# Our market crashes more than the US market - why?



## Bill M (11 March 2008)

Everytime there is a correction or a market crash our market gets hit almost twice as hard as the US market, why does this happen?

Some examples, in current correction we are down 25% and the US market is down about 16% from it's all time highs.

In 1987 during the sharemarket crash ours went down 41.8% and the US market went down 22.8%.

Is there any reason why we get hit hit twice as hard as the Americans?


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## Nick Radge (11 March 2008)

The 1970 - 1974 bear market is probably more aligned with what's going on now. The US dropped 45% and we dropped 66%.

I don't have an answer for you. As a guess it could be flight to quality, liquidity..not sure. Sorry!


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## Rainmaker2000 (11 March 2008)

I don't have that answer, but only to say our valuations were coming off a higher base....banks used to be on a PE round 14........we have not even seen the mining sector have its correction, keeping some pop corn aside for that...

I don't agree with the 66% projection...hehe.......we are doing okay...just a little  leveraged


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## MRC & Co (11 March 2008)

Perhaps due to the short-run fact that Australians can still gain real returns in cash.  

Whereas, over in the US, they are left out to dry (unless they knew about gold).  

Maybe Australians are just over-reactors?


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## prawn_86 (11 March 2008)

Perhaps the fact that every monday we follow wall sts friday lead, meaning we never actually make a decison for ourselves...?


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## ShareIt (11 March 2008)

Less investors and volume usually equals more volatility.....


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## Mofra (11 March 2008)

Our local bourse is more than 40% foreign owned; the "small holdings" of a even a moderate US hedge fund represent greater volume on a smaller exchange such as ours, so any global sell-off is likely to hit us with reasonable resonance.


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## Aussiejeff (11 March 2008)

Mofra said:


> *Our local bourse is more than 40% foreign owned*; the "small holdings" of a even a moderate US hedge fund represent greater volume on a smaller exchange such as ours, so any global sell-off is likely to hit us with reasonable resonance.




Hi Mofra. Can you state the actual percentages relating to that quote? Is it 40.1% or 49.99% - the difference could be telling....

Whatever, I suspect you are right in that foreign players now have a significant stake at the World Poker Champs table, playing with El Cheapo Oz Chips....

For The Big Playerz, it's simply a case of "Too bad if the Lil' Ozzie Bleeder goes down.... plenty more Third World economies to ransack for cheap chips..."

Meanwhile, we here in Oz seem to carry on believing in a self-delusional perpetual self-worth, based on a tenuous resources *boom* that has the capacity to go *bust* at any point in the near future (especially if China trips over the sprawled US economy). I guess overseas players might just be seeing that scenario as a tad risky too...??


AJ


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## dhukka (11 March 2008)

Oh goody, another "why is reality not doing what I want it to do?" thread. The S&P500 fell 50% during the last bear market, the Australian market less than half that. 

Maybe currencies have something to do with it? The S&P500 is down *19%*, however in Euro terms it's down *25%*


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## scuffler (11 March 2008)

Now i am not sure if its true or not but maybe the Aussies borrow too much and hence the bigger sell off???

 If anyone knows me i am a pommie bloke...i never borrow for shares...never have done, never will do.
Its all my own cash.....

  So in a nutshell all u foster drinking ,kangaroo lovers are just no good with your cash,lol.

:whip:whip


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## MRC & Co (11 March 2008)

scuffler said:


> So in a nutshell all u foster drinking




Foster drinking?


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## Trembling Hand (11 March 2008)

scuffler said:


> So in a nutshell all u foster drinking ,kangaroo lovers are just no good with your cash,lol.




The only people that drink Fosters are the Poms. :


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## wayneL (11 March 2008)

Trembling Hand said:


> The only people that drink Fosters are the Poms. :




Haha! A source of hilarity for me over here, they all presume I swill Fosters by the gallon. The look on their face when I say "Aussies don't drink that ****" is priceless.

At least one belly laugh a week so far.


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## korrupt_1 (11 March 2008)

As Mofra stated, local markets have a good size of foreign investment. When the  US, Asia or Europe crashes, it's easier to liquidate AU stocks to cover losses on the other stock markets...

You can almost see(hear) what happens in those fund manager's meeting rooms... "Right guys, we're taking a beating on the US markets, what can we liqudate to cover those losses?"... "Erm, the Aussie market perhaps?".. " Right, you guys know the drill... dump those Aussies stocks and get some cash quick!" 

* I have really no idea... but that's just a hypothesis?


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## Temjin (11 March 2008)

scuffler said:


> Now i am not sure if its true or not but maybe the Aussies borrow too much and hence the bigger sell off???




I tend to have the same view too, Aussies share tend to be brought with more "leverage" through margin lending than the US shares, relatively speaking anyway. Don't have numbers to back up though.


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## noirua (11 March 2008)

The Aussie Dollar has been very strong against the Greenback and may now look expensive, and thus a withdrawal of funds. There has been a substantial withdrawal by British investors with the Aussie down about 5% in a week. 
Signs of Aussie Banking problems and talk of some keeping quiet over losses, has also hurt the market.
Some now feel that rises in interest rates have come to an end and a reversal now looks the order of the day.


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## powerkoala (11 March 2008)

noirua said:


> The Aussie Dollar has been very strong against the Greenback and may now look expensive, and thus a withdrawal of funds. There has been a substantial withdrawal by British investors with the Aussie down about 5% in a week.
> Signs of Aussie Banking problems and talk of some keeping quiet over losses, has also hurt the market.
> Some now feel that rises in interest rates have come to an end and a reversal now looks the order of the day.




was thinking about reversal the other day. but now, i am afraid whether there will not be any good news left. xao really tumbles to the lowest when the first panic sell-off started. currently drifting slowly to the pit. hope the pit got bottom though.


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## nioka (11 March 2008)

scuffler said:


> Now i am not sure if its true or not but maybe the Aussies borrow too much and hence the bigger sell off???
> 
> If anyone knows me i am a pommie bloke...i never borrow for shares...never have done, never will do.
> Its all my own cash.....
> ...



 You are probably right about the borrowing. You are wrong about Fosters and ,as an aussie, i've probably shot more Kangaroos than you have ever seen. Kangaroos are a pest in many places.


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## Bill M (11 March 2008)

Thanks for the responses everyone, seems like there are many reasons and put them all together and we got a bigger dive. My mate and I often scratch our heads over this one that's why I asked here, thanks again.

Hey scuffler, as a pretty good beer drinker I can say I haven't seen Fosters on tap anywhere in the past few years, come to think of it I don't see it in bottle shops anymore either, cheers mate.:alcohol:


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## yonnie (12 March 2008)

hasn`t the australian market gone up faster than the US market?

might be it will come down faster as well.


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## Nick Radge (12 March 2008)

Been thinking about this one. Would it be prudent to suggest that the US authorities intervene much more in their markets compared to what occurs here? Last night being one heck of an example. We don't see that in Aust.


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## sassa (12 March 2008)

Nick Radge said:


> Been thinking about this one. Would it be prudent to suggest that the US authorities intervene much more in their markets compared to what occurs here? Last night being one heck of an example. We don't see that in Aust.




Could it be that we don't have the fanfare here like the Americans?The RBA pumped $720m into the system on Monday.


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## bvbfan (12 March 2008)

Agree with Nick.

Does the ASX have circuit breakers, don't think so.

Does it have trading curbs, again don't think so.

Has the Prime Minister/Parliament set up a group to intervene in markets like the Working Group on Financials Markets aka The Plunge Protection Team.
Again don't think so, although I suppose the Future Fund could be said to have a small effect like this at times.

Free markets my ar8e.
Funny how some commentators go on and on about social policies in Europe then in reality the US financial markets are just socialism for the rich


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## Aussiejeff (13 March 2008)

sassa said:


> Could it be that we don't have the fanfare here like the Americans?The RBA pumped $720m into the system on Monday.




Then again, we had how many years of Lil' Johnny Whoward proclaiming _"the markets will determine what's right"_. He had a definite "Government hands off" approach when it came to financial market policy. So it's no surprise that our Ruddy new guvmint still exhibits this carry-over behaviour.... IMO they fear a backlash from Joe Public if they are seen to be "meddling" in the way our puny financial markets operate.

Especially if they were to meddle and fail.....


AJ


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## powerkoala (13 March 2008)

does anyone here really can explain why ?
us market strong rally 4% down 1%
our market strong rally 4% profit taking down 2% and now down again 1.6%
what is really happening with our market ?
we already crash more than us and even now is still getting worse everyday
if recession factor fear in us, at least our market will follow the lead but not become the leader in falling down first.


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## Aussiejeff (13 March 2008)

powerkoala said:


> does anyone here really can explain why ?
> us market strong rally 4% down 1%
> our market strong rally 4% profit taking down 2% and now down again 1.6%
> what is really happening with our market ?
> ...




As others have already opined, if you are a big player on the WORLD'S roulett... errr, financial markets, which *chips* would you cash in first to rebuild yer capital base? Yer platinum coated US Whizzbang chips or yer cold, greasy, slightly mouldy OZ chips?

There. I thunnk thet explains it better?   




AJ


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## Who Dares Wins (13 March 2008)

powerkoala said:


> does anyone here really can explain why ?
> us market strong rally 4% down 1%
> our market strong rally 4% profit taking down 2% and now down again 1.6%
> what is really happening with our market ?
> ...




I've been noticing the same thing. Why is the market down 90 odd points today? Resources were up last time I looked. It seems if the Dow goes down overnight then its almost a certainty the ASX will follow too. If the Dow goes up overnight, well we can still go down. No rhyme nor reason to it.


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## waz (13 March 2008)

I agree with you Powerkoala

Im still trying to find someone who can give me a mathmatical explanation as to how increasing interest rates in Australia will reduce inflation. Yes it does reduce demand, however the demand (quantity) for food, housing, oil will be the same regardless of i rates. 

All the reserve is doing is decreasing spending in consumer goods within the local economy. 

You have probably all heard of demand pull, cost push inflation. There should be another term, interest push inflation.

The way to reduce prices in Australia is to not use less, but to produce more. Increasing i rates is hampering our efforts to build projects to bring extra capacity.


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## gfresh (13 March 2008)

Maybe I'm off-track, but there does seem to be a lot of systematic targeting of large stocks (overseas hedge funds? index shorters?). They sit fairly static for a couple of days as everything else tumbles, and then without any announcement, any news whatsoever suddenly they'll drop by a few percent each day. Then it seems selling attention is focused on another stock(s),  and the heavy selling stops. 

Anything with a P/E greater than 15 really seems to be really copping this treatment... Even if the company is in a sector that has always traditionally had a higher P/E ratio, it seems "amost" as if it's simply hit a flag on a shorter's list. If the company is in an area that by most logic should survive some difficult times, or still forecasts strong growth is treated equally to that may suffer worse. 

While it's quite across the board the selling, it seems to be going in waves, and possibly by sector. The other day for instance: XFJ (financials) was static, and XMJ was down 3-4% or so.. today it's reversed again- XMJ -0.7% and financials -2.8%.

Are there any investors whatsoever left in this market to keep things steady? Almost doesn't seem like it!

Anyhow, maybe I'm imagining it, just been noticing on a few blue chips .. Seems slightly less than random.


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## Aussiejeff (13 March 2008)

waz said:


> .... *Increasing i rates is hampering our efforts to build projects to bring extra capacity*....




I agree with you there. The higher the cost of borrowing funds to undertake infrastructure projects, the less willingness for companies to get involved.... 

As far as the government is concerned, Ruddy makes much re: the way of the future for our economy is to build heaps more infrastructure - but on the other hand says "oh well, if the independent Reserve Bank and other banks keep increasing rates, what can WE as a government do about it - oh yeah - we can always bring out the RAZOR GANG and slash government spending". Then splurge a motza on inflationary tax cuts? Hmmm. Something doesn't quite add up there.



AJ


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## Aussiejeff (13 March 2008)

gfresh said:


> Maybe I'm off-track, but there does seem to be a lot of systematic targeting of large stocks (overseas hedge funds? index shorters?). They sit fairly static for a couple of days as everything else tumbles, and then without any announcement, any news whatsoever suddenly they'll drop by a few percent each day. Then it seems selling attention is focused on another stock(s),  and the heavy selling stops.
> 
> Anything with a P/E greater than 15 really seems to be really copping this treatment... Even if the company is in a sector that has always traditionally had a higher P/E ratio, it seems "amost" as if it's simply hit a flag on a shorter's list. If the company is in an area that by most logic should survive some difficult times, or still forecasts strong growth is treated equally to that may suffer worse.
> 
> ...




Wouldn't you just love to have a few $Billion to throw your weight around with ATM? Imagine the fun you could have making and breaking stocks at the mere *tap* of a key....

MUHAHAHAAAAAA!


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## waz (13 March 2008)

Another thing, back in the 90's I though financial deregulation was a good thing. However we have gone to far.

As we have seen recently, the official reserve cash target has become less significant over the last few years. What the media should be reporting is the 90 day bank bill.

I find it weird that at a time when the economy is suffereing from sub-prime. My bank increases my credit limit on my credit card from 7000 to 9000 without me asking. Then 4 days after I got a bill saying I missed my last payment and you now need to pay a $20 late payment fee, this same bank again increases my credit limit to 12,000.

Credit cards are the australian version of american sub-crime. We may be a little more strict about giving away home loans, but when it comes to credit cards, any Australian over the age of 18 can get one, and we all get offered credit increases even though the bank has no idea what our debt servicing capability is. Whats to say that when I got my credit increases that I didnt loose my job?????

My opinion on how we got into this mess, from a personal credit point of view, was *not that credit was cheap*, but that *credit was easily obtained*. No matter what the level of interest rates, the demand for credit cards in Australia would have been almost exactly the same.

Keep in mind that like myself, many people have been switching credit cards every so often to take adavantage of 0% rate periods on balance transfers. Ive been doing this for the last 18 months, and I bet many others have too. However this cycle of transferring debt cant go on forever. I have been doing it in a similar fashion to the Yen carry trade, borrow at 0% int and earning 7% on my savings account. This handly little trick has earned me a couple of hundred dollars at the banks expense.

In short, deregulation has benefited the banks, not the Australian economy. Instead of increasing interest rates, why doesn't the reserve enforce limits on the amount of credit that individuals can borrow.

PS. When you apply for a credit card, you are asked to provide details of your job, income, dependants, current debts and a number to act as a referee (your company payroll). All these questions are meaningless, these forms dont get individually processed and a credit assesment obtained.

Everyone will pass this test, the only difference being that based on your age/income. A low income 18 year old will get $2000 credit, and a post 25 year old earning more than 50k a year will get $8,000


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## Nick Radge (13 March 2008)

We're getting sold off today because a $16 billion hedge fund in the US has just announced its fallen over.


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## MRC & Co (13 March 2008)

Nick Radge said:


> We're getting sold off today because a $16 billion hedge fund in the US has just announced its fallen over.




Incredible!


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## Bill M (17 March 2008)

"The Australian share market has been one of the worst performing in the world recently, losing more than 20 per cent since the start of the year."

Full Story Here


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## Aussiejeff (17 March 2008)

Bill M said:


> "The Australian share market has been one of the worst performing in the world recently, losing more than 20 per cent since the start of the year."
> 
> Full Story Here




Down 3% atm (1.35pm). Par for the course again..


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## vishalt (17 March 2008)

The way the Dow looks now, already -200, wow. 

Tomorrow could be the worst day in the stockmarket in a very long time, worse - I'm talking 10% if the Dow takes the cake today. 

I don't think Bernanke will come out tonght - he's due tomorrow for a rate cut.

**** I'm so glad I'm on the sidelines D:.


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