Australian (ASX) Stock Market Forum

Imminent and severe market correction

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Part of an article by James Kunstler-

This is very dangerous territory. In dollar terms, the numbers being applied to the various problems are so colossal -- trillions! -- that the death of our currency seems assured. And in defiance of congress's express intentions, none of the TARP "money" has been applied to its targeted purpose of buying up "toxic" (i.e. fraudulent) securities hidden in the vaults of banks, pension funds, and municipal portfolios.
George W, Bush's personal bailout of General Motors and Chrysler is designed solely to postpone their bankruptcy and mass job layoffs until after the holidays. Otherwise, the $17.4 billion will probably be used by the companies to underwrite the extensive legal work required for the moment they must declare bankruptcy -- when Mr. Obama is in the White House. Meanwhile, the President-elect has ramped up his job-creation target overnight from two to three million, and some observers are catching a whiff of Soviet-style economic engineering ("...we pretend to work and they pretend to pay us....").
The years since Jimmy Carter have produced an astoundingly flaccid public, sunk in various addictions and distractions, but this is about to change. The darkling mood of political protest and violent activism that saturated my own young adult years is scudding up again on the horizon. Mr. Obama's pick for attorney general, the mild-looking Eric Holder, may be the key figure in the early months of the new government. If he doesn't commence some aggressive investigations and prosecutions -- beginning with Henry Paulson for insider trading when he was in charge of Goldman Sachs and shorting his own company's mortgage-backed securities -- then the whole Obama enterprise could fall under suspicion of illegitimacy. The bums who ran the US banking sector into a ditch have to account for their turpitudes. They can't be allowed to hide under a TARP.
Unfortunately, the legal system, and probably the legislative system, will be so buried in procedural bull**** from the unwind of countless enterprises and institutions, and the sorting out of the remnants, that it remains to be seen whether this generation of people-in-charge can even embark on a fresh start of anything connected to real everyday life in America. All this is starting to alarm the tattered residue of the middle classes, and from here it's a very short path to them being really pissed off.
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http://www.kunstler.com/
 
The facts stare Australia in the face. Virtually all the mining industry will be hit very hard in 2009, and as agreements to supply at a certain price come to an end, prices for commodities will tank severely.
Profits will drop, taxes will come down and this, as well as royalties, will hit both the States/Territories and Federal Government.
Unemployment will increase further draining Government reserves.
The Aussie$ has fallen because confidence is very low and many see a serious contraction.

This does not necessarily mean shares will plunge further though, as reducing interest rates will see certain sectors are now cheap: Or maybe falls have been overdone. Avoid resource stocks in particular and indeed others, that have insufficient cash in the bank.
 
noirua said:
The facts stare Australia in the face. Virtually all the mining industry will be hit very hard in 2009, and as agreements to supply at a certain price come to an end, prices for commodities will tank severely.
Profits will drop, taxes will come down and this, as well as royalties, will hit both the States/Territories and Federal Government.
Unemployment will increase further draining Government reserves.
Click to expand...

I think it's worth defining that any significant increases in unemployment will be almost entirely contained within the private sector - especially the resources & tourism sectors.

If you happen to be fortunate enough to have a half decent Federal, State or Local Government public service job and are paying off a first home mortgage you will be dancing all the way to the bank!

This does not necessarily mean shares will plunge further though, as reducing interest rates will see certain sectors are now cheap: Or maybe falls have been overdone. Avoid resource stocks in particular and indeed others, that have insufficient cash in the bank.
Click to expand...

You could well be right. IMO the sharemarket is becoming more disconnected from the reality of the real world economy and more of a Punters Paradise atm.

Allied to that, gummints the world over now have large and ever-increasing stakes in the world's sharemarkets via the massive company "bailouts" to date - which no doubt will continue unabated this year as well. Gummints are, in effect, "nationalising" stock markets to a certain degree - certainly a lot more than they ever have been before?

Free market forces? Forget it. Much more gummint manipulation will be going on now to prop currencies, companies that are "too big to fail" etc,etc - and therefore sharemarkets themselves. Oh, and Ponzi Schemes that might need covering up ;). All at taxpayer expense, of course. :(

Then again, I could be wrong.

It might be fine in '09

Good luck all

:)
 
Friday 2 January 2009

My market perspective tends to be somewhat myopic,
confined to the forces of supply and demand, attended
by volume, as they unfold depicted in charts.

Chart are my medium for reading, but I do not consider
myself a chartist in the same category with those who
employ mechanical methods in their interpretations,
i.e. RSI, MAs, [moving averages], stochastice, even
Elliott wave, but these are my admitted biases.

In that light, I address a few comments from above:

> You could well be right. IMO the sharemarket is becoming
> more disconnected from the reality of the real world
> economy and more of a Punters Paradise atm.

I would take the other side of that view, saying that the
markets accurately reflect the real world economy, and
is the primary reason behind last quarter's collapse.
Reality finally came home to roost.

I would aslo add, charts began to show weakness back
at the end of 2007, and there was definitely reason not
to be long by July 2008. This can be viewed as a
hindsight assessment, but I was strongly advocating
getting out from longs back then. [I was not a
participant on this site back then, and my presentations
were to high-end stock brokers who saw no merit in
what I could see.]

This is not to say I was taking this position because of
the collapse that did follow. No one could have determined
the extent of how prices fell apart, but there was a simple
and obvious change of trend in the above time frames and
I was going by what I saw.

> Free market forces? Forget it.

No, no, no! They are based on solid principles and
should never be forgotten. It was their abandonment
by the financial industry that led to this mess.

> Then again, I could be wrong.

Me, too.

Cheers!
 
Aussiejeff said:
I think it's worth defining that any significant increases in unemployment will be almost entirely contained within the private sector - especially the resources & tourism sectors.

If you happen to be fortunate enough to have a half decent Federal, State or Local Government public service job and are paying off a first home mortgage you will be dancing all the way to the bank!
Click to expand...

Not so sure of the safe Gov job's as state and federal revenues are contracting rapidly.
 
US share market finally gave up on the "fake" rallies.

World Reality is overdue to set in.... another nasty downleg could follow shortly IMO.
 
Aussiejeff said:
US share market finally gave up on the "fake" rallies.

World Reality is overdue to set in.... another nasty downleg could follow shortly IMO.
Click to expand...

The VIX is down again, usually means there is a big move coming. Hard to imagine it would be up.

Cheers,


CanOz
 
From Money & Markets:
The undeniable reality: The debt crisis that first appeared in the U.S. subprime mortgage market ... then precipitated a Wall Street meltdown ... and has now driven the American economy into its sharpest decline since the Great Depression ... has now spread to the entire world.

It is driving the economies of Western Europe and Japan into an unprecedented tailspin. It threatens the economic ”” and potentially political ”” stability of Russia, China and several emerging market nations. And it's setting the stage for a global depression of epic dimensions.
 
Glen48 said:
From Money & Markets:
The undeniable reality: The debt crisis that first appeared in the U.S. subprime mortgage market ... then precipitated a Wall Street meltdown ... and has now driven the American economy into its sharpest decline since the Great Depression ... has now spread to the entire world.

It is driving the economies of Western Europe and Japan into an unprecedented tailspin. It threatens the economic ”” and potentially political ”” stability of Russia, China and several emerging market nations. And it's setting the stage for a global depression of epic dimensions.
Click to expand...

Yeah. I'm just real suspicious when so many Share Market Analyst optimists come out of the woodwork after a big Xmas & New Year's party and start proclaiming near boom times in the second half of '09. I'm a LOT more circumspect of possible way-over-optimistic statements these days. Especially given the track record of so many "gun" analysts who never saw the catastrophic negative side to their optimistic hype in the second half of '08.

Why should we believe what they spruik now? Are they all suddenly "spot on" in their forecasts?

aj
 
Aussiejeff said:
Yeah. I'm just real suspicious when so many Share Market Analyst optimists come out of the woodwork after a big Xmas & New Year's party and start proclaiming near boom times in the second half of '09. I'm a LOT more circumspect of possible way-over-optimistic statements these days. Especially given the track record of so many "gun" analysts who never saw the catastrophic negative side to their optimistic hype in the second half of '08.

Why should we believe what they spruik now? Are they all suddenly "spot on" in their forecasts?

aj
Click to expand...

For sure,Aussie, and one writer on MW warns investors about the same.

Expect more of the same today, because "BS" is still Wall Street's official language. In both bear and bull markets the lure is the same, to get you to drink the Kool-Aid, to feed a new bubble and to make them (not you) rich
Click to expand...
 
mish says he wouldnt be surprised if we get a rally till inauguration day... (Jan 20)... that would be a nice long rally...

then back to reality...
 
I think the bottom line is that there will be no fast recovery , there is still a lot of fallout to come and there is still risk of severe downward pressure on the share market.
The NAB are talking about selling assets in Britain and perhaps we dont know their real position yet, remember the worse things get elsewhere the worse they will get here, we arent on another planet.
Keep your powder dry. I think the next 6 to 8 months will sort it out, so we at least know how bad it will be or is and at least be able to stop worrying about the unknown.
Job losses here and overseas are yet to really kick in and it will be ugly, that has a knock on effect for everything, there are too many unknows just yet to sleep soundly.
 
MrBurns said:
I think the bottom line is that there will be no fast recovery , there is still a lot of fallout to come and there is still risk of severe downward pressure on the share market.
The NAB are talking about selling assets in Britain and perhaps we dont know their real position yet, remember the worse things get elsewhere the worse they will get here, we arent on another planet.
Keep your powder dry. I think the next 6 to 8 months will sort it out, so we at least know how bad it will be or is and at least be able to stop worrying about the unknown.
Job losses here and overseas are yet to really kick in and it will be ugly, that has a knock on effect for everything, there are too many unknows just yet to sleep soundly.
Click to expand...
You need to make a judgement of how much of the potential bad news is factored in too MrB.

Those not picking an oversold market a months ago have lost out on some significant gains. Some 100% plus gains actually.

Medium term I'm not sure, but it's been a great trading opportunity recently.

Don't be afraid to keep trading.
 
kennas said:
You need to make a judgement of how much of the potential bad news is factored in too MrB.

Those not picking an oversold market a months ago have lost out on some significant gains. Some 100% plus gains actually.

Medium term I'm not sure, but it's been a great trading opportunity recently.

Don't be afraid to keep trading.
Click to expand...

I'm not sure how they could factor the bad news in when they dont know whats still in the closet and a collapse of another large institution could bring it all down again, just too risky for me. Perhaps with a few thousand but not with substantial funds, it would be just gambling.
 
MrBurns said:
I'm not sure how they could factor the bad news in when they dont know whats still in the closet and a collapse of another large institution could bring it all down again, just too risky for me. Perhaps with a few thousand but not with substantial funds, it would be just gambling.
Click to expand...
The market over and undershoots, it's just a calculated risk to identify these periods. I've committed almost half my capital over the past 2 months to some short - medium term plucks, with stops. No buy and hoping yet though. The thing I am asking myself is just how many skeletons have been accounted for? Maybe even more than there are? Perhaps fear has planted them? Or not...
 
kennas said:
The market over and undershoots, it's just a calculated risk to identify these periods. I've committed almost half my capital over the past 2 months to some short - medium term plucks, with stops. No buy and hoping yet though. The thing I am asking myself is just how many skeletons have been accounted for? Maybe even more than there are? Perhaps fear has planted them? Or not...
Click to expand...

I look at whats happened so far and stand back and try to see the big picture, mass unemployment is already underway, less profits mean less staff, less home loans taken out less profits for banks less staff and around it goes, the reports of planned redundances and sacking emerging now is horrendous.
Alcoa just announced 13,500 jobs to go worldwide.
This is just snowballing and I dont believe that any sort of Govt intervention will change the ultimate result.

I see all this and I know that the sumami will reach us next year ( ummm this year) and I really cant justify diving into shares yet.

I simply do not understand "trading" sufficiently to go there so I just wait........................
 

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