Do you expect a market correction soon?

[noirua]

And this is from Mining News.net commenting on that Citic group 87 crash report


Market bears resemblance to '87 crash: Citigroup
(Thursday, 16 November 2006)

THE current investment environment is becoming increasingly characterised by moral hazards, greed, exuberant deal making and the rise of private equity, according to analysts from major US investment bank Citigroup, who have made a bold and decidedly gloomy comparison between the present and the great stock market crash of 1987.

Calling a crash is always difficult and it may be best to look closely at the constituents of an index. How many resource stocks are now in the index that were not there 4 years ago, or indeed, those stocks, mining boutique banks etc., that rely on a booming resource sector.

For instance, the US DOW 30 or ASX 20 has had few changes, but look closely at the ASX 200, 300 and 400, they tell a different story.

If the mining and resource sector slip - look around the mining sectors, there are many that have slipped 20% to 50% already - then reduced inflation pressures and costs will help many other sectors.

Mining and Resource companies with lots of cash, and assets that will still be profitable in a downturn are far safer than those that have floated on a cash bubble, on hopes and dreams. The latter, in a collapse, will see their best tenements taken for nothing, as they go under by the hundred.

My record of forecasting has not been any better than guessing in the past, so don't worry, and being over 80% in cash I have few fears if a collapse comes anyway - Good luck, may you all make a fortune.

 

[professor_frink]

here's one saying a pretty similar thing, but this one was written back in May

markets are like 87 crash

“We are very uncomfortable about predicting financial crises, but we cannot help but see a certain similarity between the current economic and market conditions and the environment that led to the stock-market crash of October 1987,” said David Woo, head of global foreign-exchange strategy at Barclays Capital.

 

[marc1]

Afternoon guys,
Re 87 crash talk , just want to add that our market just prior to oct 87 was up 96% in year 86/87. And a lot of that growth was based on debt ridden companys run by the likes of bond,skase etc.That is certainly not the case at the moment.
But like anything in life always watch out for the curve ball !
Regards long memory.

 

[YOUNG_TRADER]

Another interesting article

I don't believe a crash is on the cards, but a correction, definately so, I reckon the US mkts have just run way too hard on nothing but fumes and the harder and longer it continues to run, the harder and longer the correction will be,

Inevitably that will flow through to Aus, its the speccie/small to mid-cap resource stocks that I think will get hit the hardest


http://www.fnarena.com/index2.cfm?type=dsp_newsitem&n=EB3D7EB8-17A4-1130-F54DB49C85F1237F

 

[Rafa]

in your previous article YT, the last para stood out...

"Back in 1986, the market continued to rise with liquidity, fraud, LBOs in one of the worst examples of greed driving deals and market participants convincing themselves that it was all ok.

"Fund managers who became too cautious too soon missed out on 18 months of stellar returns. By September 1987, the market got to 2281, versus our fair value of 1299; i.e. some 75% overvalued."

When playing the market, go with the trend, not on fundamentals....
But keep your finger on the sell button!


But if your looking at fundamentals, most resource stocks are majorly undervalued... that is because whats at risk is the price of the resource itself... The market as a whole is not yet convinced that the commodoties can hold their prices.

 

[Out Too Soon]

The market doesn't normally crash in Nov, Dec & we are prob due for a decent correction or crash. As always the longer it takes to happen the worse it will be. The survey clearly shows UMMMM! we don't know. My guess is early next year.

 

[nizar]

Another interesting article

I don't believe a crash is on the cards, but a correction, definately so, I reckon the US mkts have just run way too hard on nothing but fumes and the harder and longer it continues to run, the harder and longer the correction will be,

I dont know about "nothing but fumes"
Quarterly earnings a few weeksa go were mostly above analyst consensus.
Inflation has somewhat eased.
Housing downturn isnt as bad as first thought.
And last nights data showing strength in regional manufacturing so the economy is riding along sweetly.
CPI data out tonight could be another one for the bulls.

 

[Sean K]

I dont know about "nothing but fumes"
Quarterly earnings a few weeksa go were mostly above analyst consensus.
Inflation has somewhat eased.
Housing downturn isnt as bad as first thought.
And last nights data showing strength in regional manufacturing so the economy is riding along sweetly.
CPI data out tonight could be another one for the bulls.

Note: I think I remember housing prices eased by 9% in the Sep qtr. A record drop in the value of houses in the US. It's building up I think. If interest rates go up again, and again, people will be foreclosing loans and won't be able to sell them to get their money back = bankrupcy. My worry atm.

 

[KIWIKARLOS]

I agree with you Nizar, i think all this alarmist news is a crock of crap. Just like over ambitious announcements can make a stock sky rocket i think bad news will make everyone wet their pants. Things are actually pretty good at the moment, aren't they?

Here's food for thought. Big investment company gives out warning to investors of potential crash, every panicks, stocks plunge. Big investment company buys up at stock at cut price rates, then everyone relises the sky isn't actually falling it's just a little rain

For my two cents im thinkin a minor correction or downturn not a 1987 or 1930's.

 

[chops_a_must]

Note: I think I remember housing prices eased by 9% in the Sep qtr. A record drop in the value of houses in the US. It's building up I think. If interest rates go up again, and again, people will be foreclosing loans and won't be able to sell them to get their money back = bankrupcy. My worry atm.

With enormous amounts of debt, our economy could become like Japan's, I suppose. That wouldn't be much fun.

 

[Sean K]

With enormous amounts of debt, our economy could become like Japan's, I suppose. That wouldn't be much fun.

I don't think we're in the same boat as the US as our housing has slid off nicely. Although I think WA is going to be in grave danger when resources go over the supply demand hump. It will be ugly. Very ugly.

 

[chops_a_must]

Not for those who don't own homes but would love to cash in on idiots.

 

[tech/a]

Elliot theorists called 5400 ish as the turn.

They got the last low spot on so could be!

 

[scsl]

I don't think we're in the same boat as the US as our housing has slid off nicely. Although I think WA is going to be in grave danger when resources go over the supply demand hump. It will be ugly. Very ugly.

Is there a way you can short-sell houses??

 

[YOUNG_TRADER]

Some good news out of the US, sent DJIA soaring


http://www.aireview.com.au/index.php?act=view&catid=8&id=4693

 

[scsl]

The last 1.5 hours has seen both the All Ords and ASX200 fallen close to 1%! I think this is one of the biggest falls we've had since September maybe? ...Definately more to come I think.

I'm expecting the Dow to fall quite substantially some time this week and this will ultimately wipe any early gains the FTSE may make and ultimately, our market might see more of what happened today.

Btw, does anyone trade the Aussie200 with CMC Markets? Since close of trade, it's still continued to fall ... I'm not complaining though as I short sold a few on Friday night.

 

[Fab]

T3 must have something to do with this as TLS fall over 4% today as funds moved from TLS to T3 instalment. Banks had a bad day too.
If the DOW continues it move upward this correction could be a bad memory very quickly.

 

[CanOz]

XAO down 1.5 and the XJO 1.7% if i got my math right! Biggest one day drop for a while on those two. I agree this could be mostly TLS, it has re weighted the index, but is that into account already?

The XMJ was down nearly 1.8% too.

Sentiment not great at the moment.

 

[wayneL]

T3 must have something to do with this as TLS fall over 4% today as funds moved from TLS to T3 instalment. Banks had a bad day too.
If the DOW continues it move upward this correction could be a bad memory very quickly.

US futures are down a bit already (23 pts DOW)

Doesn't mean a hell of a lot this early, but then again, it could.

 

[Sean K]

BHP off a little too, added to TLS and banks creates a fall. I was mostly green today strangely.

Might find some support at 5300, then 5200 and we could have set up a major support tline at 5100.