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How low can the All Ords go?

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Thanks, Tech/A and Dombat, for taking up my query. I've just been feeling that this is potentially a massive problem which - if not being ignored - is certainly not being put much in the public face.

Last Friday I was in a gathering of people, mostly self funded retirees and people close to retirement, and I would have thought reasonably financially aware, but was astonished that (a) they have just stood by helplessly and watched their Super being eroded, and (b) demonstrated a sort of blind optimism that it will all be OK pretty soon, despite being unable to come up with any clear rationale about why.

Then when I suggested the whole CDS's market was still out there, full of unknowns, no one had ever heard of any such thing.

Anyone else have any informed views about this?
 
tech/a said:
Julia.
Your topic is ignored or either misunderstood by the masses.
Its certainly not talked about in the "Kochie" type help the people understand programmes.
I'm sure that if Rudd was asked you'd get some very swift political side stepping.

I find this whole topic fascinating.Spending a great deal of time reading all I can.

The "simple" answer to your question from what I can gather is that the total exposure is a point of speculation however it is so great that if it did start causing a chain reaction of defaults due to in ability to pay from those who created these derivatives,the Western Capitalist system would collapse due to simply not having enough to cover the debt.
In other words the world as we know it would become bankrupt.

So the only solution offered up so far is to throw money at it (to those caught) from all sources (Meaning world government intervention) in the hope that eventually these derivatives will "unwind" avoiding armageddon.

Interested in others take on the situation.
Click to expand...


The chain reaction effect is troubling since these weapons of financial mass destruction are showing up everywhere. Now we are discovering in the wake of the Icelandic banking meltdown that the three Icelandic banks were amongst others packaged into hundreds of CDO's containing their CDS.

Now in hindsight the pundits claim that letting Lehman fail was the worst decision yet by the Fed and treasury as that basically cratered the CP market and led to the sellers of $400 billion of CDS to pay out 90 cents on the dollar to cover their exposure. However since sellers of CDS have to mark to market their positions everyday, the additional losses on the contracts was marginal. Still you can see why there is no confidence when you don't know where the next blowup is coming from because just about everyone is exposed to some degree.

Since the US Treasury and the British Government has ringfenced the deemed "too big to fail" banks in their respective countries, their CDS and CP spreads have come in markedly. However it has the effect of pushing one side of a balloon in only to see the other side blow out. Now other financial companies such as Insurance companies not receiving Federal assistance have seen their spreads blowout. Whilst certaintly around the "chosen ones" has improved, others have become the source of uncertainty.

It should be remembered that the architects of the global bailout never saw this coming so it is no surprise as they stumble along that the unintended consequences are multiplying at a rapid rate.
 
In relation to this thread, CDS and CDOs are not the instruments of financial destruction to local markets as they are (and have already been) to northern hemisphere markets.
Ultimately the CDS insurers will prove worthless and their unbacked paper debts will impart a similar value.
Although I believe we are destined for a slow and deep market decline it is just possible that Bush and others over this weekend have started to put together plans that will avoid a depression.
An earlier chart suggesting 1000points for the allords is, in my view, too extreme given we should be smarter and able to act more-globally than ever before.
I still reckon low 3000s are inevitable and high 2000s the more likely area to see stabilisation.
If, however, our esteemed leaders are not up to it, a depression and sub-2000 allords would have to come into play.
 
jonojpsg said:
Are you serious!!!!????!!! 1000:eek: I personally can't see how you can follow wave analysis to the extent that prices/earnings will drop from where they were 12 months ago to 1/6th of that over the next two years?

And how can you say that the market is correcting a bull run that began in the 70s?? Don't know if the chart is reliable, but the one on the ASX site that shows the Oz market back to 1900 shows a pretty steady rise over the last 100 years. Why don't you say that we are going to see a correction of that "bull run"?

IMO if Wall St falls through 7000 which I've seen predictions on regarding the whole sub-prime mess, then one could say that we will most likely move down through at least another, what, 1000 points? so my prediction would be that we would hit 3000 as a worst case low.
Click to expand...

Some further clarity is here --> https://www.aussiestockforums.com/forums/showpost.php?p=351534&postcount=5214
 
Looked at news.com.au this morning.

Interesting close for the Dow Jones, a mistake or a prediction?? :p
 

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You have only to go to the top of this thread to see how wrong people can get their predictions using the best of analytical tools therefore after examining various goat entrails from goats sacrificed at full moon time I predict that all ords have another 15 to 20 per cent to fall but this will not happen as fast as in the past month and there will be a number of small rallies on the way down. Actually I have yet to hear that the hedge funds have finished getting out of the aust mkt I dont know how much is left in there and if someone could work that out we would know when we were near bottom
 
Thanks OWG.

I think the current panic and dismay at the behaviour of the market is understandable inasmuch as when people get burned they get angry. And a lot of people are being burned by the market right now. But your graph does put into perspective that these collapses are quite normal events. Not common, but normal in that they are an inevitable part of the cycle.
 
OzWaveGuy said:
read the above first.

Under the above posting - you are approximately here
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1000-1500!!! bloody jesus f**king christ!!u got to be kidding me!!!.... @%!^&%@^&!!@!!!!!!!!!!

- excuse my above language - but thats the only polite way i could have worded it!!
 
Korrupt.

Its an extreme case.
Much like your reply.:)
Unikely but could happen
 
I can't remember where I heard this or read, but did you know that Warren Buffet does not hold any stock in his personal portfolio other than treasury bonds.

I know this does not have to do much with the thread directly, but it shows that even he does not trust the market, even though he publicly endorses everyone to see it as a good buying opportunity.

Therefore my guess would be in 1000s or less unless we get the worst and the whole system is bankrupt and shutdown.
 
That's what buffet used to do.
He's invested his own money back into US stocks last week.
He said he can't predict the bottom short term, but he's happy with what he's bought. He's bought in with alot of his personal wealth recently.

There's value out there, its just a bit of guesswork as to future near, mid and long term earnings.

Sound byte of last week : "Buy when others are fearful, sell when others are greedy"
Article by Buffet in NY Times last week :
http://www.nytimes.com/2008/10/17/opinion/17buffett.html

A prudent approach would be to wait until it turns a corner and company profit results show the market what the real value is, but where's the fun in that. So if results are 20% down, but the stock is 50% down, then you might consider buying, then if Quarter on Quarter results show consistency, then you'd probably start to feel more confident of less downside risk.
 
dhukka said:
It should be remembered that the architects of the global bailout never saw this coming so it is no surprise as they stumble along that the unintended consequences are multiplying at a rapid rate.
Click to expand...
It should also be remembered that Al Greenspan presided over the regime of financial instruments that are now crumbling the walls of global financial institutions.
Greenspan has been giving evidence to the House Committee on Oversight and Government Reform. He admitted to putting too much faith in the self-correcting power of free markets and had failed to anticipate the self-destructive power of wanton mortgage lending.

“Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief."

The flow-on effects to Australia should continue well into 2009, so anyone thinking our market has already bottomed, or has just a little more to fall, is likely to also succumb to a state of "shocked disbelief".
 
How low can the All Ords go?

Zero. At least we know an index cant go negative ;)
 
I've taken the long term data from the site that someone had previously posted and I have provided one view of the long term Elliottwave counts for the DJI monthly close chart (log scale).

I've looked:

  1. for an extended wave (that is longer and has typically more subdivisions),
  2. for any Triangle patterns (in wave 4 positions)
  3. for relationships in price between waves.
  4. to ensure all 6 points of an elliottwave structure DO NOT touch the parallel lines (contrary to most EW thinking, true impulse wave do not all touch the bounded parallel lines, however corrective waves operate tightly within parallel lines).
  5. Wave Alternation in time, shape and price

The data does not go back far enough to map out a wave I, so there's an assumption here that wave I labeled is actually wave I.


So here's what I found:

  1. Wave III is the longest wave and appears to be the extended wave
  2. Wave IV is a triangle
  3. Wave V is 78% Fibonacci relationship to Wave III (Wave I could also be a 78% relationship to wave III also - but this is only a guess)
  4. Only 3 points touch the 0,I,II,III,IV,V points (although the II - IV trend line's slope perfectly aligns to the ends wave 1 circle, 3 circle and V which can be a common internal feature)
  5. Wave Alternation between wave II and IV is evident in time, shape and price

Also, almost all wave 4's encroach upon the wave 4's of a lesser degree - which is key to Elliottwave behavior.

Summary: Now is certainly a time for a major correction based on the evidence that 5 waves up is complete since 1982. A trendline hit on the 75yr DJI trendline would be around 4100 points or so, and could be a final low or a resting point for awhile. Encroachment into the price range of the previous wave 4 of a lesser degree (wave IV of around 1000 points in this case) would be common for corrective waves to undertake.

Whether the stock exchanges would even be open in the event of a major extreme correction is questionable, I doubt derivatives would still be operational or legal eg Governments would most likely extend the shorting ban to the whole market, and would most likely create a new financial system (as already indicated by Gov and Banking leaders around the world including Australia).

One things for certain, the current market is evolving in impulse waves (5 waves) down then there is more downside to come. The next significant Elliott 'market milestone' will be upon us very soon and will ultimately determine if the bear market will come to an end or if the market will continue down towards levels cited above. More later on this.
 

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Julia said:
Thanks, Tech/A and Dombat, for taking up my query. I've just been feeling that this is potentially a massive problem which - if not being ignored - is certainly not being put much in the public face.

Last Friday I was in a gathering of people, mostly self funded retirees and people close to retirement, and I would have thought reasonably financially aware, but was astonished that (a) they have just stood by helplessly and watched their Super being eroded, and (b) demonstrated a sort of blind optimism that it will all be OK pretty soon, despite being unable to come up with any clear rationale about why.

Then when I suggested the whole CDS's market was still out there, full of unknowns, no one had ever heard of any such thing.

Anyone else have any informed views about this?
Click to expand...

Retirement approaching, your money shouldn't be in the market
Government bonds is your friend and you getting an extremely good rate right now.

1 year gov bonds fetch 7.5%
5 years bonds at 6.5%

when I retire 80% of my money in the bonds and 20% for me to play the market cos I love it
 
I've posted this before, but a chart taken from Bob Prechter's book Conquer The Crash. A bit sketchy I'm afraid, due to the manner of its reproduction. The book was first published in 2002, and this is from a 2007 reprint, but I don't think the chart has been added to since the original release.

GP
 

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Nice analysis Waves.
Your count still sits well with the one G/P has posted.
If G/P's is correct perhaps the 1000 scenario is unlikely.
Could still happen as it wouldnt be encroaching into wave 1
 

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