# Will the market experience a big drop again?



## GundamZeta (1 December 2008)

will the big drop in Oct & Nov happen again in near future?

or the worse day is over....

cos im thinking to get in the market now or wait till the next drop to buy some cheap blue chip for long term :


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## Flip (1 December 2008)

maybe. who knows. I'd suggest investing in educational material.


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## sails (1 December 2008)

GundamZeta said:


> will the big drop in Oct & Nov happen again in near future?
> 
> or the worse day is over....
> 
> cos im thinking to get in the market now or wait till the next drop to buy some cheap blue chip for long term :




LOL - we'd all like to know for sure...   If you take the time to read the posts at ASF, you will find some think it might be, some are not sure and some say it's not...

In reality, one side will be right - the other wrong.  That's were money management comes in - to keep losses at a mimimum.


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## ThingyMajiggy (1 December 2008)

Well duh, ofcourse it will! Just put a minimum of 13 indicators on your charts and then throw everything you have on it going down, thats it. Or you could go rub the kettle and see if anyone pops out to tell you which way it goes 


No no no....but really.....no one knows, its true


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## Sean K (1 December 2008)

ThingyMajiggy said:


> Well duh, ofcourse it will! Just put a minimum of 13 indicators on your charts and then throw everything you have on it going down, thats it. Or you could go rub the kettle and see if anyone pops out to tell you which way it goes
> 
> 
> No no no....but really.....no one knows, its true



So, you're saying it's going to drop another 50% Sam? Or 100%?

Or, are you saying you don't know?


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## Johno (1 December 2008)

I think we are at the bottom or close enough to it. I am staggering money in a little bit at a time and keeping a close eye on things. Thats what im doing and I am currently sitting at 5% down. Not too bad.

Ive kept an eye on any companies that i hold that start looking dicey and get rid of em if i cant sleep on it. Rio is a good example. I got rid of them a day after i bought them because i didnt like the amount of debt and the whole BHP takeover wasnt worth entering into. I could see that Rio was going to pin BHP down for too long even if it went ahead. Far too many other good companies to invest in. 

I am scooping up some solid companies right now. I am going for companies with good balance sheets, low debt/equity ratios and trying to stay in the top 50. Even if it hits 2500 to 3000, i will still be doing quite good in the long run and it just represents another opportunity to buy more to even it out.

I just bought some more today ahead of tomorrows expected interest rate cuts. I would think tomorrow will be a rally.

Most importantly do your own research because no-one knows what will happen as the others have already said.


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## ThingyMajiggy (9 December 2008)

kennas said:


> So, you're saying it's going to drop another 50% Sam? Or 100%?
> 
> Or, are you saying you don't know?




You can't tell? The last 5 words are honest, the rest is sarcasm.


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## Juan Mortyme (9 December 2008)

On Bloomberg TV early this morning I heard David Tice of Perennial Bear say that he sees a further 50% drop in US stocks.


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## Juan Mortyme (9 December 2008)

Here's the link on what I saw on Bloomberg TV earlier :
http://moneynews.newsmax.com/streettalk/david_tice/2008/12/08/159545.html


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## rhen (16 December 2008)

http://au.youtube.com/watch?v=9HKN-A0EqyA
Ensure you stay to the 8 min mark with Faber's thoughts.
Remember they are his opinion, unfortunately, they are well supported (imo).
Read the market today.
Watch GOLD and successful gold miners (my favourite is CTO...in which I have shares)...be careful...cash may well be king?
Some have suggested that the market will have a bounce and then...
No one can give an unequivocal answer to the question but I believe the odds are in favour of a "yes".


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## nunthewiser (16 December 2008)

I.M.O .NO we have not seen the bottom yet ......... IMO we will hit the 2,s , anyways..........each to there own and paddle your own canoe ........ if you reckon we hit bottom .....cool ...personally think not

enjoy the rallys while they are there tho

avaniceday


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## cutz (16 December 2008)

GundamZeta said:


> will the big drop in Oct & Nov happen again in near future?
> 
> or the worse day is over....
> 
> cos im thinking to get in the market now or wait till the next drop to buy some cheap blue chip for long term :




If it doesn't punch through 3200 then the worst is over


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## CAB SAV (16 December 2008)

Yes. The problem has gone from talking in billions to fix to trillions. Throwing $10-20 trillion at a $1,000 trillion derivative problem has created bottom, no, not for me.


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## >Apocalypto< (16 December 2008)

GundamZeta said:


> will the big drop in Oct & Nov happen again in near future?
> 
> or the worse day is over....
> 
> cos im thinking to get in the market now or wait till the next drop to buy some cheap blue chip for long term :




in Bear markets prices normally go down so sure why not :


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## akamitso (17 December 2008)

Is a frogs ar$e water tight?


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## Sunder (17 December 2008)

You registered in September, had us waiting with bated breath for your first post... And that was it?

Profound 

Just to make this relevant, yes, I do think there will be another drop some time soon. The basis for this assumption is as simple as follows.

If the share market looks ahead 6-12 months, then do I expect economic conditions to be better, or worse in a year? And my answer is "worse". So more drops coming.


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## sinner (17 December 2008)

CAB SAV said:


> Throwing $10-20 trillion at a $1,000 trillion derivative problem has created bottom, no, not for me.




Thankyou, my thoughts exactly!


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## akamitso (18 December 2008)

Sunder said:


> You registered in September, had us waiting with bated breath for your first post... And that was it?
> 
> Profound
> 
> ...




Congrats mate you've made over a 100 posts of drivel. Although unlike your last post, I managed to drum up an honest response via an analogy which conveys the message whilst stimulating the reader with added humour.

Honestly you've just claimed that things will get worst.. How? Why? Did you raise your finger to see which way the wind blew? Flip a coin? Or have you just been persuaded from the copious amounts of pessimistic media?


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## basilio (18 December 2008)

Well actually most people from analysts to the simple punters on this forum are seeing things like :

1) The steepest falls in comsumer sales since the depression
2) Widespread layoffs across financial, manufacturing  and service industries. The effect of many of these has yet to hit the economy
3) The largest amounts of consumer debt in relation to  GDP yet seen in history. This is not going to help consumer spending
4) A collapse in resource prices because of the collapse in consumer demand and therefore manufacturing
6) A continuation of the collapse of financial institutions as excessive mortgage debts unwind and the reality that much car, credit card and consumer debt is vulnerable
7) The expose of the 50 billion dollar Madoff scam, its impact on the already fragile financial institutions around the world and the possibility that may be a few more little packages waiting to explode.

Have I left anything out? Probably but hell its Christmas and we don't want to spoil the festive spirit.


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## Sunder (18 December 2008)

basilio said:


> Well actually most people from analysts to the simple punters on this forum are seeing things like :
> 
> ... [snip]
> 
> Have I left anything out? Probably but hell its Christmas and we don't want to spoil the festive spirit.




Does look like I really hit a nerve with him doesn't it? A little sarcasm goes a long way on this forum.


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## Gundini (18 December 2008)

CAB SAV said:


> Yes. The problem has gone from talking in billions to fix to trillions. Throwing $10-20 trillion at a $1,000 trillion derivative problem has created bottom, no, not for me.




Yes, 1 or 2 % can't fix this problem.

How do, or can they fix this?

Does Asset re- inflation assist here?


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## Glen48 (18 December 2008)

USA  Wealth destruction:
R.100 Change in Net Worth of Households and Nonprofit Organizations
Billions of dollars; not seasonally adjusted
2003 2004 2005 2006 2007 2008
                                   Q1        Q2      Q3      Q4/07        Q1     Q2   Q3/08
1 Change in net worth (1) 5938.2 5417.3 5264.2 4206.3 1094.0 917.9 27.1 -1460.3 -2423.7 -392.5 -2813.8 1
2 Net investment 506.0 479.3 56.0 -17.0 203.0 -224.5 236.9 178.1 310.9 286.0 58.6 2
3 Net physical investment 585.8 641.1 666.0 676.5 112.6 151.9 172.2 138.8 73.9 107.3 108.7 3
4 Capital expenditures 1459.0 1581.7 1702.9 1717.2 378.5 420.6 443.9 413.5 343.6 379.8 390.2 4
5 - Consumption of fixed capital 873.2 940.6 1036.8 1040.7 266.0 268.6 271.7 274.7 269.8 272.5 281.5 5
6 Net financial investment -79.8 -161.8 -610.1 -693.5 90.5 -376.5 64.7 39.4 237.1 178.7 -50.1 6
7 Net acquisition of financial assets 944.3 995.8 539.6 578.9 267.5 -68.1 275.3 268.7 342.6 140.3 77.4 7
8 - Net increase in liabilities 1024.1 1157.6 1149.7 1272.5 177.0 308.4 210.6 229.4 105.6 -38.5 127.4 8
Holding gains on assets
9 at market value (2) 5298.9 4877.2 5157.9 4218.9 782.0 1174.7 -190.2 -1495.4 -2734.0 -630.8 -2872.2 9
10 Real estate 1412.7 2194.1 2551.6 299.5 -53.0 -198.5 -495.9 -708.4 -662.4 -217.1 -646.9 10
11 Corporate equities 1709.5 974.8 930.9 1911.4 530.4 632.9 78.2 -377.0 -910.5 -246.5 -921.8 11
12 Mutual fund shares 411.5 296.7 193.8 416.2 84.4 201.5 96.2 -144.9 -297.3 -25.5 -522.6 12
13 Equity in noncorporate business 473.9 775.6 977.4 637.5 127.1 101.0 47.9 -0.6 -31.9 -9.8 -127.6 13
Life insurance and
14 pension fund reserves 1291.3 635.9 504.2 954.3 93.0 437.8 83.4 -264.5 -831.9 -132.0 -653.3 14
Holding gains on assets
15 at current cost (2) -98.2 -22.2 -39.7 -43.3 -13.1 -11.0 -15.4 -10.7 5.0 -9.1 1.8 15
16 Consumer durable goods -98.4 -22.1 -40.0 -44.8 -13.7 -11.4 -15.0 -11.2 5.0 -10.4 -0.2 16
17 Equipment and software 0.2 -0.1 0.2 1.5 0.5 0.3 -0.4 0.5 0.0 1.3 1.9 17
18 Other volume changes (3) 231.4 83.1 90.1 47.8 122.1 -21.3 -4.2 -132.3 -5.6 -38.7 -2.0 18
Memo:
19 Net worth outstanding (4) 46703.3 52120.6 57384.8 61591.2 62685.2 63603.0 63630.2 62169.9 59746.2 59353.7 56539.9 19
20 Disposable personal income 8162.5 8680.9 9062.0 9640.7 10013.5 10088.0 10228.8 10351.5 10425.5 10806.0 10683.3 20
(1) Sum of net investment (line 2), holding gains (lines 9 and 15), and other volume changes (line 18).
(2) Calculated as change in amount outstanding less net purchases during period.
(3) Consists of the difference between series for consumption of fixed capital published by BEA and statistical discontinuities.
(4) Table B.100, line 41.


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## basilio (18 December 2008)

> Quote:
> Originally Posted by basilio View Post
> Well actually most people from analysts to the simple punters on this forum are seeing things like :
> 
> ...




Sorry if that sounded sarcastic.  To be honest I think l  was scaring myself as I started to outline the issues that are facing the economy and  of course us.  

And I *would* like to enjoy Christmas !! Have a Merry Christmas.

Cheers


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## drsmith (18 December 2008)

While there is still some significant day to day volatility stock markets appear to have stabalised somewhat in terms of a general trend since the falls of October and November.

The $64k question now is whether at present levels there is too much gloom factored in or not enough.


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## wayneL (18 December 2008)

In a sane world we would not have seen the bottom for all the reasons mentioned above, but the US Fed (followed by other CBs) still have a few rabbits to pull out of the hat. eg "quantitative easing" AKA the infamous helicopter drop of cash.

My point is to not have a set "view", because we are about to go in unchartered economic waters. We "should" go down further, but the rule book has been tossed in the bin. 

Be prepared for ANYTHING!


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## Gundini (18 December 2008)

Isn't the only way they can get through this situation, and pass it on down the track to later generations:

Create Asset Inflation? Wayne...


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## wayneL (18 December 2008)

Gundini said:


> Isn't the only way they can get through this situation, and pass it on down the track to later generations:
> 
> Create Asset Inflation? Wayne...




It's asset inflation that has got us into trouble... malinvestment, to use the Austrian term.

A decent, proper recession/depression is the best way to reset the economy for future health. The problem is that it is politically and sociologically very unpalatable. Very bitter medicine, if you will.

The world's response so far has been to support and perpetuate malinvestment. This cannot be healthy and we will pay dearly someway down the track. Can it be fobbed off to some poor unfortunate future generation? 

I do not believe so. Look at the problems we are having now as a result of the same philosophy expedited immediately after 911; less than a decade later.

No, we need to take the medicine now, even if it hurts.

But we won't.


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## akamitso (19 December 2008)

wayneL said:


> It's asset inflation that has got us into trouble... malinvestment, to use the Austrian term.
> 
> A decent, proper recession/depression is the best way to reset the economy for future health. The problem is that it is politically and sociologically very unpalatable. Very bitter medicine, if you will.
> 
> ...




Agreed. Due to government and CBs intervention are you of the thought that the bottom of the market will come as a compression form that gradually rises rather than the typical massive fall and speedy rise?


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## wayneL (19 December 2008)

akamitso said:


> Agreed. Due to government and CBs intervention are you of the thought that the bottom of the market will come as a compression form that gradually rises rather than the typical massive fall and speedy rise?



The question becomes - what do people do with cash?

Government Bonds for safety but negative real returns?
Cash deposits for insulting negative real interest and palpable risk?
Stocks for better (and probably declining) yields, possibly great upside, but great risk?
Real estate in an obviously crashing market?
Precious metals for no yield and an argument as to whether they are a store of wealth or just another commodity?

I really don't know.

My opinion is that earnings won't support strong gains for some time, but we're in wonderland, who the hell knows?


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## Aussiejeff (19 December 2008)

wayneL said:


> The question becomes - what do people do with cash?
> 
> Government Bonds for safety but negative real returns?
> Cash deposits for insulting negative real interest and palpable risk?
> ...




Merry Xmas, Santa! :santa: :santa:

May your pettypounds turn into supereuros in 2009.  

Chiz,

Mr Pufft


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## wayneL (19 December 2008)

Aussiejeff said:


> Merry Xmas, Santa! :santa: :santa:
> 
> May your pettypounds turn into supereuros in 2009.
> 
> ...



Oh jeez!!! That sort of talk could get you killed around my area. 

As for me, I don't care, I just want to know where Merv's helicopter is going to start dropping all that cash...


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## Aussiejeff (19 December 2008)

wayneL said:


> Oh jeez!!! That sort of talk could get you killed around my area.
> 
> As for me, I don't care, I just want to know where Merv's helicopter is going to start dropping all that cash...




Unfortunately, that fluttering cash will most likely be worthless by the time it reaches the ground 

Good luck scrounging...


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## wayneL (19 December 2008)

Aussiejeff said:


> Unfortunately, that fluttering cash will most likely be worthless by the time it reaches the ground
> 
> Good luck scrounging...




ROFL!

Very true, at least I'll be able to stoke up the fire with it and keep warm.


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## Bushman (19 December 2008)

wayneL said:


> The question becomes - what do people do with cash?
> 
> Government Bonds for safety but negative real returns?
> ?




Don't forget corporate bonds currently at historical spreads to treasuries. Problem is lingering default risk but without a doubt bonds lead securities and property down this garden path and they will also lead us out. 

Also how do you invest in the schweinehunds if you are a retail investor? Managed funds is probably the easiest and then you risk redemption freezes and the like. Answer is a pina colada and a beach in the sun. 

Merde, putana, kak and other swear words in foreign languages. 

PS: GE is showing some sign of distress and good old Johhny Come Too Late S&P have downgraded them. It is RELENTLESS... also what for the market if GE goes?


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## Gundini (19 December 2008)

Bushman said:


> PS: GE is showing some sign of distress and good old Johhny Come Too Late S&P have downgraded them. It is RELENTLESS... also what for the market if GE goes?




Perhaps the question should be:

What is worth more, the wheelbarrow, or the cash?


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## Sunder (19 December 2008)

basilio said:


> Sorry if that sounded sarcastic.  To be honest I think l  was scaring myself as I started to outline the issues that are facing the economy and  of course us.
> 
> And I *would* like to enjoy Christmas !! Have a Merry Christmas.
> 
> Cheers




Ah, no, sorry mate, I was saying the conversation between myself and the other guy got very quickly sarcastic. I quoted you as you correctly pointed out the writing is on the wall for shares, but he still had to question whether I was just sticking a finger up in the wind to see which way shares are going.


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## Monario (26 December 2008)

Down... In my opinion, I agree mostly with Basilio.

1) We are indeed staring at a resource market that's bubble has burst and is starting to tumble..gathering speed might I add... 

2) From this we have seen, and will see further Job losses.. Leading up to christmas, in the engineering consulting industry, I have seen 500 jobs go in a 6 week period, all based in the Brisbane CBD. Mines have closed in W.A. century and cannington have both put off large numbers of staff. All these are key indicators.

Of most concern is the engineering side, if jobs are going at that level, that means projects are been scrapped, which can only mean a flow on to the blue collar industry.

3) Once this hits home, we will begin to see a fall in housing, especially in the hugely over inflated mining towns. Which inturn will lead to further problems for the finance sector.

4) As australia becomes a less attractive option, foriegn investors are moving offshore, just look at America, money is flooding into the realestate sector from offshore investors due to the record lows in prices.

So, with that, and a few other points not mentioned, I am sure we will be heading further down..


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## Cherrypicker (26 December 2008)

Trying to pick bottoms (or tops) is financial suicide.  I would not recommend going long on anything medium or long term, just yet.  This s**t fight is far from over and the vast majority of weekly stock trends are still heading south.


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## MRC & Co (26 December 2008)

wayneL said:


> In a sane world we would not have seen the bottom for all the reasons mentioned above, but the US Fed (followed by other CBs) still have a few rabbits to pull out of the hat. eg "quantitative easing" AKA the infamous helicopter drop of cash.
> 
> My point is to not have a set "view", because we are about to go in unchartered economic waters. We "should" go down further, but the rule book has been tossed in the bin.
> 
> Be prepared for ANYTHING!




Missed this post.

But I have just been thinking the same the last couple days.

Used to be able to put some boundries on things, now you just think WTF.  Oil to 150 and back.

AUD to near parity then back.

Aussie market over halved, how far can it now bounce?  Or how low can it go?

Worst unemployment figures out in like 3 decades in the US and the market rallies.

To tell you the honest truth, nobody has the slightest freakin clue anymore! Truly the case now to trade what you see.  Anybody who tries to apply logic lately, gets burnt.  Very short-term trading is the way to go in these times.


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## Glen48 (27 December 2008)

Will the market experience a big drop again? yes


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## inenigma (27 December 2008)

Get the dynamite boys......  We've hit rock bottom and need to blast a way thru.


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## Pager (27 December 2008)

Glen48 said:


> Will the market experience a big drop again? yes




Will the market experience a big bounce again? yes

Funnily enough the 2 biggest trades i had this year were both longs and both came in October against the huge downtrend


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## gfresh (27 December 2008)

Yes, but the market flattened off towards the end of the year, no v-bounce there. 

I'm of the belief presently that January may be a repeat of last January... off the back of 4th quarter US results out soon. They will not be pretty, and effect sentiment here. 

After this we may find a current bottom, but have a feeling it will be around the 3000 level. 

In 2 weeks time we'll probably know which way it's going. January's always seem to be fairly indicative of the direction for the coming year. But whichever direction, it's likely to be be strong. A month of sideways movement has to break one way or the other.


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## MRC & Co (27 December 2008)

gfresh said:


> I'm of the belief presently that January may be a repeat of last January... off the back of 4th quarter US results out soon. They will not be pretty, and effect sentiment here.
> 
> After this we may find a current bottom.
> 
> January's always seem to be fairly indicative of the direction for the coming year. But whichever direction, it's likely to be be strong. A month of sideways movement has to break one way or the other.




Like the US unemployment figures that drove us to new lows?  

Agree, January's do seem to be fairly indicative of the direction for the coming year, but these are times unseen.

Does it have to break one way or the other?  Not necissarily.


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## wayneL (27 December 2008)

MRC & Co said:


> Like the US unemployment figures that drove us to new lows?
> 
> Agree, January's do seem to be fairly indicative of the direction for the coming year, but these are times unseen.
> 
> Does it have to break one way or the other?  Not necissarily.




Yer,

I can't see much that would make folks want to jump back into the market apart from excess liquidity again sloshing around (which delivered us to this point in the first place).

Commods are in the tank, earnings slaughtered, unemployment about to go on a moonshot, etc.

But re excess liquidity, the banks have deep pockets and short arms atm... apart from the literal helicopter drop, I don't see where it's going to come from.


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## BentRod (29 December 2008)

> Will the market experience a big drop again?




Not a chance, we are "poised for a surge"  :screwy::


http://www.news.com.au/business/story/0,27753,24851442-462,00.html


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## rhen (29 December 2008)

Marc Faber's response is worth a listen:
http://au.youtube.com/watch?v=04u-jfRrW0s&feature=related

some background on Faber:
_Faber is famous for advising his clients to get out of the stock market one week before the October 1987 crash.[citation needed]

A lot of people[who?] say that he gets the trend right, but the timing wrong. The prime example was his calling NASDAQ top and advising investors go long commodities, including gold, in 1999.[citation needed] He lost money shorting US stocks since 1999. Now he admits that market timing is very difficult. His market advice since 2000 is quite accurate and he predicted the rise of oil, precious metals, other commodities, emerging markets and especially China in his book (Tomorrow's Gold: Asia's Age of Discovery). He also correctly predicted the slide of U.S. dollar (since 2002)[citation needed] and the 5/06 and 2/07 mini-corrections[citation needed]. He states that there are few value investments available now, except for farmland and real estate in some emerging markets like Argentina and Vietnam.[citation needed] He believed in early 2007 that a major market correction was "imminent." (Fox News, 2-2007); however, by 5/2007 he was saying that the U.S. equities were moderately overvalued -less so than the emerging markets.

His most recent interview (June 2008, see external link for Bloomberg) goes over his bearish views on a wide spectrum of investments: stocks, real estate and commodities. He is extremely critical of the Fed's inflationary actions. However, his recent views are almost deflationary except for holding precious metals.
_From Wikipedia, the free encyclopedia


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## jonnycage (29 December 2008)

just for a change in the weather im hoping for a slight surge.

getting a little sleepy with all the doom / gloom.

though fear may yet present some further buying opportunities ?

jonny


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## Aussiejeff (31 December 2008)

jonnycage said:


> just for a change in the weather im hoping for a slight surge.
> 
> getting a little sleepy with all the doom / gloom.
> 
> ...




Salvation is at hand!

*The Great US Car Industry Bailout has saved The World!*

Share markets across the globe have soared on news that GM & GMAC have got the deepest of GWB's & BA's blessings and have at last got their hands on a steaming pile of public monies to play wid.  

Forget the worst US consumer sentiment in a gazillion years.
Forget the worst slump in US housing prices in a gazillion years.
Forget the coming worst Dec Q company reports in a gazillion years.

It was just a bad dream.

The soaring markets are obviously proof of the power of unbridled optimism vs grinding pessimism.

Rejoice!! 

Happy New Year is almost upon us :bananasmi

Cheers to all ASF'ers....

:jump:


aj


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## CAB SAV (31 December 2008)

Aussiejeff said:


> Salvation is at hand!
> 
> *The Great US Car Industry Bailout has saved The World!*
> 
> ...




Yep, No bad news, All good, GMAC will be issuing sub prime car loans to the poor, unemployed without deposits. Nice steep rally coming up for 09 so great for shorters in few months.


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## rhen (31 December 2008)

Market Update for December
 Market Condition: Volatile Bear

by 
Van K. Tharp, Ph.D.

I always say that people do not trade the markets; they trade their beliefs about the markets. In that same way I'd like to point out that these updates reflect my beliefs. If my beliefs and your beliefs are not the same, then you may not find them useful. I find the market update information useful for my trading, so I do the work each month and I'm happy to share that information with my readers. 

However, if your beliefs are not similar to mine, then this information may not be useful to you. Thus, if you are inclined to do some sort of intellectual exercise to prove one of my beliefs wrong, simply remember that everyone can usually find lots of evidence to support their beliefs and refute others. Just simply know that I admit that these are my beliefs and that your beliefs might be different.

These monthly updates are in the first issue of Tharp’s Thoughts each month. This allows us to get the closing month’s data. These updates cover 1) the market type (first mentioned in the April 30 edition of Tharp’s Thoughts), 2) the five week status on each of the major U.S. stock market indices, 3) our four star inflation-deflation model plus John Williams’ statistics, 4) tracking the dollar, and 5) the five strongest and weakest areas of the overall market.

Part I: Market Commentary

Since this market update is coming out early, it only includes data through December 26th and that includes the month end changes. I’ll do a year end review in the middle of January. 

I don’t plan to extensively discuss what’s going on because I’d prefer to end the year with a little optimism. For example, some of the biggest years ever for the stock market occurred during the Great Depression. 2008 was certainly one of the worst years in the history of the U.S., so perhaps 2009 will be much better.

On December 15th, the Federal Reserve effectively lowered its interest rates to zero for the first time in history. It basically shows that we have the potential for another depression like era. Bernanke was a student of the Great Depression and will do anything he can to avoid deflation. Well, he’s now done everything he can, so we’ll have to see what happens. One good thing is that mortgage rates have now hit 30 year lows.

Part II: The Current Stock Market Type Is Volatile Bear

I have now substituted my new market type for the 1-2-3 model (which is still red light). I’ve done this because the 1-2-3 model has now gone below a certain PE ratio (that has turned Steve Sjuggerud quite bullish) and that automatically turns one of the three signals to go. However, I expect us to be in a secular bear market until the PE ratios of the S&P 500 reach single digits. Thus, the 1-2-3 doesn’t really fit my current beliefs. 

My advice, once again, is that secular bear markets usually end when the PE ratios of the S&P 500 hit around 6-8, for example, 1932, 1942, and 1982. We’re in the worst crisis since the Great Depression and perhaps in one that is worse. Are you willing to risk the PE ratio of the S&P 500 dropping to single digits? My advice, get in the market when prices are above the 200-day moving average and get out when they are below (or at least stay out until our market type turns bullish for at least two weeks). That would have kept you out of this market throughout 2008.


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## kirtdog (31 December 2008)

all i know is there have been some bargain buys around lately and if your a short term trader you could have made some easy dollars... and as for the big question will the market plummet again, i believe so the next few years will be a bit of a rollercoaster, won't be buying anything long term any time soon if i get a decent gain on anything ill take it and run, and i wont have all my eggs in one basket. Thats just my plan.


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## gfresh (31 December 2008)

Going off this, there is going to be plenty of selling in the first quarter due to further hedge fund redemptions, including those based in Australia. Plenty of scope for further falls in early 2009.. http://www.theaustralian.news.com.au/business/story/0,,24850205-20142,00.html


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