Black September/October coming?

[GreatPig]

It's interesting that only the resource sector is being crunched (why the ASX is screwed). Otherwise, in the industrial stocks, it's business as usual.

Yeah, most of my investment stocks were up today, BHP being the concrete boots until I cut the rope early this morning.

The other couple of resource stocks I had in my trading portfolio took a hammering, one down around 8% and the other around 4%. In fact, the trading portfolio had an overall bad day today in that everything was down - including the put warrant (just my luck to take a put warrant on one of the few stocks to hold its price during a 2.5% drop in the XAO)!

GP

 

[Out Too Soon]

I'm down 5% on BHP at the moment (silly me for buying when I did), but it's only giving me the jitters, i.e it don't hurt 'cause I wont sell this Blue chip at a loss Black October or not, (at least not until next year some time), what does hurt is those @*$%%# CCL shares I've started to ditch after 12 months of misery. If I was patient enough I suppose I should hang onto the coke shares too, but to hell with that, I'm a lot more patient than ppl that r ditching BHP at the moment.
:they say patience is a virtue, others say it's just a good strategy.

 

[GreatPig]

they say patience is a virtue

They also say there's just the quick and the dead...

 

[Realist]

another poor day today...

Bad week overall for the ASX despite a good week in the US.

 

[Halba]

yes what is happenin..my portfolio is trashed

 

[Realist]

yes what is happenin..my portfolio is trashed

People are predicting a fall in commodity prices, a fall in the ASX, and bad times ahead.

The very fact that so many people are talking about it gives me alot of confidence.

When people say things like "this will go on forever", or "everyone will be rich" or "it can only go up" is when you need to worry.

 

[wayneL]

People are predicting a fall in commodity prices, a fall in the ASX, and bad times ahead.

The very fact that so many people are talking about it gives me alot of confidence.

When people say things like "this will go on forever", or "everyone will be rich" or "it can only go up" is when you need to worry.

Note on contrarian theory: It is now so well known it is in danger of becoming a cliche'. In fact it is now so depreciated as an indicator that I no longer take any notice. I am seeing that any more than two people with the same opinion and people are invoking the contrarian indicator.

The truth is, people are still unbelievably bullish on resources... particularly where I live.

Before invoking the the "contrarian indicator"... and indeed before we see any new continuation of a possible bull market in resources, we need to see a capitulation sell-off.

That ain't happened yet. A few more down moves should break the heart of the numpties that I know, going by there emotions/nervousness at the moment, but the Chindia perpetual boom theory is still strong (and wrong).

 

[Realist]

The truth is, people are still unbelievably bullish on resources... particularly where I live.

But Wayne, BHP and RIO both have P/E ratios less than 9 based on conservative 2007 estimated earnings, and a PER of about 10 for FY06 earnings.


If you think PER's of 9 are overly bullish you are dreaming!!

Look at some of the US PER's of major companies, they make BHP and RIO look as cheap as chips!

not only that, but they have cash to burn.....

 

[swingstar]

Is everyone bearish? The thread Why all the red? indicates to me that people are actually bullish. There's not much in the news, except for housing. Journos are bullish or bearish depending on the day.

There were some wild bearish comments (well, enough to invoke responses like these) like there are now before the 30s, so I agree with wayneL re: contrarian view.

"I cannot help but raise a dissenting voice to statements that we are living in a fool's paradise, and that prosperity in this country must necessarily diminish and recede in the near future."
- E. H. H. Simmons, President, New York Stock Exchange, January 12, 1928

"Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months."
- Irving Fisher, Ph.D. in economics, Oct. 17, 1929

Edit: Ok, it's not the Why all the red? thread I was talking about... I'm sure there was a thread I saw the other day of people quite bullish, maybe on another forum.

 

[professor_frink]

But Wayne, BHP and RIO both have P/E ratios less than 9 based on conservative 2007 estimated earnings, and a PER of about 10 for FY06 earnings.


If you think PER's of 9 are overly bullish you are dreaming!!

Look at some of the US PER's of major companies, they make BHP and RIO look as cheap as chips!

not only that, but they have cash to burn.....

Just out of curiosity Realist(or any other fundies out there),

What has been BHP/RIO P/E ratios at the top of other bullmarkets?

Is there anywhere I can find out what a companies EPS is going back for the last 20 years to find out for myself?

 

[Realist]

Just out of curiosity Realist(or any other fundies out there),

What has been BHP/RIO P/E ratios at the top of other bullmarkets?

Is there anywhere I can find out what a companies EPS is going back for the last 20 years to find out for myself?

I do not know, but Commsec shows up to 10 years of EPS. So you could work it out I suppose.

Either way a PER of 9 or 10 is obviously low, and a commodity price drop is already built into the price. What if commodities go up? They are tremendously undervalued if that happens, and it is not impossible - nobody knows but everyone seems to be guessing they'll drop.

 

[professor_frink]

I do not know, but Commsec shows up to 10 years of EPS. So you could work it out I suppose.

Cheers. I'll go have a quick peak(just gotta try and remember what my login used to be!)

Either way a PER of 9 or 10 is obviously low, and a commodity price drop is already built into the price. What if commodities go up? They are tremendously undervalued if that happens, and it is not impossible - nobody knows but everyone seems to be guessing they'll drop.

At face value, a PER of 9-10 does appear to be low. Not being heavily into fundamental investing, that doesn't really say much though.

 

[wayneL]

I do not know, but Commsec shows up to 10 years of EPS. So you could work it out I suppose.

Either way a PER of 9 or 10 is obviously low, and a commodity price drop is already built into the price. What if commodities go up? They are tremendously undervalued if that happens, and it is not impossible - nobody knows but everyone seems to be guessing they'll drop.

Realist.

Commodities markets are way different to stock markets. Pull up any long term chart of any commodity and you will see periods like this in the past.

You will also see evidence of the truism that commodities will eventually collapse under their own weight. All bull markets correct, many to their "nominal" mean, i.e. not even allowing for inflation. The only exception possible is oil, being a finite resource, and seemingly coming to the end of its supply possibilities (even this is arguable)

Gold for example, *still* hasn't taken out it's 1980 high (and might not in this cycle, we shall see). Adjusted for inflation, we are nowhere even close. That can be interpreted bullishly of course and it is a valid view.

The thing is, commodity traders know this. The public don't, apparently.

In any investment, particularly anything to do with commodities (which Buffett won't touch I believe, nor any commoditized industries such as airlines) there must be a *substantial* risk premium for smart investors to be involved.

At a PE of 10, there really isn't adequate risk premium... in fact the risk has been discounted IMO. As China implodes, people will learn this lesson.

 

[dubiousinfo]

Just out of curiosity Realist(or any other fundies out there),

What has been BHP/RIO P/E ratios at the top of other bullmarkets?

Is there anywhere I can find out what a companies EPS is going back for the last 20 years to find out for myself?

I dont know about BHP & RIO specifically, but in 87 I remember the blue chips were averging a PE of around 20+

 

[nioka]

yes what is happenin..my portfolio is trashed

Remember you will lose if you sell. You may not if you hold. This will apply to most stocks all you need to know is which ones.

 

[nioka]

Realist.
As China implodes, people will learn this lesson.

If China implodes India will probably take over. I live in hope not despair. But then I don't risk anything I can't afford.

 

[dubiousinfo]

Realist.

Commodities markets are way different to stock markets. Pull up any long term chart of any commodity and you will see periods like this in the past.

You will also see evidence of the truism that commodities will eventually collapse under their own weight. All bull markets correct, many to their "nominal" mean, i.e. not even allowing for inflation. The only exception possible is oil, being a finite resource, and seemingly coming to the end of its supply possibilities (even this is arguable)

Gold for example, *still* hasn't taken out it's 1980 high (and might not in this cycle, we shall see). Adjusted for inflation, we are nowhere even close. That can be interpreted bullishly of course and it is a valid view.

The thing is, commodity traders know this. The public don't, apparently.

In any investment, particularly anything to do with commodities (which Buffett won't touch I believe, nor any commoditized industries such as airlines) there must be a *substantial* risk premium for smart investors to be involved.

At a PE of 10, there really isn't adequate risk premium... in fact the risk has been discounted IMO. As China implodes, people will learn this lesson.

The thing is, will it happen next week, next month, next year, 2yrs time ??

It will happen but until it does, there is money to be made. (Money to be made when it does happen too, but thats another topic)

I got gun shy for a while after 87 and missed out on profits by getting out too soon. And again after the property crash.

Now, I dont care which way I have to jump what ever is on offer I will take. The market up or down (though I find up easier) - Property - commercial, industrial or residential (one of them is usually moving at any given time)

 

[nioka]

Is there anywhere I can find out what a companies EPS is going back for the last 20 years to find out for myself?[/QUOTE]

WE have the future to look towards, the past may not be relevant.

 

[nizar]

People are predicting a fall in commodity prices, a fall in the ASX, and bad times ahead.

The very fact that so many people are talking about it gives me alot of confidence.

When people say things like "this will go on forever", or "everyone will be rich" or "it can only go up" is when you need to worry.

Agree 100% Realist

My views on the way the DOW will play out:

The DOW is looking so bullish, any sort of weakness is used as a buying opportunity and buying begets more buying. Typical bullmarket behaviour.

Tonights CPI data is partially factored in. If oil remains in the 65-70 range, which is a fair drop from its highs, and the CPI is bullish ie. slow steady growth, inflation contained, then we will break through 12,000 by end of the year easily IMO

And seriously - with sooo many technical analysts calling for a fall, it seems like the perfect time to be buying stocks or going long. Remember the "guru" that called 10,000 for the NASDAQ back in the dot.com fever?? And when every1 is saying buy, buy, buy, the DOW will reach 13,000 in the next month or so, and u get the masses buying and so much euphoria, thats when u sell. Its contrarian investing at its finest.

This correction (september/october) is so eagerly anticipated by just about EVERYONE that (i think) its reasonable to expect it wont happen? Since when do corrections come right when u expect them to?

But having said all that, CPI which shows glass "half empty", and it could all start tumbling down..

For now im on the bulls side

This has nothing to do with us of course, as we tend to ignore the US lead the last few months, and we are lagging behind everything FTSE, DAX and DOW.. but after leading the gains for the last few years, i guess the good times cant last forever

As for the XJO: there is already so much money on the sidelines since may-june, and u cant have a crash if ur not even rallying or in a bullmarket. Any selling will be limited.

As u say Realist, people are predicting commodity prices to fall and that they are at the top of their cycle. The thing is, historically, gold/commodity bullmarkets have coincided with bear markets for stocks... so how does that work in terms of where we go from here?

ANd also - how far does every1 here think oil is gonna fall?
The bottom i think will be us$60/barrel coz thats probably the point where OPEC decides to turn off the taps.

 

[Halba]

i have some good stocks that are showing big losses. i also have some stocks showing big losses which i am prepared to wait for as their problem is not due to the company (i.e. it is outside their control)

just time to wait i guesss, let time in the market hopefully solve my dilemma