GFC 2 - or correction?

[princeplanet]

Just wanted to sample the good folk on this forum with respect to the question above. Would it be to impertinent to get a show of hands? Been reading some worrying threads here and elsewhere where some seem convinced we're headed down to at least 4300. You guys agree or disagree?

 

[clowboy]

I tend to lean more towards revisiting 4300 than not, but that sure does not make a GF 2.0. Peaks where above 7000 last high and falls down to 3200 so we would need to visit 2500 for another crisis......

 

[beachlife]

Demographers have been calling 2012 as the top for years. Sub prime stopped things early. Those same demographers have been calling a depression until 2025. With the Feds plans to soon stop QE the demographic reality of the western world may be upon us now. I am one of those that agree with the demographers, many will disagree and that's ok, so my 2c, the biggest boom in recent history is over and wont be back for decades, so for me a pause again at 4500, then a pause at 4000 then down to 3200 again. Maybe worse, after all we had a surplus when we hit 3200 last time. Not in a straight line, I expect it will bounce around a bit on the way.

After all that stimulus, and all the talk of China, India and mining booms, we barely poked our head above 50% recovery since the GFC. I cant think of anything that will cause a boom now, but see job losses and cancelled mining projects every week on the news. 5 months of advances just got wiped out in 4 weeks.

 

[Aussiejeff]

Demographers have been calling 2012 as the top for years. Sub prime stopped things early. Those same demographers have been calling a depression until 2025. With the Feds plans to soon stop QE the demographic reality of the western world may be upon us now. I am one of those that agree with the demographers, many will disagree and that's ok, so my 2c, the biggest boom in recent history is over and wont be back for decades, so for me a pause again at 4500, then a pause at 4000 then down to 3200 again. Maybe worse, after all we had a surplus when we hit 3200 last time. Not in a straight line, I expect it will bounce around a bit on the way.

After all that stimulus, and all the talk of China, India and mining booms, we barely poked our head above 50% recovery since the GFC. I cant think of anything that will cause a boom now, but see job losses and cancelled mining projects every week on the news. 5 months of advances just got wiped out in 4 weeks.

View attachment 52963

Yep. Couldn't agree more IMO, especially your second para. Perhaps the coming decade(s) from an Aussie perspective will become known as the "Great Oz Grind I" aka GOGI.

A grind for anyone less than a multi-billionaire of course....:1zhelp:

 

[clowboy]

It seems like you think 3200 is a best case scenario? Are you implying we will revisit these lows and this will be a base or do you think we are headed for lower low's?

Would you have bought stocks 10 years ago when they where at those levels or do you think they were overvalued then as well.

The argument for prices at or below 3200 its a particuarily bearish one and goes hand in hand with a not very bright future for the world for some time I would think.

Even if we see minimal to no real growth for the next 15 years that doesn't mean the market isn't fairly valued now or after this "correction"

In terms of the recent multi decade bull run, the only things I really found that has a similar time frame is the exiting of the gold standard and the advancment of technology. If you look at historical share market returns, the last decade has returned to those of the pre 70's 80's and 90's historically high returns.

I forget which book I read it in but it was an interesting point that "real wealth" of the average western citizen has been growing at an exponetial rate for the last centuary, brought about mostly by the advancement of civilisation and technologies.
20 years ago if I was in my position I would have had to send a letter to say hi to my family which would have cost something near $5 in todays money, now I can send as many as I want for free by email.....

Anyway, interested in your answer as to where you think the bottom is...

 

[Letts]

So what is making money in Australia? If we're seeing another plunge in the stock market in the foreseeable future, and with gold and silver prices heading to their lowest points since 2011 the question is where do you put your money in an effort to get any kind of return?

 

[satanoperca]

No GFC2 as GFC 1 never went away. He/she has been lurking around for years, covered over in mountains on debt.

Not all doom and gloom however, things will find an equilibrium over time, opportunities will still exists, some people will make money, others will loose money.

Life will go on and all you can do is trade what is not what might happen, but be cautious.

Cheers

 

[chops_a_must]

The way things are looking, I think it is rather conceivable to see the share market test the lows around 3200 and push to 2500 in a big ABC corrective pattern.

It is also conceivable it doesn't. But things are really in the balance IMO at the moment.

 

[Trembling Hand]

Gee guys I hope your partners have hidden all the razor blades from you. :behead:

 

[zzaaxxss3401]

20 years ago if I was in my position I would have had to send a letter to say hi to my family which would have cost something near $5 in todays money, now I can send as many as I want for free by email.....

Firstly, the cost of a stamp in 1990 was around $0.41c (but later rose to $0.43c in August 1990). Adjusting for inflation, this ($0.43c) equates to around $0.76c (2012)... so hardly $5.00 - just a little exaggerated!
http://www.rba.gov.au/calculator/annualDecimal.html

Secondly, you're probably not sending your emails for free. Hardware, software, maintenance (anti-virus), electricity, ISP charges (broadband), Telco service charge (phone rental) all cost money. You (directly) or someone else (indirectly) is paying for it... right now - probably your employer! And you wonder why you weren't selected for that training course last month.

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Is this a correction or GFC 2 / GFC 3 / GFC 4 - correction only. The XAO has been ramping in a parabolic curve for the past 5 months which is unsustainable. Gold is down, interest rates are down, the AUD is down (overseas investors have pulled their money already), housing prices are already too high for a lot of people and risky if interest rates go up... so where do you put your hard earned cash - shares. Let the dust settle and buy back in when you've done your research.

 

[KurwaJegoMac]

We are going to do very well in the future.

Why do I think this? Easy - because every post on this thread so far is doom and gloom

 

[tech/a]

Gee guys I hope your partners have hidden all the razor blades from you. :behead:

Razor Blades?---who can afford Razor Blades!

 

[KurwaJegoMac]

Razor Blades?---who can afford Razor Blades!

Don't worry Tech, computer mouse cable can be used in a pinch

 

[chops_a_must]

Things aren't looking great from my perspective.

China has stopped buying most of our commodities.

Concentrate is being stockpiled at a lot of our ports because there are no buyers.

I think we're only at the beginning of our job layoffs.

Doesn't stop one from looking for opportunities though.

 

[clowboy]

Firstly, the cost of a stamp in 1990 was around $0.41c (but later rose to $0.43c in August 1990). Adjusting for inflation, this ($0.43c) equates to around $0.76c (2012)... so hardly $5.00 - just a little exaggerated!
http://www.rba.gov.au/calculator/annualDecimal.html

Secondly, you're probably not sending your emails for free. Hardware, software, maintenance (anti-virus), electricity, ISP charges (broadband), Telco service charge (phone rental) all cost money. You (directly) or someone else (indirectly) is paying for it... right now - probably your employer! And you wonder why you weren't selected for that training course last month.

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Is this a correction or GFC 2 / GFC 3 / GFC 4 - correction only. The XAO has been ramping in a parabolic curve for the past 5 months which is unsustainable. Gold is down, interest rates are down, the AUD is down (overseas investors have pulled their money already), housing prices are already too high for a lot of people and risky if interest rates go up... so where do you put your hard earned cash - shares. Let the dust settle and buy back in when you've done your research.

Are you arguing my entire point / statement or just the economics of my point?

Firstly it is an International stamp not a local stamp, and admitably I did not do the maths on the figures, it may still not come out at $5, it's just a point.

Second, outside of Australia most of the rest of the world has free wifi, everywhere so it is in fact free. in some places (penang) the entire downtown district has free wifi, and yes you could argue that Tax's pay for these etc etc, but that wasnt really my point, and in my case I don't pay for it, it's free.
Yes, you need hardware (although again it can be obtained for free - libary's for example) but you could make an argument that you needed a pen and paper and envelopes etc etc back in the day.
my point is - I can send an email home for FREE (although granted somewhere the colective pays) you could never send a letter for free.

But I wasn't really trying to start an argument, rather just showing an example of what I meant and looking for thoughts on reasons the 1975-2000 period was so good - I provided 2 thoughts I had.

As for my employer, I am unemployed so that is not the case but if I was, aside from as you point out the cost of my potential productivity cost does not mean that an already existing cost puts a cost on my additional email.

If you took away the plumbing in residential housing, every glass of water would have a direct cost associated with it, however once the initial cost and base cost of providing that plumbing (repairs, labour etc etc) are factored in the cost of each additional glass of water is free (excluding the cost of the water itself) ?

anyway, not trying to start an argument, just sharing my thoughts and looking for feedback

Thanks for the comments regarding correction or meltdown.

 

[Accumulator]

Gee guys I hope your partners have hidden all the razor blades from you. :behead:

times 2

- - - Updated - - -

Things aren't looking great from my perspective.

China has stopped buying most of our commodities.

Concentrate is being stockpiled at a lot of our ports because there are no buyers.

I think we're only at the beginning of our job layoffs.

Doesn't stop one from looking for opportunities though.

China never holds stock until it needs it...that is a good thing for our miners..

 

[chops_a_must]

Yes, but we haven't had layoffs like this in the mining sector since 08/09.

Higher ed enrolments are also through the roof apparently, which is an indication of a very soft job market.

 

[McLovin]

Correction. But, as with any correction these days everyone wants to try and call the next meltdown.

I'd be more worried about people who have taken out large mortgages because of the low interest rates. If/when US rates start going up again, Australian mortgage rates will be following.

 

[tinhat]

Up until about a couple of months ago I was long banks. I missed some of the top with CBA and pulled half my money out before it topped and the rest at a lower price on a stop loss. I pulled my money out of the other banks through stop losses. I bought these shares when they were yielding >10% grossed up and I realised a 30% capital gain.

I should have sold out of TLS too but something that is yielding me 12% grossed up dividend I don't want to risk mistiming my buy and sell over.

So yes the global outlook is not great but there market presents opportunities.

I've been smashed by some bad decisions in other areas and some speculative forays that have exposed my lack of technical analysis and discipline but have taught me lessons. But through all this bear market I'm actually making good dividend income in the SMSF and some capital gain.

In my opinion, there are lots of great stocks (good company fundamentals and decent outlooks) that are still overpriced with very optimistic PEs. I can see a case for the XAO to come down a lot further when I look at how overpriced so many companies still are. The miners are dragging the indexes down and until there is some turn around in commodity prices the XAO is going to be depressed.

When the price of gold and the AUD/USD stabilizes then we might know where the bottom of this cycle is at. Already there are good yields opening up on the market. I would be happy to grab WBC at today's price. When the market looks like it has bottomed there will be some good dividend yields on offer in the likes of WOW, WBC, etc and there will be the opportunity again to grab some good stocks and ride the cyclical bull and grab some nice dividends along the way.

So yeah, growth/earnings outlook might not be great but the market will present opportunities.

 

[coolcup]

There are a limited amount of investment options open to people in the Australian market and with the SMSF sector growing so fast, individual investors are limiting their options even more. Apart from cash, shares, property and managed funds there are not many investment options available to the ordinary individual who doesn't want to expand into more exotic products. So if we are headed to a "weaker for longer" economic scenario, then cash rates will remain depressed and will continue to be eaten away by inflation - not a great prospect for superannuation money. For this reason, I still think property and shares will continue to be attractive products for the vast bulk of the nation's savings pool.

The other thing we can't forget is that the Australian market is heavily owned by offshore money (~40% I heard on a recent TV show). The A$ has responded to the prospect of higher rates in the US / lower rates here and a "sell anything to do with China" thematic that is happening globally at the moment. The dramatic weakening of the Aussie dollar over the past few months has caused a mass exodus of offshore money leading to an overall market correction. The offshore money is leaving because:

1. They are moving to a "sell anything to do with China" mandate, and that means sell Australia
2. The Aussie dollar weakening is significantly dragging on their performance in US$ terms. The Aussie market represents only 2% of the global MSCI index, and offshore funds have been heavily overweight the last 12 months or so, chasing the higher yields here.

Until the Aussie dollar stabilises (which won't be for some time in my view) those larger fund flows will continue to dictate the overall direction of the market in my view.