonable bounce would unfold. The blow off low, the record reading in the put/call ratio, the impulsive nature and rejection off the lows, etc etc. Review my post #1384 or better still watch this video and note how I build the "probable" argument.

You need to ask, "what is the most probable pattern now?" and therefore, "what is the next most probable pattern to unfold?" Add to these specific analysis of volume, seasonal tendencies and sometimes it all falls into place.

So, in the ASX we are nearing the completion of the 5-wave off the August lows. We therefore know that this move up can only be an impulse, a wave-1 or -A. Either way, the short term would suggest a 3-wave counter trend move followed by another leg higher of similar magnitude of what we've just seen. It does not mean "BULL" nor does it mean "BEAR". What the next impulse will show us is whether we're in a "probable" BULL or BEAR move. Understanding the relationships of moves and they they combine is a powerful tool.

Nick


----------



## dhukka (1 September 2007)

*Re: Perhaps we'll ride out this correction?*

Kennas I thought we'd agreed that the Dow is the muppet index? 



kennas said:


> Interesting, even if you are a funnymentalist you shouldn't ignore the factors that are less subjective. (maybe less subjective)




Surely you're not suggesting that lines drawn on a chart ex post facto as an explanation for what might happen in the future is less subjective?



> (I'm still more in the bear den dhukka, but there are solutions to any problem)




Yes there are but the Fed and the government continue to ignore the obvious solution before their eyes - let the market do it's job.


----------



## Sean K (1 September 2007)

*Re: Perhaps we'll ride out this correction?*



Nick Radge said:


> I think you need to break down the pieces a lot better. The market evolves each and every day and offers new information. Take a read of Mark Douglas' book "Trading In The Zone". Read it 10 times and absorb what is being said.
> 
> There was a lot o evidence, both domestically and in the US that a reasonable bounce would unfold. The blow off low, the record reading in the put/call ratio, the impulsive nature and rejection off the lows, etc etc. Review my post #1384
> 
> ...



Thanks Nick, I'm obviously an amateur at both FA and TA and learning what I can. I can say honestly say that saw the capitulation and mentioned it in the admin threads, but it was just a gut feel pluck I suppose. In regard to saying we may have returned to the 'BULL', I would define this as simply staying above the 200d ma at the moment. The US bounced off it, and we spent about 5 days below during the panic, so IMO the bull is still in tact. I'm looking for the XAO to make 6200 as support and the US to break through before opening some bubbly. 

Long term, fundamentally, there are some serious issues with the US materialistic psych that need to be addressed, but probably won't.


----------



## Sean K (1 September 2007)

*Re: Perhaps we'll ride out this correction?*



dhukka said:


> Kennas I thought we'd agreed that the Dow is the muppet index?
> 
> Surely you're not suggesting that lines drawn on a chart ex post facto as an explanation for what might happen in the future is less subjective?



 Yes, happy with a muppet index, but nonetheless an indicator that people watch.

I've come to trust a chart more than a company report crafted by a Hogwarts graduate...

Damn accountants!!!


----------



## dhukka (1 September 2007)

*Re: Perhaps we'll ride out this correction?*



kennas said:


> Yes, happy with a muppet index, but nonetheless an indicator that people watch.
> 
> I've come to trust a chart more than a company report crafted by a Hogwarts graduate...
> 
> Damn accountants!!!




I don't trust company reports either, I trust in my own ability to dissect them and pull out what's relevant. Interesting that you have such faith in charts yet you're still in the bear camp, didn't yesterday give you a signal to go all in? 

Oh ye of little faith.


----------



## Sean K (1 September 2007)

*Re: Perhaps we'll ride out this correction?*



dhukka said:


> Oh ye of little faith.



I don't post every trade, or investment.


----------



## Nick Radge (1 September 2007)

*Re: Perhaps we'll ride out this correction?*



> would define this as simply staying above the 200d ma at the moment




Since 1960, the use of the 200ma on the S&P500 has only been effective on 30.7% of occasions. Of the 127 crossovers it has caught 7 significant bear markets ('62, '66, '69, '73, '77, '81 and '02) . On the other 120 occasions it gave false signals.


----------



## Sean K (1 September 2007)

*Re: Perhaps we'll ride out this correction?*



Nick Radge said:


> Since 1960, the use of the 200ma on the S&P500 has only been effective on 30.7% of occasions. Of the 127 crossovers it has caught 7 significant bear markets ('62, '66, '69, '73, '77, '81 and '02) . On the other 120 occasions it gave false signals.



I'm not exactly sure what your saying here Nick.... 

From my interpretation, I provide the fol:

I've only been applying this to the XAO actually, but just assumed it was a universal inicator. Assume - making an ass out of u and me.  

Actually, I'm not sure if you mean crossing up, or down, Nick... I would always expect a cross up through the line (or hold above) to be more reliable than below. The charts do generally go up in the end.....

I do notice you've just used since 1960, you're not trying to use a certain time frame to support an argument are you?  he he.


----------



## nizar (1 September 2007)

*Re: Perhaps we'll ride out this correction?*



Nick Radge said:


> Since 1960, the use of the 200ma on the S&P500 has only been effective on 30.7% of occasions. Of the 127 crossovers it has caught 7 significant bear markets ('62, '66, '69, '73, '77, '81 and '02) . On the other 120 occasions it gave false signals.




Nick, was 2002 a "significant" bear market?
What actually is a bear market or a bull market?
I think I might start a new thread...


----------



## GreatPig (1 September 2007)

*Re: Perhaps we'll ride out this correction?*



kennas said:


> I'm not exactly sure what your saying here Nick....



My interpretation is he's saying a break below the 200 day MA is an unreliable indicator of a change to a bear market. 30.7% accuracy is hardly reliable.

In fact, based on those figures, you'd probably be more successful treating such a break as a buying opportunity and use some other stop to get you out of a real bear market.

Hmm... might have to try a bit of backtesting on that, although I only have data back to 1997.

Cheers,
GP


----------



## Nick Radge (1 September 2007)

*Re: Perhaps we'll ride out this correction?*



> In regard to saying we may have returned to the 'BULL', I would define this as simply staying above the 200d ma at the moment




My point is the statement above is obviously based on testing you have done to qualify the 200ma as a trend determinant. My testing proves otherwise is all.


----------



## wavepicker (1 September 2007)

*Re: Perhaps we'll ride out this correction?*



nizar said:


> Nick, was 2002 a "significant" bear market?
> What actually is a bear market or a bull market?
> I think I might start a new thread...




Hi Nizar,

This very question has cropped up quite a few times on other threads. Just about everyone has an opinion on it, and there is probably no right or wrong explanation.
I suppose it really depends on ones situation and how it effects your positions, and ultimately how one handles it psychologically. 

Interestingly the DJIA market of the 70's (1968-1980)was often referred to as a bear market, but the market actually trended nett sideways in that timeframe with some repeated choppy swings.

I should  add that many bear markets have also been followed by economic contraction shortly after. So then, a bear market is then the psychologically reality as reflected by falling prices, and the economic reality in some cases lags this ie recesssion, depression etc


----------



## nizar (1 September 2007)

*Re: Perhaps we'll ride out this correction?*

Thanks wave for your response.


----------



## Nick Radge (1 September 2007)

*Re: Perhaps we'll ride out this correction?*

My definition, and it will differ as waves says, is:

(1) > 15% decline, or
(2) 6 months sideways trading.

Each to their own.


----------



## Sean K (15 September 2007)

*Re: Perhaps we'll ride out this correction?*

XAO comforably holding on to gains above the 200d ma and finding support. World markets recovering well and ignoring some short term noise from a few poorly managed entities, suffering from bad lending practices in a minor part of world financial markets. The ASX gained (including financials) even after the fallout from one bank in the UK to push above significant resistance. US talking more and more of recovery instead of death and destruction....



> *Paulson: Turmoil to Persist But Economy Strong*
> By Reuters | 14 Sep 2007 | 12:09 PM ET
> 
> Treasury Secretary Henry Paulson said on Friday that it will take time to work through the problems contributing to current financial market turmoil but expressed confidence U.S. growth will not be derailed.
> ...




One of the banks most likely to suffer from sub prime posts record earnings and gains 2% after the aformentioned UK blip.



> *Macquarie heads for $1bn half*
> Marc Moncrief
> September 15, 2007
> 
> ...




Shares don't just jump because of previous results but factor in potential future earnings, as we know. 

Doesn't seem to be ALL bad news to me......

No apocalypse from this angle. he, he, 

:couch


----------



## wavepicker (15 September 2007)

*Re: Perhaps we'll ride out this correction?*



kennas said:


> XAO comforably holding on to gains above the 200d ma and finding support. World markets recovering well and ignoring some short term noise from a few poorly managed entities, suffering from bad lending practices in a minor part of world financial markets. The ASX gained (including financials) even after the fallout from one bank in the UK to push above significant resistance. US talking more and more of recovery instead of death and destruction....





Don't get too excited,

markets have a habit turning very quickly when things start turning rosy.
My take is that it's good opportunity to unload, not stock up.


----------



## Sean K (15 September 2007)

*Re: Perhaps we'll ride out this correction?*



wavepicker said:


> Don't get too excited,
> 
> markets have a habit turning very quickly when things start turning rosy.
> My take is that it's good opportunity to unload, not stock up.



I agree. 

But I don't necessarily see the four horseman approaching at this minute...


----------



## numbercruncher (15 September 2007)

*Re: Perhaps we'll ride out this correction?*

Who needs the four horsemen when youve got the Receiver, the Liquidator , the Lawyer and the undertaker


----------



## son of baglimit (15 September 2007)

*Re: Perhaps we'll ride out this correction?*

ride out this correction ? - no way - i was holding too many duds being propped up by the stupidly faint possibility of takeover etc - thankfully got out / getting out of nearly all - except NMS of course.


----------



## wavepicker (15 September 2007)

*Re: Perhaps we'll ride out this correction?*



kennas said:


> I agree.
> 
> But I don't necessarily see the four horseman approaching at this minute...





your right, but then again I am biased I am a bear!!


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## dhukka (15 September 2007)

*Re: Perhaps we'll ride out this correction?*



kennas said:


> World markets recovering well and ignoring some short term noise from a few poorly managed entities, suffering from bad lending practices in a minor part of world financial markets.





I always find your posts amusing in their naivety. Short-term noise, hilarious. A few poorly managed entities, what you mean like the 156 mortgage companies that have gone under in the last year? I had feeling that Northern Rock operated in a rather large and important financial market.

I didn't know Goldman Sachs was a poorly run entity operating in a minor part of world financial markets or Merrill Lynch for that matter.



> The ASX gained (including financials) even after the fallout from one bank in the UK to push above significant resistance*. US talking more and more of recovery instead of death and destruction.*...




This is the funniest bit, quoting that utter moron Paulson. This is the same guy that said sub-prime is contained and will not spill over to the rest of the economy. The same guy that said 6 months ago housing had bottomed. It's amazing the guy still has a job.   




> One of the banks most likely to suffer from sub prime posts record earnings and gains 2% after the aformentioned UK blip. Shares don't just jump because of previous results but factor in potential future earnings, as we know.




Why is Macquarie one of the banks most likely to suffer from the sub-prime crisis? Once again much more hope than anything approaching rational analysis in your post.


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## reece55 (15 September 2007)

*Re: Perhaps we'll ride out this correction?*



dhukka said:


> I always find your posts amusing in their naivety. Short-term noise, hilarious. A few poorly managed entities, what you mean like the 156 mortgage companies that have gone under in the last year? I had feeling that Northern Rock operated in a rather large and important financial market.
> 
> I didn't know Goldman Sachs was a poorly run entity operating in a minor part of world financial markets or Merrill Lynch for that matter.
> 
> ...




Come on Dhukka, there's no need to be quite so nasty here, don't you think?

Kennas is entitled to his opinion, regardless of whether you believe it is "naive". It's much better IMO to objectively put forth the arguments that you believe contradict his view, rather than insulting him.

To quote someone else (I think ASX.G), play the ball not the person!

Cheers


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## Mofra (15 September 2007)

*Re: Perhaps we'll ride out this correction?*



dhukka said:


> Why is Macquarie one of the banks most likely to suffer from the sub-prime crisis? Once again much more hope than anything approaching rational analysis in your post.



The same Macquarie that has raised over $8.6b this year in capital, has no subprime loans (on its books) in any mortgage operations, and unlike most major banks does not write loss-leading loans for cross sale opportunities?

Regardless, you'd have to expect sector sentiment will spread across every financial institution listed on the ASX once the US subprime reset rates peak in Oct & Nov 07. Even deposit holding organisations have to securitise a portion of their loan books, and CDOs are not a ticket to cheap cash anymore.


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## dhukka (15 September 2007)

*Re: Perhaps we'll ride out this correction?*



reece55 said:


> Come on Dhukka, there's no need to be quite so nasty here, don't you think?
> 
> Kennas is entitled to his opinion, regardless of whether you believe it is "naive". It's much better IMO to objectively put forth the arguments that you believe contradict his view, rather than insulting him.
> 
> ...




Reece,

Of course kennas is entitled to his opinion, am I not entitled to mine? I believe that some of his comments demonstrate naivety and I try provide evidence of why I believe that to be the case, simple


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## dhukka (15 September 2007)

*Re: Perhaps we'll ride out this correction?*



Mofra said:


> The same Macquarie that has raised over $8.6b this year in capital, has no subprime loans (on its books) in any mortgage operations, and unlike most major banks does not write loss-leading loans for cross sale opportunities?
> 
> Regardless, you'd have to expect sector sentiment will spread across every financial institution listed on the ASX once the US subprime reset rates peak in Oct & Nov 07. Even deposit holding organisations have to securitise a portion of their loan books, and CDOs are not a ticket to cheap cash anymore.




Absolutely all financials will get tainted with the sub-prime brush to some degree. I don't see why Macquarie is one of the banks most likely to be affected.  

Remember also that MBL's financial year ends in March so 1H08 ends Sep 30 2007. This is not forward looking. Of more interest will be commentary on how they see the second half of FY08 panning out.


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## Sean K (16 September 2007)

*Re: Perhaps we'll ride out this correction?*



dhukka said:


> I always find your posts amusing in their naivety.



I enjoy all your posts dhukka. Keep up the good work. Cheers.  :dunno:

I need a fishing smilie to add here.


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## dhukka (17 September 2007)

*Re: Perhaps we'll ride out this correction?*



kennas said:


> I enjoy all your posts dhukka. Keep up the good work. Cheers.  :dunno:
> 
> I need a fishing smilie to add here.




Kennas,

I didn't mean to imply that I found all your posts naive, far from it, just on this particular subject.


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## Sean K (17 September 2007)

*Re: Perhaps we'll ride out this correction?*



dhukka said:


> Kennas,
> 
> I didn't mean to imply that I found all your posts naive, far from it, just on this particular subject.



I'm obviously not working this thread very well. Some of my comments are obviously serious while others are done with half tongue in cheak designed to drag a bear out of cave. The line I draw between sarcasm and sincerity was obviously too blurred on this occasion. My sence of humour is losing itself. Apologies.


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## Sean K (25 September 2007)

*Re: Perhaps we'll ride out this correction?*

Correction over? Already!? What the? 

The most bullish might not have thought we'd recover this quick. XAO at all time highs and DJI a few points away....

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

I guess we'll just have to wait for the real crash a bit longer. 

Crazy beast this market.



> *RBA, resources push shares to record high *
> Scott Murdoch | September 25, 2007
> 
> IT has taken exactly two months for investors to cast aside fears over the global credit crisis and drive Australia's stock market into record territory.
> ...




Sorry, no politician quotes


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## wayneL (25 September 2007)

*Re: Perhaps we'll ride out this correction?*



kennas said:


> Correction over? Already!? What the?
> 
> The most bullish might not have thought we'd recover this quick. XAO at all time highs and DJI a few points away....
> 
> ...



There is a belief here that Oz (and China) will not be affected by recession in USA and Europe. A bloke I spoke to today was "the first" I've spoken to that acknowledges the possibility of a downturn. (An old timer in mining/engineering that has seen this all before)

But that is the sentiment... bullish.


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## Sean K (25 September 2007)

*Re: Perhaps we'll ride out this correction?*



wayneL said:


> There is a belief here that Oz (and China) will not be affected by recession in USA and Europe. A bloke I spoke to today was "the first" I've spoken to that acknowledges the possibility of a downturn. (An old timer in mining/engineering that has seen this all before)
> 
> But that is the sentiment... bullish.



Resources may have something to do with it. BHP and RIO are probably to blame for most of yesty's gains. I wonder how much longer the key commods can keep going up to support them?  



> *Commodity exports to soar to $145bn *
> September 24, 2007
> 
> THE Federal Government's chief resources forecaster has predicted a 4 per cent jump in commodity export earnings to $144.7 billion.
> ...


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## Uncle Festivus (25 September 2007)

*Re: Perhaps we'll ride out this correction?*



wayneL said:


> There is a belief here that Oz (and China) will not be affected by recession in USA and Europe. A bloke I spoke to today was "the first" I've spoken to that acknowledges the possibility of a downturn. (An old timer in mining/engineering that has seen this all before)
> 
> But that is the sentiment... bullish.




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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## Sean K (25 September 2007)

*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?



It's gotta pop sooner or later. Might be the next excuse for another correction, or the true bear. I don't think it will take much for punters to take their $$ back off the table.


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## dhukka (25 September 2007)

*Re: Perhaps we'll ride out this correction?*



wayneL said:


> There is a belief here that Oz (and China) will not be affected by recession in USA and Europe. A bloke I spoke to today was "the first" I've spoken to that acknowledges the possibility of a downturn. (An old timer in mining/engineering that has seen this all before)
> 
> But that is the sentiment... bullish.




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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## >Apocalypto< (25 September 2007)

*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?




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


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## Sean K (25 September 2007)

*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.



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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## >Apocalypto< (25 September 2007)

*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.




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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## dhukka (25 September 2007)

*Re: Perhaps we'll ride out this correction?*



kennas said:


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




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?


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## >Apocalypto< (25 September 2007)

*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.




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!


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## Sean K (25 September 2007)

*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!



 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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## >Apocalypto< (25 September 2007)

*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...




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


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## dhukka (25 September 2007)

*Re: Perhaps we'll ride out this correction?*



Trade_It said:


> dhukka,
> 
> firstly I really enjoy your posts.
> 
> ...




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.


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## Temjin (25 September 2007)

*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.




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.


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## Whiskers (25 September 2007)

*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.




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.
> ...



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


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## Sean K (2 October 2007)

*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.
> ...




Or, perhaps these people are just muppets?


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## Sean K (15 October 2007)

*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.


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## Sean K (12 April 2008)

*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....


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## eclipse (12 April 2008)

*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.


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