How Far Will The Market Fall?

[aus_trader]

Stocks were still looking expensive. Let's see after today. There are a lot of trash stocks out there

I think the weeds will be removed or severely pruned back from the crops this time...

 

[Dona Ferentes]

What we're seeing is a progressive collapse of expectations.

Take this thread for example. It started less than a week ago and the first posts are talking about 20% decline from the peak and so on. Now we're talking about drastically more than that, indeed real world reality has already blown through the earlier thoughts.

That basic pattern is being seen across everything at the moment. Whatever was thought a week ago, the thinking is far worse now.

We'll be somewhere near the bottom when that stops being the case. When expectations stop being revised downward or even simply stop being issued in the first place because just about everyone's given up.

We're not at that point yet.....

Capitulation

 

[Dona Ferentes]

Yes, we are in new territory.

The market commentators are as clueless as the economists.

the epidemiologists are running policy, advising the politicians and technocrats. the market is roadkill

 

[sptrawler]

Well one thing for sure, it is getting all that fat out of the market that the media were complaining about, caused by cheap money.

 

[sptrawler]

Yes, we are in new territory.
In many ways this is worse than those previous falls, massive disruption of all levels of society and commerce.
On the other hand, it will end quicker once the virus has passed however not without major damage.
No one really knows how low it will go or how long it will last. The market commentators are as clueless as the economists.

It will give clarity to Buffett's saying, "Only when the tide goes out do you discover who's been swimming naked."
Bad balance sheets and poorly run companies will disappear very quickly, as banks wont be able to prop up everyone.

 

[moXJO]

So far that 4800-5000 mark is our fortress wall. Will it hold all day?

Asia leading the dow?

Japan just did stimulus or something didn't they?

 

[OmegaTrader]

The public look panicked. Woolworths and Coles empty shelves with the media whipping up hysteria is not a good look. If they can't do the basics. Like keeping toilet paper stocked after this many weeks. Then no wonder people are being stupid. Get the small things right.

I don't feel the government has moved swiftly or decisively enough (either medically or financially). They and business need to show a strong hand. Fear seems to be running pretty high.

So another run down is most likely. I'll probably pick up some more if we hit round the 4000-4150. Possibly see how we hold round 4800 tomorrow and judge if I will pick up some more at that. I'm still in profits from Friday buying, though that may vanish by tomorrow.

4800 is a brave buy I think alot of people had the same idea by the looks of the chart.

We are about to get the most substantial demand collapse the world has ever seen. This is no longer about the virus and is about whether the central banks can save the financial system. Over the last ten years, corporates have gone a massive debt binge and invested in share buybacks (not productive assets). Right now liquidity has disappeared from the corporate bond market. When no one knows which loans are going to go bad, all are assumed to go bad. This is going to take months and months to clear up. All the while the taxpayer is going to be the proud owner of zombie companies. Basically we are all turning Japanese.

If the central banks can save the corporate debt market, then it's the GFC, if they can't its 1929.

"If the central banks can save the corporate debt market, then it's the GFC, if they can't its 1929."
95% chance we are 1929 then.
The central banks have nothing left, zip , zero,0, they have run their course, their theories have failed.

Questions
1) Isn't the problem in Aus private housing debt?
2) How do we know that this will be the one to deleverage the debt
3) Did anyone think that 2008 was the one too?
4) Will the fed gov bow to political pressure for stimulus if it gets bad enough?

My two cents
1) Federal gov can still do stimulus and use QE to buy the debt
2) The debt does not have to be bailed out in totality, only keep the economy still kicking along to allow repayments
3) Rates are very low so even though debt is large repayments are low
4) Aus has sovereign currency not like eurozone
5) Central banks can inject liquidity into almost any market
6) RBA can act as lender of last resort to banks and exchanges,using swaps,RBMS etc

I don't think this is the one.

So far that 4800-5000 mark is our fortress wall. Will it hold all day?

Asia leading the dow?

Japan just did stimulus or something didn't they?

Sentiment tells me no, the chart tells me yes but still in a downtrend.

 

[Garpal Gumnut]

Bears are about.

 

[PZ99]

I believe the big four are in for a whacking.

Nobody likes them especially the politicians.

My guess is in one years time.
CBA $35.96
ANZ $12.40
NAB $14.32
WPC $09.01

https://www.aussiestockforums.com/posts/966461/

All the bastards

 

[bluekelah]

Very interesting charts, thanks. I'd like to think optimistically as well and say we must be at or near the bottom.

Only worry is the China involvement this time. With GFC, we had an approx. 50% decline in the markets despite everyone (not me, I got haemorrhoids) cheering and high fiving how China saved Australia from a recession and things went on as nothing has happened.

Yeah, I have the same worry because our economy is so reliant (due to mineral exports and consumer goods imports) on China.

So all in all, I think it's probably too early to say there's nothing further to worry about...

The only reason markets here are still somewhat stable is because relatively speaking we dont have that many cases as Europeans or USA. We are not at that stage yet. Also despite tourism and airlines and education getting hit, Iron ore prices are still at 90+USD, in fact up from 80+usd in Feb when china was first hit and had lockdown. Hasnt crashed at all unlike oil prices.

I would watch the iron ore prices as thats a really huge sector and most people will trade the AUD on that and mining may not be that big part of the economy percentage wise, but trickle down effects wise it can cause a big impact.

 

[gartley]

I see, nice charts by the way

Thanks aust_trader. It all starts from one line.... But as we can see even fake markets give us clues

 

[wayneL]

I, along with so many others, I thought that the can was just kicked along the road from 2008.

Supposing they managed to kick the can even further down the road this time - I'm sceptical that they can actually do it but who knows, they just might do it again - what then?

An even bigger financial crisis somewhere further down the track?

 

[Knobby22]

I, along with so many others, I thought that the can was just kicked along the road from 2008.

Supposing they managed to kick the can even further down the road this time - I'm sceptical that they can actually do it but who knows, they just might do it again - what then?

There is no where to go in my opinion. How can the government help?

Interest rates can't be dropped anymore, most countries including most of Europe and the USA are running large deficits.

Marginal businesses will go broke. There is no way to save them.
The financial system will be heavily stressed, banks will have runs, it's not going to be pretty.

 

[SirRumpole]

"If the central banks can save the corporate debt market, then it's the GFC, if they can't its 1929."
95% chance we are 1929 then.
The central banks have nothing left, zip , zero,0, they have run their course, their theories have failed.

Absolutely right, and how many small shareholders, driven into the market because of low interest rates have lost large amounts of their retirement funds due to the market crash ?

I wonder if RB governor Phillip Lowe and the rest of the RB board think about that. And how much do the government deserve a kick up the a**e for ignoring the signs (which were there even without the virus) that the economy was tanking while they concentrated on their precious surplus ?

I bet Albo and the rest of the Labs are glad they lost the election now.

 

[sptrawler]

Absolutely right, and how many small shareholders, driven into the market because of low interest rates have lost large amounts of their retirement funds due to the market crash ?

I wonder if RB governor Phillip Lowe and the rest of the RB board think about that. And how much do the government deserve a kick up the a**e for ignoring the signs (which were there even without the virus) that the economy was tanking while they concentrated on their precious surplus ?

I bet Albo and the rest of the Labs are glad they lost the election now.

Yes some of the suggested changes, would look pretty scary at the moment, but that is history.
Imagine if there had been $50billion poured into stimulus, in the last two years as the media have been screaming for.
How many of the companies would be geared up and no materials, while they wait to see if they have a workforce or not, it certainly would be interesting. IMO
But it is all speculation and the Government does have the money, they didn't spend, to spend now when a real crisis has hit. More luck than good judgement though.
Also IMO the handouts make everyone feel good, but in reality wont do much, people are buying plenty of medicine and food.
I don't think they will go out to a restaurant or buy a t.v or go buy clothes. I think they will put it in the draw in case they need it.
Just my opinion.

 

[SirRumpole]

I don't think they will go out to a restaurant or buy a t.v or go buy clothes. I think they will put it in the draw in case they need it.

Maybe, but when the COVID disaster is over, they may open the drawer and spend it in the shops that they were afraid to go to before.

 

[sptrawler]

Maybe, but when the COVID disaster is over, they may open the drawer and spend it in the shops that they were afraid to go to before.

Absolutely right Rumpy, I don't think money is going to sort this one out, it is dependent on how fast this thing goes through and immunity is achieved.
It is a bit like the old saying, it doesn't matter how much money you have, if you don't have your health.

 

[PZ99]

When the cash handouts happened in 2008/9 the Libs' alternative view was to bring forward the tax cuts that were taken to the 2007 election. To be honest I'm surprised they haven't taken this path instead of copying what happened last time.

They do have other alternatives apart from cash but they are too hard and controversial but...

Bring forward more paye tax cuts
Do a deal with the states to kill payroll tax
Temporarily freeze the super guarantee - that's an immediate 10% payrise in the pocket
Do another first home buyers grant
Allow the optional release of $1000 from super as cash which won't blow the federal budget
Allow the optional release of $10000 from super to go directly into mitigating home loan debt and lower repayments.

Of course with the unwieldy way of our over-governance none of this will happen and probably won't help the sharemarket but they are alternatives to cash handouts.

 

[greggles]

They do have other alternatives apart from cash but they are too hard and controversial but...

Raise the tax free threshold to $22,000 or even $25,000. That will give some relief to those on low incomes, part-time and casual workers and those who reluctantly participate in the "gig economy".

 

[sptrawler]

When the cash handouts happened in 2008/9 the Libs' alternative view was to bring forward the tax cuts that were taken to the 2007 election. To be honest I'm surprised they haven't taken this path instead of copying what happened last time.

They do have other alternatives apart from cash but they are too hard and controversial but...

Bring forward more paye tax cuts
Do a deal with the states to kill payroll tax
Temporarily freeze the super guarantee - that's an immediate 10% payrise in the pocket
Do another first home buyers grant
Allow the optional release of $1000 from super as cash which won't blow the federal budget
Allow the optional release of $10000 from super to go directly into mitigating home loan debt and lower repayments.

Of course with the unwieldy way of our over-governance none of this will happen and probably won't help the sharemarket but they are alternatives to cash handouts.

Good points, but the reality at the moment isn't lack of money, it appears to be the lack of stock supply.
All you have suggested could and may happen, but the issue is office works has run out of gear, the mining companies are running out of gear, shops are running out of gear.
People are still working, the question is for how long.