How Far Will The Market Fall?

[Dona Ferentes]

Not often you see this guy pessimistic.

Who is This Guy? He's on the money..

 

[finicky]

Clifford Bennett is quite a big picture contrarian and I first came upon his views on a Switzer segment on the Sky Business Channel I think. You win some and lose some but I think he adjusted his 'grand bull market' view pretty quickly as he read the implications of cv19.

His youtube channel is: CBTV

"Clifford Bennet is well known for "ringing the bell" for a new Grand Bull Market in global equity markets on the Switzer Show, just two days after the absolute low in March 2009, suggesting a 5-15 year new bull market had just commenced. Proven remarkably correct 10 years on and with 400% gains being seen in the US stock market. In 2010, Clifford forecast the Dow Jones would hit 30,000 at the end of this decade"
http://www.cliffordbennett.com.au/about

 

[MrChow]

I like hearing different point of views of where we may end up over the medium-long term.

He seems to be predicting an L shaped recovery where businesses will take longer to reopen and even when they do demand will remain depressed.

I see more of a W shape where there is clear air for most of the next couple quarters.

Then comes the stressors for a 2nd half capitulation. Stimulus has projected for a 6 month downturn where big expenses / debts have been government paid, delayed or acculumulated to an upper limit. However any secondary virus waves requiring further economic freezes has the capability of breaking the financial system similiar to the GFC.

Example - AFL is able to pay its essentials for the next 6 months to survive with a $500m loan from NAB and ANZ. What is Plan B if Coronavirus returns intermittently until a vaccine and they are unable to put on a product this time next year? If there is no further credit available they may never recover (they'll likely play behind closed doors instead of going up but other businesses on the brink don't have that lever).

Bottom line is the world has a few months to prepare for next U.S and Europe flu season (when the 1918, 1957, 1968 viruses actually peaked) and we can't fail when it hits.

 

[aus_trader]

He seems to be predicting an L shaped recovery where businesses will take longer to reopen and even when they do demand will remain depressed.

I see more of a W shape where there is clear air for most of the next couple quarters.

I think the L prediction was made earlier in the panic selling phase while the prices were plunging. That prediction is not playing out. Based on current price patterns a W is quite likely scenario, on both local and US markets...

 

[satanoperca]

Example - AFL is able to pay its essentials for the next 6 months to survive with a $500m loan from NAB and ANZ. What is Plan B if Coronavirus returns intermittently until a vaccine and they are unable to put on a product this time next year? If there is no further credit available they may never recover (they'll likely play behind closed doors instead of going up but other businesses on the brink don't have that lever).

They are screwed, but it is only a sport, not survival.

 

[Smurf1976]

Example - AFL is able to pay its essentials for the next 6 months to survive with a $500m loan from NAB and ANZ. What is Plan B if Coronavirus returns intermittently until a vaccine and they are unable to put on a product this time next year? If there is no further credit available they may never recover (they'll likely play behind closed doors instead of going up but other businesses on the brink don't have that lever).

Using the AFL example and assuming you're referring to football not AF Legal Group some other risks come to mind:

1. Even if they are physically permitted to do so, to what extent will the public be able and willing to spend the cost of attending football (or any other paid entertainment)?

2. To what extent will TV networks be willing to pay for the rights to broadcast? If advertising revenue slumps, you can be pretty sure that so too will the amount they're willing to pay.

3. Sponsors and the amount they're willing to pay to get their name on a jumper or beside the ground etc.

If the broader economy falls in a heap then it would be at least somewhat difficult for professional sport to keep the same level of money rolling in.

 

[sptrawler]

I think AFL is in a stronger financial position, than a lot of sports, it sounds as though Rugby Australia is in real trouble already.
The other problem for Rugby I would think, is the fact that NSW is being hit the hardest with the virus and is the main money area for Rugby.
Cricket is going into the off season, but the overseas contracts wont be there for the players, it is really turning into a mess with no end in sight.

 

[peter2]

There's an increasing possibility that we've seen the bottom. I've been anticipating another swing down to test the recent low but the market has been very reluctant to go lower. The upcoming batch of US earnings will be starting soon and this may trigger a dip as the looming economic recession becomes apparent.

I'm missing out on most of this rally but I don't want to chase it higher only to be disappointed if the market does fall again.

 

[InsvestoBoy]

There's an increasing possibility that we've seen the bottom. I've been anticipating another swing down to test the recent low but the market has been very reluctant to go lower. The upcoming batch of US earnings will be starting soon and this may trigger a dip as the looming economic recession becomes apparent.

I'm missing out on most of this rally but I don't want to chase it higher only to be disappointed if the market does fall again.

Funny because my read on the price action, at least for XJO, is that the market is very reluctant to go higher. It might not want to go down, but it sure doesn't like going up.

 

[InsvestoBoy]

I think AFL is in a stronger financial position, than a lot of sports, it sounds as though Rugby Australia is in real trouble already.
The other problem for Rugby I would think, is the fact that NSW is being hit the hardest with the virus and is the main money area for Rugby.
Cricket is going into the off season, but the overseas contracts wont be there for the players, it is really turning into a mess with no end in sight.

Speaking of sports,

 

[peter2]

My comments pertained to the equity markets in general. Today's price action in the ASX was very bullish. This may not be apparent in the banks and the top 20 but buyers were happy to pile into riskier equities (XSO and XEC). Did we see a panic selloff just before the close today, knowing that it's a extra long weekend for the ASX? FOMO is alive and well in the ASX today.

 

[Betavegeta]

Wimbledon, a low key pro investor

 

[InsvestoBoy]

My comments pertained to the equity markets in general. Today's price action in the ASX was very bullish. This may not be apparent in the banks and the top 20 but buyers were happy to pile into riskier equities (XSO and XEC). Did we see a panic selloff just before the close today, knowing that it's a extra long weekend for the ASX? FOMO is alive and well in the ASX today.

Maybe it was panic short covering just before the close today, knowing that it's an extra long weekend for the ASX?

Maybe bidders on the close knowing they can hedge in the US markets?

I wouldn't call it FOMO.

Don't get me wrong, you're talking to someone who has been buying on the 11th, 13th and 23rd March, covered deep in the money puts on 23rd March and made this post the next day: https://www.aussiestockforums.com/threads/xao-banter-thread.17461/page-160#post-1063655 ...so if we hit that 0.382 retrace in overnight trading, I'll hardly be surprised, but I sure notice what looks like a lot of huge block sells and what I'm reading indicates this move up isn't bullish action, just short covering.

 

[MrChow]

RSI still has a way to go to the upside especially on the XAO.

Usually I don't look at technicals but that seems as good an explanation at the moment.

 

[hja]

My comments pertained to the equity markets in general. Today's price action in the ASX was very bullish. This may not be apparent in the banks and the top 20 but buyers were happy to pile into riskier equities (XSO and XEC). Did we see a panic selloff just before the close today, knowing that it's a extra long weekend for the ASX? FOMO is alive and well in the ASX today.

At least this is the first decent sustained pullback rally which is deep and with slightly more volume than the small sideways one of early March. But it'll still be a while till the dust settles I reckon.

 

[Smurf1976]

Wimbledon, a low key pro investor

Given they're well known as being a somewhat conservative organisation in all regards and have a history that goes back 150 or so years, they've probably got a pretty thorough "no stone unturned" approach to financial risk.

There's a lesson in there - an organisation that is neither a financial nor a medical one but they identified and protected themselves from a risk that most others ignored.

 

[flightcrank]

It seems bizzare that the asx is rallying up, even if we are flattening the curve. We will still be stuck on restrictions for some time. The longer it drags on the more it should fall. Or at least stagnate.

 

[tinhat]

It seems bizzare that the asx is rallying up, even if we are flattening the curve. We will still be stuck on restrictions for some time. The longer it drags on the more it should fall. Or at least stagnate.

Money does strange things to people. The world is being run be sociopaths. No point rationalising things except to understand that the reckoning will come. The toilet paper will return and recession will hit big time.

 

[sptrawler]

Money does strange things to people. The world is being run be sociopaths. No point rationalising things except to understand that the reckoning will come. The toilet paper will return and recession will hit big time.

I think that is spot on, there is an exuberance probably helped by the insto's, but as the chart guys on the forum are saying pick the top, before we go over the hill. Unless this is the hill now and things improve quickly.
Just my take.
There will be a huge slide when the next reporting season comes in, but there will be some fantastic opportunities, we are not going to go back and live in caves, we are not going to even go back to growing our vegies.
So IMO remember life will go on, the capitalist system will go on and things will recover.
Don't forget these are the opportunities that set you up for the rest of your life, be disciplined, be cautious and pick great companies that will be there after the rout.
I'm no expert, but I have missed out on enough opportunities to know one is going to present, or is presenting ATM, in this crisis.
Again just my opinion.

 

[Smurf1976]

Money does strange things to people. The world is being run be sociopaths. No point rationalising things except to understand that the reckoning will come.

I see the market as having a lot in common with the fact that Perth is having a heatwave at the moment.

The heatwave doesn't change the fact that it's now almost half way through April and we're rapidly running out of days where such a thing is even possible with winter fast approaching. Much the same with the market in my view - sure it's warming up at the moment but we're heading toward winter not summer so far as the seasons are concerned.