# Shares - no more volatility



## MrBurns (16 February 2009)

The market seems much calmer, has it bottomed , safe to go back in ???


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## Sean K (16 February 2009)

MrBurns said:


> The market seems much calmer, has it bottomed , safe to go back in ???



Jump right in.


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## MrBurns (16 February 2009)

kennas said:


> Jump right in.





I'll just be cringing in the corner


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## Sean K (16 February 2009)

MrBurns said:


> I'll just be cringing in the corner



I've been buying some gold stocks the past 2 months. Also a couple of IO/Coal things that were trading under cash backing. Bought a couple of banks but decided that was folly, other than short term knife grabbing potential.  

EW'ers tell us there's another leg down but 12345ABCs aside it all depends on what's factored in. Is a 50% drop factoring it all in? Flip of a coin for mine, crystal ball is a bit foggy. 

75% ish cash just in case there's more skeletons.


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## MrBurns (16 February 2009)

I guess it's a bit early in the new year to bother yet and the news out of the US and Japan is very, very bad.

Term deposits are just a waste of time now, but I gota tell you I'm sick of waiting for a sign to do something.

Too early for property, too early for shares bugger all interest on cash.
Perhaps gold ? 

I'd only be doing it because I'm bored I've no idea where golds going.

If I get any more bored I'll but an expensive car so I guess I can justify share purchases on the fact that they wont depreciate as much as the car, last one I bought cost me $3000 a kilometer in depreciation over 3 years.

BHP wouldn't do worse than that would it ?


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## Gundini (16 February 2009)

Not sure anymore.

I sold all my holdings on Monday last ahead of the US stimulus package. I thought it would disappoint, which it did, but only by 5%.

Then, Australia shruged its shoulders and said who cares, like they have decoupled.

News of Chinas stimulus starting to flow through, ours being passed...

My concern is that it may get better before it gets much worse!

I would rather the pain now. 

We still haven't had capitulation yet IMO, or is it different this time...


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## MrBurns (16 February 2009)

Gundini said:


> Not sure anymore.
> I sold all my holdings on Monday last ahead of the US stimulus package. I thought it would disappoint, which it did, but only by 5%.
> Then, Australia shruged its shoulders and said who cares, like thay have decoupled.
> News of Chinas stimulus starting to flow through, ours being passed...
> ...




I think there's still  lot of people with a lot of cash holding it all up at present, here in AU anyway.


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## MrBurns (16 February 2009)

> Japan's finance minister denies being drunk at G7




Ha I know I would be...............

http://www.abc.net.au/news/stories/2009/02/16/2492922.htm?section=justin


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## Gundini (16 February 2009)

Japans finance ministers are always drunk, that's how they roll...

On topic though, I used to trade the oil index, and depending on whether the wind blew there could be a $5 per barrel change in the spot price. The wind kept the ships from docking, and hence the rise due to demand, or, hence the fall due to the glut...

These markets remind me of those times... Unpredictable!


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## MRC & Co (16 February 2009)

MrBurns said:


> I guess it's a bit early in the new year to bother yet and *the news out of the US and Japan is very, very bad.*




Yes, you make a very good point MrBurns.

That news out of Japan today (GDP) was HORRIBLE!  Market rallied a bit, but no real great volatility.

I honestly think, most paper (institutional global macro positions) are either locked in, or on the sidelines now.  Hence, volatilities and volumes drying up.  Just a lot of noise and no real paper to give it any direction.


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## Gundini (16 February 2009)

MRC & Co said:


> (institutional global macro positions)




Yes, those are the guys that got us into this mess!


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## wonderrman (16 February 2009)

Who knows really I think trying to time these markets is a futile exercise. You either sit out on the side and wait around a while until the upturn kicks in. But who knows, you could have missed out 20% of the upturn by then.

Economic conditions are going to be hell though over the next year so I don't see how the market could rise. We could just sit around these levels for a while with a few drops on bad news and rises on good news (if any). Or the market could get angrey again and we drop further because of the troublesome economy. Who knows? There would be no such thing as the stock market if we all knew what was going to happen in the future. 

If you'd be entering the market (for the long-term) you would only stick to the top 20 or 50 I would think.

Good luck with these markets. It's a tough call at the moment. Banks are giving you nothing, you can dervie your income from the dividends if you can withstand the capital volatility.


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## drsmith (16 February 2009)

The Chinese are buying ???????

Long term horizon though. Not worried about a short term loss if that occurs ?


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## Gundini (16 February 2009)

drsmith said:


> The Chinese are buying ???????
> 
> Long term horizon though. Not worried about a short term loss if that occurs ?




What do you mean drsmith, the Chinese are buying "what?", and not worried about short term loss... 

Buying for long term?

Is that what you mean?


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## So_Cynical (16 February 2009)

Gundini said:


> What do you mean drsmith, the Chinese are buying "what?",




China Minmetals makes $1.7 bln (US) bid for Oz Minerals.

https://www.aussiestockforums.com/forums/showthread.php?t=11797&page=17

and

http://www.iht.com/articles/ap/2009/02/16/business/AS-China-Australia-Oz-Minerals.php


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## Julia (16 February 2009)

wonderrman said:


> Good luck with these markets. It's a tough call at the moment. Banks are giving you nothing, you can dervie your income from the dividends if you can withstand the capital volatility.



CBA have already flagged a diminished dividend next time around.  They are not likely to be the only bank to take such a position.


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## gfresh (16 February 2009)

Cut to zero? no.. we will simply see a return to 5-6% dividend yields.

Sure buy a car burns: that's what the RBA would like you to do


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## drsmith (16 February 2009)

Gundini said:


> What do you mean drsmith, the Chinese are buying "what?", and not worried about short term loss...
> 
> Buying for long term?
> 
> Is that what you mean?



Is a long term interest in the red dirt in the ground (over decades) more important than tomorrow's RIO share price ?

I'm very much interested in further commentary on this.


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## sinner (16 February 2009)

Gundini said:


> What do you mean drsmith, the Chinese are buying "what?", and not worried about short term loss...
> 
> Buying for long term?
> 
> Is that what you mean?




Chinese govt providing steep incentives to invest in oil production

http://www.oilandgaseurasia.com/news/p/0/news/4019

Also interesting to note arrangements between private sector and PRC government which do not affect market prices bluntly, such as Sino Gold. DYOR on this


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## sammy84 (16 February 2009)

drsmith said:


> Is a long term interest in the red dirt in the ground (over decades) more important than tomorrow's RIO share price ?
> 
> I'm very much interested in further commentary on this.




I'm very conflicted over this. Its long term damaging to sell of some of our prized land, but do we want RIO to turn into another OZ minerals? Thats not good in the long run either


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## Gundini (16 February 2009)

I am still convinced there is more short term pain to come for those invested in the market. 

While Chinas index is trying to kickstart the world economy, the US index, Eur, and Jap, are treading water and getting tired.

It is not going to take much to spook this market...

I'm still in the leg down mode.


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## MRC & Co (16 February 2009)

Gundini said:


> Yes, those are the guys that got us into this mess!




And the guys who provided a bull market nobody complained about.


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## MRC & Co (16 February 2009)

Gundini said:


> It is not going to take much to spook this market...




Like the worst GDP figures for Japan since 1974?  I'm wondering what it will actually take to spook this market for another leg down...........

One thing is for sure though, after all this mining hype with RIO etc, the Aus Market is too high.  Though with this latest buy up from China, this mining rally may kick on for a little while yet.


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## nomore4s (16 February 2009)

MRC & Co said:


> Like the worst GDP figures for Japan since 1974?  I'm wondering what it will actually take to spook this market for another leg down...........
> 
> One thing is for sure though, after all this mining hype with RIO etc, the Aus Market is too high.  Though with this latest buy up from China, this mining rally may kick on for a little while yet.




I actually think we are going to see some sort of rally shortly, back towards 4000 maybe as high as 4300 but we could see a retest of the lows first. But in saying that we could also break to the downside but atm I favour a break higher.


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## wayneL (17 February 2009)

This is becoming a hard market to pick (as if you can ever pick the market )

On value basis and in isolation, and on looking forward to the prospects of diminishing earnings for most companies... even possible depression, the market is clearly still way overvalued. Indexes "should" be taking where the sun don't shine.

But complicating matters are the CBs actions in trying to avert deflation; i.e. zero or near zero interest rates and "quantitative easing". AKA the rape and pillage of the prudent in order to prop up the profligate.

For those with cash, it's a tough call.

If the CBs lose the deflation battle, cash will indeed be king, even with crap interest rates.

If CBs manage to touch off the inflation bomb, savers will be "rooned". Meanwhile, savers who are living off yield (retirees etc) are having to dip into their capital, a double betrayal most foul by those with their greedy hands on the fiscal and monetary levers. This means many savers are being forced by circumstance to put their capital base at higher risk in order to get some sort of yield.

Gu'mint bonds may yield slightly higher, but capital will be decimated if interest rates start to fly. Corporate bonds.... well, that could be playing poker with the devil.

That leaves the share market. With the promulgation of the theory that the market has reached a bottom and is cheap, I think savers are propping the market as savers start chasing dividend. The "bottom" theory is BS, but could be self-fulfilling.

It's easier if the investor is comfortable with moving capital around swiftly, but let's face it, the vast majority of people (and their BS advisors) are not capable of doing this in an expeditious fashion; and even if they try will likely do it at the worst possible time.

The share market is an unfaithful lover, but it's the devil most people know. there is probably not enough faith to push to higher levels, but perhaps enough for folks to buy the dips.

Things get interesting if/when dividends are cut _en masse_.


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## nomore4s (17 February 2009)

wayneL said:


> Things get interesting if/when dividends are cut _en masse_.




Good post Wayne

This is also when I think we will see the next major leg down. ATM the banks and most blue chips look like holding the D/Es to the current high yields (close enough anyway), this makes these blue chips look cheap especially considering the low returns on cash atm.


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## wonderrman (17 February 2009)

> CBA have already flagged a diminished dividend next time around. They are not likely to be the only bank to take such a position.




Yes that is true but the current market yield is 8%. If yields are halfed it would be 4%. Cash will be getting you something like 2% by year end. 4% is more then 2% is isn't it?


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## MrBurns (17 February 2009)

wayneL said:


> This is becoming a hard market to pick (as if you can ever pick the market )
> 
> On value basis and in isolation, and on looking forward to the prospects of diminishing earnings for most companies... even possible depression, the market is clearly still way overvalued. Indexes "should" be taking where the sun don't shine.
> 
> ...





Yes good post and I agree with all of it.

Those with cash are between a rock and a hard place at present.

If, as you say the market, is overvalued because of probable future dividend yields falling then I for one will stay out , I know the market may go up anyway because people will chase anything better then 2% but I wont be one of them.

I still think buying property with cash is the way to go if you can hold out till the market bottoms, once again it's being artificially propped up by that loose cannon KRudd.

I've never seem so much intervention in an economy and I have a strong feeling there will be a price to pay.


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## Trembling Hand (17 February 2009)

Reduced volatility for sure but we still have elevated levels. I guess its all relative and we are more likely to compare to the most recent data which as we know was extraordinary (08). On a longer term view we are still getting rather large weekly moves when expressed as a %.

Below is a chart of weekly high low range going back to 18/6/04 (remember the good old bull days ) with a 10 week average in red. As you can see it jumped up in late 07 and its making higher Lows, I think that's still an up trend in volatility.

But is it about to return to "normal"???


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## jonojpsg (17 February 2009)

wonderrman said:


> Yes that is true but the current market yield is 8%. If yields are halfed it would be 4%. Cash will be getting you something like 2% by year end. 4% is more then 2% is isn't it?




Don't forget also that most divvies are fully franked which adds another 30-45% to the actual yield.  Say CBA cut their div in half to 4% and your tax rate is 30% then you actually earn 5.2% don't you?

Definitely better than 3.5% in the bank which then gets taxed at 30%!

And for retirees who buy in now, if the capital value drops then picks back up again over the next 3-5 years, so what?  As long as div yield is around 4-5% ff then they should be OK.  Honestly, can anyone see CBA dropping divs more than 50%


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## Aussiejeff (17 February 2009)

wonderrman said:


> Yes that is true but the current market yield is 8%. If yields are halfed it would be 4%. Cash will be getting you something like 2% by year end. 4% is more then 2% is isn't it?




Then again, a gummint guaranteed *2% of SOMETHING* might look better to some than a possible *4% of sweet FA* with the way many stocks are performing!!!

Even the Big 4 banks SP's are still struggling after being given a zillion FREE Get Out Of Jail cards by the Joker, Swan.


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## Aussiejeff (17 February 2009)

jonojpsg said:


> Don't forget also that most divvies are fully franked which adds another 30-45% to the actual yield.  Say CBA cut their div in half to 4% and your tax rate is 30% then you actually earn 5.2% don't you?
> 
> Definitely better than 3.5% in the bank which then gets taxed at 30%!
> 
> And for retirees who buy in now, [size=+2]if[/size] the capital value drops then picks back up again over the next 3-5 years, so what?  As long as div yield is around 4-5% ff then they should be OK.  Honestly, can anyone see CBA dropping divs more than 50%




Hi jonojpsg.

I adjusted one tiny little word in your response that might actually be important.... the dreaded what "if" also applies to dividend yield possibilities... how do you know div yield will be ok at 4-5%?

There seem to be a few divvy "shocks" floating on the cesspool of late...


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## MrBurns (17 February 2009)

jonojpsg said:


> Don't forget also that most divvies are fully franked which adds another 30-45% to the actual yield.  Say CBA cut their div in half to 4% and your tax rate is 30% then you actually earn 5.2% don't you?
> 
> Definitely better than 3.5% in the bank which then gets taxed at 30%!
> 
> And for retirees who buy in now, if the capital value drops then picks back up again over the next 3-5 years, so what?  As long as div yield is around 4-5% ff then they should be OK.  Honestly, can anyone see CBA dropping divs more than 50%




Superfunds pay tax at 15% so thats bugger all in the scheme of things.


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## wayneL (17 February 2009)

jonojpsg said:


> Don't forget also that most divvies are fully franked which adds another 30-45% to the actual yield.  Say CBA cut their div in half to 4% and your tax rate is 30% then you actually earn 5.2% don't you?
> 
> Definitely better than 3.5% in the bank which then gets taxed at 30%!
> 
> And for retirees who buy in now, if the capital value drops then picks back up again over the next 3-5 years, so what?  As long as div yield is around 4-5% ff then they should be OK. * Honestly, can anyone see CBA dropping divs more than 50%*




The possibility is that CBA makes a loss for a half or three... and doesn't pay a divvie for some time. However improbable you think it, it's more possible than you may realize.

That would be utter disaster for retirees. 4-5% yield does not represent good risk premium on that basis.

Junk bond ETFs are yielding 13% and are probably no more risky than CBA. There are option based ETFs yielding 9% which are *up* YoY.

Them's good risk premiums.


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## MRC & Co (17 February 2009)

Trembling Hand said:


> But is it about to return to "normal"???




Errrr, that's a scary thought!!  

But will be ok if it decimates most day traders and you get some decent paper flows again without all the noise.........


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## wonderrman (17 February 2009)

> I've never seem so much intervention in an economy and I have a strong feeling there will be a price to pay.




Interesting you say that, the head research man at Bell Potter doesn't think there has been enough. In crisis of yesteryear he says governments have had to spend 13% of GDP to solve the problem. So far US and UK combined have only spent 7%. 

The guy also states that government injection of capital for deferred shares in the companies need to happen to make them liquid. Then the company can buy them back off the gov in future times.

I usually don't like to listen to/read what analysts have to see. This guy seems to know what he's talking about though and the info he presents is pretty logical. 

http://www.bellpotter.com.au/AVI_Restoring/bell_potter.wmv


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## Trembling Hand (17 February 2009)

MRC & Co said:


> Errrr, that's a scary thought!!




Yes thats is a scary thought. Index Futs trading with a 2% range per week would suck.


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## MrBurns (17 February 2009)

wonderrman said:


> Interesting you say that, the head research man at Bell Potter doesn't think there has been enough. In crisis of yesteryear he says governments have had to spend 13% of GDP to solve the problem. So far US and UK combined have only spent 7%.
> 
> The guy also states that government injection of capital for deferred shares in the companies need to happen to make them liquid. Then the company can buy them back off the gov in future times.
> 
> ...





Maybe I should have said so much *publicity* about intervention.


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## MRC & Co (17 February 2009)

Trembling Hand said:


> Yes thats is a scary thought. Index Futs trading with a 2% range per week would suck.




Especially at 2000-2500 points later this year!!!


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## Trembling Hand (17 February 2009)

MRC & Co said:


> Especially at 2000-2500 points later this year!!!




Yes I was going to mention something along thiese lines.

LOL, everyone will become scalpers. Even the god of trading himself


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## nunthewiser (17 February 2009)

Trembling Hand said:


> LOL, everyone will become scalpers. Even the god of trading himself




 happy to scalp when the opportunity presents


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## MRC & Co (17 February 2009)

Trembling Hand said:


> Yes I was going to mention something along thiese lines.
> 
> LOL, everyone will become scalpers. Even the god of trading himself




lol.

Or maybe get into Waynes sideways oppies action!


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## Julia (17 February 2009)

Aussiejeff said:


> Then again, a gummint guaranteed *2% of SOMETHING* might look better to some than a possible *4% of sweet FA* with the way many stocks are performing!!!
> 
> Even the Big 4 banks SP's are still struggling after being given a zillion FREE Get Out Of Jail cards by the Joker, Swan.






Aussiejeff said:


> Hi jonojpsg.
> 
> I adjusted one tiny little word in your response that might actually be important.... the dreaded what "if" also applies to dividend yield possibilities... how do you know div yield will be ok at 4-5%?
> 
> There seem to be a few divvy "shocks" floating on the cesspool of late...



I wouldn't be buying into any bank shares on the basis of the dividends, franking credits or not.   Agree with AJ.  Plenty of room for SP's to fall further and dividends to be cut.





MrBurns said:


> Superfunds pay tax at 15% so thats bugger all in the scheme of things.



And actually no tax at all once in pension phase.


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## sammy84 (18 February 2009)

Dow Jones looks set to re-test its November lows tonight. Looks like were finally going to see whether there is a bottom in the market or not.


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## seasprite (18 February 2009)

sammy84 said:


> Dow Jones looks set to re-test its November lows tonight. Looks like were finally going to see whether there is a bottom in the market or not.




so far $indu has been flat hovering around the 7600 mark , a late rally would be nice.


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