Dr Doom says: Bail out now!!!

[Smurf1976]

Could be a few lessons to learn from this :

Base metals can not rise at a greater pace than Au
If POG & XAU are diverging then something must wrong
When a housing boom goes bust --- so does everything connected with it

Another one is that when interest rates are held at extraordinarily low levels for several years, it ends up causing a LOT of inflation. Inflation that we've seen in stocks (dot.com boom) followed by housing, then oil and gold, then other commodities joined in and now there's increasing evidence that it's filtering right through the economy. In due course it reaches the checkout.

The cure is, of course, higher interest rates. But a word of warning. It defies belief that the effects of years of low interest rates will be overcome by simply returning to normal rates. More likely we'll see a period when rates are actually high. IMO that is some years away but it's coming. I think the markets are starting to wake up to this.

In the short term, bank bill yields suggest another rate hike from the RBA is on the cards in the not too distant future.

Of course it is likely that this long term trend of rising interest rates will take the form of moves both up and down, but with an underlying upwards trend, since markets don't usually move in a straight line.

IMO the present US cycle of interest rate rises will end when it is clear that something has "broken". Either some market falls seriously, someone very big goes broke or the economy ends up in recession. That's simply based on my observation that the Fed tends to keep going until something breaks. Given the rather obvious pressure on the US Dollar and inflation I see no reason why they wouldn't do the same this time. In view of that, a decent rally in the US Dollar over the coming months wouldn't be at all surprising to me.

 

[professor_frink]

YES there are some stocks out there looking prime for a top-up..

But IMO more downside to come in next few days/weeks, maybe asx200 get to about 4800-4900 before next leg up..

Much more less risk in the short term by buying these stocks on the way up, not the way down... so im waiting for them 2 bottom out..

tomorrow is the key for me- XJO has hit it's trendline from the oct lows. If it breaks through there's gunna be some fun to be had on the shortside!!

Wow i wonder how much money this would be!
Probably several 10s of millions?

lets just say ALOT

Learnt my lesson well and truelly on that one years ago !

Chased DROORY all the way down from $8 to $1 , sold it a couple of weeks ago for around .95c after around 5 years

NTG from around $4 to the cents

BRY DOWN to near zero

These stocks in their day where the darlings of their sector --- Brokers where saying to hop in now while they are a bargain -- some bargain !

Cheers :swear:

Sounds familiar! There's nothing like watching all your money disappear!
Should try options- I've even managed to lose alot of money at various stages of this bullmarket. now that takes talent!

 

[coyotte]

Could someone please explain ?

If you go to stockcharts & run a $SPX v $UST2Y
they track each other

going by that , whilst the US continues to raise rates -the SPX will keep rising ?


Cheers

 

[michael_selway]

don't you love those bears. this guy sounds like he went to the same school as you and I wayne!!

Actually Marc Faber was the guy that said gold was to reach $6000 an ounce, so just wondering why he became so bearish all of a sudden? or is he still bullish?

thx

MS

 

[nizar]

Actually Marc Faber was the guy that said gold was to reach $6000 an ounce, so just wondering why he became so bearish all of a sudden? or is he still bullish?

thx

MS

brother u should read the article first before commenting

Marc Faber, founder and managing director at Hong Kong- based Marc Faber Ltd., has been urging investors to buy commodities since 2001 and holds 10 percent of his personal assets in gold in a bank vault. The holding has earned 65 percent in the past year

Gold's 5.2 percent drop yesterday below $700 an ounce for the first time in a week was a ``tiny'' decline, Faber said. Investors shouldn't buy gold now because prices may fall further to $550 or $600 before resuming its rally, he said. Gold closed yesterday at $677.40 an ounce.

He reckons next 3-6months could be down. Read the article that started this thread

 

[TheAnalyst]

I aint worried in the slightest.....actually i seen some stuff that was so fundamentally cheap that i spent all today but i can go get some more if i really feel like it.......i dont look at the index overall actually i dont care less about the index at this stage it is more of a concern of what you individually hold...U.S. interest rates well who cares either..cos i dont all it does is reduce the deficit by increasing the U.S. dollar.....and increases the Australian deficit.....at this stage in the economic cycle who really cares....the tax breaks will adjust for the interest rate hike....

 

[professor_frink]

nasdaq has now fallen for 8 consecutive sessions according to news on my brokers website! Kinda reminds me of the freefall it had in 2002!

Wonder if the PPT is going to come in soon and rescue all the perma bulls?

 

[noirua]

Basically, the markets of the World took fright just because inflation in the States rose by 0.6% in one month. Most countries are expecting a rise in inflation for 2006 and forecasting a fall back during 2007/8.

Much of the States problem is due to a weak Dollar, and much of the World wants the Dollar weaker, so commodity prices fall in their own currency terms. Strong Asian markets should gain from a weaker US Dollar, Indonesia and India are among those most at risk in the coming weeks and Hong Kong should not be affected much. China and Taiwan are probably cheering at the events of the past week.

 

[TheAnalyst]

It will be resource stocks from a massive correction that will bring the index down.....professionals have been distributing all year..........like i said the real pain will come from what you hold not the index.

 

[wavepicker]

It will be resource stocks from a massive correction that will bring the index down.....professionals have been distributing all year..........like i said the real pain will come from what you hold not the index.

Totally agree with you analyst, professionals have certainly been distributing of late. Our Index is heavily weighted with resource companies and banks. Any major correction in the resource sector will be heavily reflected in the index but will not necessarily be a reflection of what may be happening in other sectors which are undervalued or oversold at present. I always said this business is just a big merry round!

 

[TheAnalyst]

The bank i find that is most overly priced at the moment is WBC from a fundamental point...even those smaller state ones have high per's its only because at any time the takeover offer will arrive.

Suncorp needs to demerge its insurance arm and consider a merger with its bank and wealth creation segments with the such of St George which i believe would create massive synergy cost savings.

 

[Smurf1976]

It will be resource stocks from a massive correction that will bring the index down.....professionals have been distributing all year..........like i said the real pain will come from what you hold not the index.

Whenever you buy anything there is someone else selling.

In short, if the general public are net buyers then some other category of investors are net sellers. IMO buying stock that professionals are dumping whilst Joe Public is rushing to buy is asking for trouble in view of the history of stock markets - the masses don't tend to be the big winners.

Hence I become very wary of any investment or investment strategy which attracts the attention of the general public who aren't usually overly interested in such things. The big flashing warning sign is when it gets a mention on commercial TV (remember just how many were watching money during the last days of the dot.com boom?). That applies whether it be stocks, currencies, real estate or whatever.

Whilst I'm very much a resources bull in the long term, especially when oil is concerned, IMO the sector has attracted far too much public interest of late to the point that there aren't many people not aware of the increase in commodity prices.

I'll become interested in resource stocks again when I hear taxi drivers complaining that converting to LPG wasn't worth it because petrol prices have come down or when some high profile economist or politician trots out the idea that the recent rise in commodity prices was just a blip.

 

[TheAnalyst]

Thats is a major fundamental sign Smurf...remember all those renovation shows and house and apartment buying shows just 18 months ago......and the tht was it...we now have commodities.....and once again when you have the born again christian ministers telling their congregations and having visiting born again christian enterprenuars and the likes coming to talk to their congregations and get em in on some good honest christian investments....just like they were doing in the dot com and the real estate boom...they came in at the last minute and blew up there flock...


Commodities correction will bring the falls on the index....

 

[Kipp]

Whenever you buy anything there is someone else selling.

In short, if the general public are net buyers then some other category of investors are net sellers. IMO buying stock that professionals are dumping whilst Joe Public is rushing to buy is asking for trouble in view of the history of stock markets - the masses don't tend to be the big winners.

Hence I become very wary of any investment or investment strategy which attracts the attention of the general public who aren't usually overly interested in such things. The big flashing warning sign is when it gets a mention on commercial TV (remember just how many were watching money during the last days of the dot.com boom?). That applies whether it be stocks, currencies, real estate or whatever.

Whilst I'm very much a resources bull in the long term, especially when oil is concerned, IMO the sector has attracted far too much public interest of late to the point that there aren't many people not aware of the increase in commodity prices.

Good point smurf. I asked my step dad last week what the symptoms of the last resource crash were. And he said, "it's when the guy at Coles starts giving you stock tips"... should of jumped off last week! Too much greed...

 

[TheAnalyst]

Mr Heffernan says canny investors should be using this sell-off to top up their holdings in the blue chips such as BHP, Rio, the major banks, Woolworths and Coles.

The word from one of the biggest institutional dealing desks in town is that there has been some rebalancing by the big institutions but no serious selling as yet. "They've been selling stocks with big offshore exposure and high P/Es and buying into the retailers such as Woolworths and a bit into the banks but nothing has fundamentally changed really," says one head dealer. "The domestic stocks are holding up and we've got the tax cuts coming through, so it's just been the shakeout we needed."

http://www.theage.com.au/news/business/is-the-party-over/2006/05/20/1147545564568.html?page=3

 

[kgee]

I was wondering if anybody here had heard the saying "sell in may and go away" ?
Yesterday I heard it for the first time when talking to a friend...he said it comes from the "fact" that in the US this is the typical time that fund managers take there holidays, and closing there positions before they do
Sounded a bit hokey to me...has anybody heard this before???

 

[nizar]

I was wondering if anybody here had heard the saying "sell in may and go away" ?
Yesterday I heard it for the first time when talking to a friend...he said it comes from the "fact" that in the US this is the typical time that fund managers take there holidays, and closing there positions before they do
Sounded a bit hokey to me...has anybody heard this before???

yes iv heard this before..
believe it? Hmm... now thats a different story/.

 

[TheAnalyst]

The cracks are beggining to appear.....

http://www.theage.com.au/news/busin...ore-price-soars/2006/05/21/1148150124509.html

China baulks as iron ore price soars
By Barry Fitzgerald
May 22, 2006

CHINA is crying poor that its steel industry cannot afford the bumper 19 per cent price increase secured by Australian and Brazilian iron ore producers for shipments of the key steel-making raw material in 2006-07.

The Government-owned China Daily said the US dollar price rise ”” it follows on from last year's 71.5 per cent increase ”” could bust the current boom.

China has fast become the biggest market for Australian iron ore with an annual value of about $4 billion, making the health of the steel-making industry there a key consideration for the leading exporters, the Pilbara operators BHP Billiton and Rio Tinto.

"When over-capacity is looming in China's steel industry, rising ore cost that further bites in to domestic steel makers' profits could turn the current boom in to a bust and no one will benefit," according to an editorial in the China Daily.

China's Iron & Steel Association said that its steel makers and the iron ore producers that supply them, including BHP and Rio, "still differ" on price and that their price talks would continue.

An emergency meeting of 16 Chinese steel makers in Beijing on Friday was held in an effort to ensure a united front in China's opposition to the price increase ”” one now accepted by the rest of the global steel-making industry as the new benchmark. This was underlined by the announcement from Rio Tinto's Hamersley Iron subsidiary on the weekend that it had reached agreement with South Korea's POSCO for a 19 per cent price increase for shipments of its Pilbara lump ore.

The chief executive of Rio's iron ore operations, Sam Walsh, said the agreement with POSCO ”” the world's fourth biggest steel maker ”” confirmed the "tightness of the iron ore market and the very strong demand for Australian iron ore".

China's hopes of securing a price increase of no more than 10 per cent were dashed last week when the world's biggest producer, CVRD, effectively set the new benchmark in a 19 per cent price-increase settlement with Germany's ThyssenKrupp.

The Chinese have argued ever since that the CVRD settlement was not a global benchmark.

The Federal Government's chief commodity forecaster, the Australian Bureau of Agricultural and Resource Economics, predicts that world seaborne trade in ore ore could rise by 7.6 per cent to 706 million tonnes this year, with China's booming economy to account for about 44 per cent of the total ”” up from 28 per cent in 2003.

Expansions by BHP and Rio are expected to underpin a 17 per cent surge in Australian exports this year to 282 million tonnes worth about $14 billion.

Meanwhile, the Australian producers' case for China to pay up for iron ore has been strengthened by moves in India to curb its iron ore exports.

India's Steel Ministry has called on the Ministry of Commerce to curb exports to protect the interests of the domestic steel industry.

Exports from the country are not big but their removal from the global market, to feed the booming domestic industry, would add to the global tightness in iron ore supplies.

 

[MARKETWAVES]

Hi there Dr Doom

I like your thinking

Just wanted to put a visual chart of the Nasdaq to show probabilty .
- if the USdollar resumes its recent downturn trend , what do think would be the out come of the Equity markets ?

---------------------------------------------------------------------

 

[noirua]

Following the predictions of Doctor Doom, markets have continued down in Europe today. October is Marc Faber's prediction on when to buy back in, but, where will markets be then?

The Merrill Lynch World Mining IT has just 60 cents to got to register a 33% fall, now down 28%. Major mining stocks see falls from 5% to 12% in London today, as the bears position themselves to feed at the NYSE opening.