GFC 2 - or correction?

[CanOz]

Are we talking about the market or the economy?

If its the market, then i'm still in the correction camp...We're not in bear market territory yet.

Curious the way the US is closing well off the lows the last coupla sessions. Thats good though for more downside, as there needs to be "someone left to sell" as Larry Williams used to say.

China is taking a whipping so far this morning, i'm happy as long as i'm short (only US equities) and the markets dropping.

CanOz

 

[Trembling Hand]

I would have to say we are doing pretty well here.

China lost 6 % yesterday and has just drop another 3.5%. Thats some serious bear market in anyone's book.

 

[CanOz]

I would have to say we are doing pretty well here.

China lost 6 % yesterday and has just drop another 3.5%. Thats some serious bear market in anyone's book.

Yeah, agree on the China thing...but its not carrying over to that degree on the other markets....yet

 

[Zedd]

Short-term correction, potentially quite a nasty one if sentiment gets up momentum, but long-term bull for Australian economy.

The mining boom saw some money getting circulated around Aus but the vibe during the initial years of the GFC was that the majority weren't seeing much benefit. Not sure how much that has changed since I left the country but anecdotally sounds the same. So while everyone has been crowing about how good mining facing companies are doing, the rest were going bust, or getting lean and mean. Anyone still left is about to have a great decade once the dollar stabilises to a new low norm.

Falling Aussie dollar, global food shortages and massive increases over the last few years in wealthy Asians point me towards a boom in Australian agriculture, tourism and education sectors. How to capitalise on this I'm still trying to figure out as agri has been largely bought out in the last few years and I'm not sure how to get decent exposure to the education sector. Tourism has always seemed a v. risky area to me.

I'd like to think property and construction would run with these sectors too, but still feel the surplus cash from the mining has left prices high, although all once the skills rotate out of mining back into construction there's room for profits with cheaper wages. Whether the price bubble will burst or just deflate through stagnating prices and inflation is the question I'm toying with. Real-estate in tourism towns should do well at least.

 

[beachlife]

once the skills rotate out of mining back into construction

Curious about this, construction of what to fill the demand of which age demographic?

We barely export any products any more so I assume you mean construction of something to meet local demand but I cant think of anything that would employ the skill base of the mining industry.

 

[Zedd]

Curious about this, construction of what to fill the demand of which age demographic?

We barely export any products any more so I assume you mean construction of something to meet local demand but I cant think of anything that would employ the skill base of the mining industry.

Was primarily thinking of building industry, especially given what our real estate market appears to be propped up, at least to some extent, by undersupply.

 

[So_Cynical]

In a recent book i listened to (audio book) a good case was made for this century being the US century, surprising to me because i had pencilled in the last century as the US century and this current century as the China/BRIC century...anyway the point was made that even though the US and EURO is swamped in debt, the global appetite for that debt is unwavering and insatiable to some degree.

The more bonds the US fed issues the more the buyers cue up to pay for it, even at very low rates of return...Conclusion: The world is ok with the US and EURO to be issuing bonds and ok with their level of debt otherwise they would stop buying it.

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GFC 2? no i don't think so, just the ongoing gyrations of the GFC and the BRIC/Commodity's boom, all the growth is still in the BRIC country's and the broader developing world, still reckon they will be the drivers going forward...one thing for sure is that every significant market dip since July 2008 has been an opportunity to acquire tremendous wealth.

Just got to have the money and the guts and make the correct choices.

 

[Aussiejeff]

Was primarily thinking of building industry, especially given what our real estate market appears to be propped up, at least to some extent, by undersupply.

Excellent plan. Let's put ALL our eggs into an even smaller basket, eh? Sounds like a plan guaranteed to succeed.

- - - Updated - - -

In a recent book i listened to (audio book) a good case was made for this century being the US century, surprising to me because i had pencilled in the last century as the US century and this current century as the China/BRIC century...anyway the point was made that even though the US and EURO is swamped in debt, the global appetite for that debt is unwavering and insatiable to some degree.

The more bonds the US fed issues the more the buyers cue up to pay for it, even at very low rates of return...Conclusion: The world is ok with the US and EURO to be issuing bonds and ok with their level of debt otherwise they would stop buying it.

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

GFC 2? no i don't think so, just the ongoing gyrations of the GFC and the BRIC/Commodity's boom, all the growth is still in the BRIC country's and the broader developing world, still reckon they will be the drivers going forward...one thing for sure is that every significant market dip since July 2008 has been an opportunity to acquire tremendous wealth.

Just got to have the money and the guts and make the correct choices.

Ergo, YOU are now tremendously wealthy?? You must be feeling quite philanthropic by now....

 

[Zedd]

Excellent plan. Let's put ALL our eggs into an even smaller basket, eh? Sounds like a plan guaranteed to succeed.

You mean backing the Australian economy over global or did you take my thoughts to mean the money was to be made by cycling out of mining stocks into building industry? Scroll up a bit. Aussie economy good. Falling dollar better. Sectors to benefit - education, tourism, agriculture.

That's a fairly diversified basket IMO...

 

[jimbowan]

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.

I agree 100% with coolcup.

Correction based mainly on the weakening of the AUD and poor market sentiment (fear of QE easing, China). I saw a stat recently that SMSF is the most booming financial industry in Australia with something now like TWO TRILLION dollars in self managed super.

That money will always favour property and the equities market over more exotic and risky investments.

We are in an age of volatility though no doubt but I see another bull run in the future once this correction settles down.

 

[mullokintyre]

those who were investing around the time of the GFC will remember that the illiberal creation of massive amounts of derivatives was one of the reasons that caused the GFC and alo prolonged it.
It seems that the banks, and their patsy regulators, really learnt nothing from that era.
From Wall Street on Parade

Someone else great and famous once said that those who do not learn from history, repeat its mistakes.
Mick

 

[divs4ever]

It seems that the banks, and their patsy regulators, really learnt nothing from that era.

yes they did , they repackaged them , added in car debt ( and goodness knows what else ) , to create yield in a zero interest rate scenario , re-labeled them , added extra weasel/legal clauses ..... and assured the buyers they were safe enough to leverage

SADLY the buyers of these things learned nothing even about leveraging complex products