Imminent and severe market correction

[treefrog]

Isn't the double top target from that set up around 0!

That's some correction......

sure is - on that chart the DT is confirmed below 800 with a target of 200

 

[Sean K]

DJ Australian Shares Midday: Down 2.0%; Value Emerging07/01/2008 12:54PM AEST

SYDNEY (Dow Jones)--The Australian share market is down sharply midday Monday, with falls across the board, after Wall Street and the London Metal Exchange suffered Friday from a weak U.S. employment report.

The benchmark S&P/ASX 200 index was down 126.8 points, or 2.0%, at 6180.7 at 0145 GMT, earlier hitting a three-week low of 6148.1.

However, volumes remain light, with many institutional clients still on holiday.

Resources and financials have had the biggest negative impact, with BHP Billiton down 2.1% at A$39.99, National Australia Bank down 2.3% at A$36.46 and Westfield down 3.9% at A$19.04.

Despite the falls, analysts say the Australian economy is in good shape and value is starting to emerge.

"It's very much a case of follow the leader," said CommSec chief equities economist Craig James. "But it's still the case that our economy is in a whole lot better shape (than the U.S.). Valuations are very good."

James said the historic 2007 price-to-earnings ratio is about 14 times, compared with a long-term average of 15.7 times and a low of 13.1 times in August 2007.

"If it falls to about 13.5, it will represent a good long-term buying opportunity," said James, who has a midyear target of 6900 for the S&P/ASX 200.

Elsewhere on the share market, Zinifex was down 4.8% at A$11.59 after hitting a 16-month low of A$11.41 following a steep fall in LME zinc prices.

Telstra, Woolworths and Foster's have outperformed, thanks to defensive buying.

-By Sydney bureau; 61-2-8235-2950; djnews.sydney@dowjones.com

James is a Bull and his job somewhat depends on the market going OK, but I think he has some qualifications over my degree in beer drinking, and I couldn't call him a ramper.

Another correction another opportunity? Or, a 50 year Bear?

 

[dhukka]

James is a Bull and his job somewhat depends on the market going OK, but I think he has some qualifications over my degree in beer drinking, and I couldn't call him a ramper.

Another correction another opportunity? Or, a 50 year Bear?

Or how about anything in between? It will be interesting to revisit his forecasts in June. Revisiting AMP's Shill, I mean Shane Oliver's forecasts from last year.

Market is just correcting itself
...AMP Capital Investors chief economist and head of investment strategy Shane Oliver expects investors to have a rough ride for the next few months but says the long-term direct impact of the downturn will be minimal.

"However, the main risk is if the crisis leads to a further slump in the US credit and share markets," he says.

"The US sub-prime mortgage crisis will get worse before it gets better.

"Total losses could be high - up to $US100 billion ($A116 billion) - but this is small relative to the US mortgage market overall.

"We don't believe it is enough to trigger a US recession."

Mr Oliver says over the next six to 12 months the market will continue to rise, as the $US100 billion loss represents only 1 per cent of the total outstanding mortgages in America.

Despite yesterday's almost 3 per cent fall to 6082.9 points, Mr Oliver is forecasting that the benchmark ASX 200 index will reach 6700 points by year end and break 7000 points in the first quarter of next year.

"There will a rough patch for the next few months but the market will rally hard in the last few months of the year," he said.
Historically, a collapse in the US mortgage market has never significantly affected consumer spending levels or kicked off a recession.

Looks like Oliver was relying on the Santa Claus rally that never arrived. Still he was wasn't too far off (about -4.1%). Wonder how close he'll get with his 7000 in 1Q08 call?

 

[theasxgorilla]

Anyone watching the S&P500? Those boys in the PPT are sure effective aren't they? Here I was thinking we'd get a weak close and whaddayaknow...

 

[explod]

Anyone watching the S&P500? Those boys in the PPT are sure effective aren't they? Here I was thinking we'd get a weak close and whaddayaknow...

Yep got an election in November. The stunts will go way over the top and you and I have a ring side seat. Not much to be made out of ticket selling though and by the look in thirty years they will not believe you anyway.

 

[hacheln_mice]

I still see this current move as sideways. Time passing as opposed to price rocketing (as it has) or falling (as many here reckon it already is). Time passing = waiting. There are still plenty of parachutes left to go around. Although, wasn't Friday night on the US markets rather entertaining?? Can't wait to see if a real support level is actual broken.
ASX.G

I second that. Just one big ol' trading range.

 

[Edwood]

Merrill's reckoning the US is already in recession

http://www.telegraph.co.uk/money/ma...CBQ0IV0?xml=/money/2008/01/07/bcnuseco107.xml

 

[ithatheekret]

Merrills must have some bad news to splutter out I'd presume .......

Nowhere have I seen a reason for them not to go into recession , when as far as I'm concerned they already were , the market just kept going , a sellers market , cough , cough , cough .

But to get down to the nitties thus below has stated " the US faces several challenges " . Hank the w/yank being one of them .

 

[ithatheekret]

Has anyone heard one of the myriad of economists mention the interruption of the perpetual consumption ?

Someone recieved a reply from me here , that "to understand the business helps one negates the risks "

If you understand the motions and structure of true capitalism , the motorisms aspects are clearly defined . Much of this apart from consumers and labour , fulls into the policy box . Shifting idealogies play a main part here , and it is happening , people just have to realise it , including the smart money or they'll get caught again .

There's a lot of avenues we could go down in relation to what has actually happened , which I won't go into or we'd have to start talking wars etc. , but the analysis is easy to acheive when you look into the relations between all the above mentioned and others . Accumulations ( a subject in itself ) , protection of supply in consumer goods and redistribution of wealth are all semaphores .

The shift will cause disruptions all by itself , any stuff ups in ledgers , will just add to it . The fuel is money , always has been in a capitalist world .

So if we know what the fuel is , then all that has to gauged is the burn rate .

The problem faced is now whether the fuel consumption can be maintained .

 

[numbercruncher]

House equity maxed out, now Americans are being forced to max out Credit cards to cover the shortfall.

Surely more pain to come. Peak debt is surely just around the corner.

The Federal Reserve reported Tuesday that consumer borrowing rose at an annual rate of 7.4 percent in November, far higher than the 1 percent rise in October.

The 7.4 percent overall increase in credit pushed total credit up by $15.4 billion - much stronger than the $8.5 billion increase that analysts had been expecting.

The overall increase left total consumer credit at a record $2.51 trillion. The Fed's credit report tracks all debt not secured by real estate meaning that mortgages, a big chunk of the debt load carried by most households, is not covered

http://money.cnn.com/2008/01/08/news/economy/consumer_borrowing.ap/index.htm

 

[Whiskers]

Assuming they can broker a deal, for arguement sake, to freeze the interest rate of all loans... will the average US consumer take the hint and tighten their belt or continue spending and cause an exponential bust some time later?

President Bush, meanwhile, conceded, "It's going to take awhile to work through the downturn," and Treasury Secretary Henry Paulson said he is concerned about the potential for additional home defaults.

Paulson said the administration is exploring expanding a deal it brokered with mortgage lenders last fall to include relief to people who borrowed at prime, conventional rates as well as those with subprime, adjustable-rate mortgages that were due to reset.
http://biz.yahoo.com/ap/080108/housing_outlook.html

 

[Whiskers]

The Federal Reserve will cut interest rates more than previously anticipated... apparently.

But will it be enough to stave off the bear market that some commentators are now calling! Maybe enough that the Aus market won't hurt too badly.

U.S. Will Escape Recession as Consumers Hold Up, Economists Say

By Shobhana Chandra and Alex Tanzi

Jan. 9 (Bloomberg) -- The U.S. will skirt recession as consumer spending slows without collapsing, a survey of economists showed.

Economic growth will average 1.5 percent in the first six months of 2008, matching the fourth quarter's pace, according to the median estimate of 62 economists surveyed by Bloomberg News from Jan. 3 to Jan. 8. The rate of expansion would be the weakest since the last nine months of 2001.

It's soft economic activity that feels like a recession, but we probably won't have one,'' said Mickey Levy, chief economist at Bank of America Corp. in New York. ``The state of the consumer is clearly softening, but spending is not declining. That's very important.''

The Federal Reserve will cut interest rates more than previously anticipated, economists said, triggering a reacceleration in growth by the third quarter that will keep the economy from stalling.
http://www.bloomberg.com/apps/news?pid=20601068&sid=aEUZyMLV9TMo&refer=economy

 

[MS+Tradesim]

In a brilliant article in the Wall Street Journal, Carrick Mollenkamp and Serena Ng detailed the rise and fall of a collateral debt obligation (CDO) called Norma, ushered into existence by Merrill Lynch. This is a $1.5 billion CDO created in March of 2007 with over 90% of its paper rating "A" or better, and $1.125 billion rated AAA. In November 2007, the entire CDO was downgraded to junk.

That is not particularly news, as there are a lot of subprime CDOs that are being downgraded. What caught my eye was how this CDO was created. Quoting (and emphasis mine):

"For Norma, [the manager] assembled $1.5 billion in investments. Most were not actual securities, but derivatives linked to triple-B-rated mortgage securities. Called credit default swaps, these derivatives worked like insurance policies on subprime residential mortgage-backed securities or on the CDOs that held them. Norma, acting as the insurer, would receive a regular premium payment, which it would pass on to its investors. The buyer protection, which was initially Merrill Lynch, would receive payouts from Norma if the insured securities were hurt by losses. It is unclear whether Merrill retained the insurance, or resold it to other investors who were hedging their subprime exposure or betting on a meltdown.

"Many investment banks favored CDOs that contain these credit default swaps, because they didn't require the purchase of securities, a process that typically took months. With credit default swaps, a billion-dollar CDO could be assembled in weeks.

"UBS Investment Research estimates that CEOs sold credit protection on around three times the actual face value off triple-B-rated subprime bonds. 'The use of derivatives "multiplied the risk," says Greg Medcraft, chairman of the American Securitization Forum, an industry association. 'The subprime mortgage crisis is far greater in terms of potential losses than anyone expected, because it's not just physical loans that are defaulting.'"

The article goes on to detail how the entire CDO world is one large daisy chain of credit default swaps. Who's got your back? And who's got the back of the guy who has your back? And .... you better hope it is not ACA.

Never heard of the company? You will. ACA has dropped 95%, from $16.55 to $0.86 today. Why? Because the company sold credit insurance on CDOs. "If now junk rated ACA can't come up with an additional $1.7 billion in capital by January 18, it will be insolvent and the $69 billion in credit default swaps on CDOs it underwrote will be worthless." (Shilling) $69 billion? That is huge. Think that won't hurt balance sheets all over the world?

http://www.investorsinsight.com/thoughts_va.aspx?EditionID=634

 

[numbercruncher]

Jan. 10 (Bloomberg) -- Capital One Financial Corp., the largest independent U.S. credit-card issuer, reduced its full- year profit forecast by about 20 percent because of swelling loan losses in a weakening U.S. economy.

http://www.bloomberg.com/apps/news?pid=20601103&sid=agYg.EonG2ig&refer=news


I also read credit card debt is rising much faster than forecast, ominous warning, the maxed out consumer is hurting

Implodeometer up another notch

 

[ithatheekret]

We could always try a TRIN value , chuck in an upside down ratio and hope the beta gods aren't against us ...........

 

[numbercruncher]

The New York Times reported that Merrill Lynch (MER, Fortune 500) is expected to take a $15 billion hit when it reports, nearly twice the loss it original estimated

http://money.cnn.com/2008/01/11/markets/stockswatch/index.htm

 

[lesm]

Moody's US Debt Downgrade; Oh my, this could be HUGE

Moody's just warned the US that it is at the point of losing its top Bond rating status, due to huge US spending. This rating was given in 1917, when Moody's first rated US debt.

Why would Moody's cut US debt rating? Perhaps that they know something not in the public domain yet, we all know that the US overspends, what else to it is there? We have to remember that behind Moody's there is Berkshire Hathaway, run by Warren Buffett the Omaha Oracle. Are they expecting something much worse to come?

If more rating agencies announce the same, it could be huge for the Markets. In uncertain Market times (like now), the riskier assets are sold and the flight to the safety moves things to US Treasuries. From this safety flights, the dollar get a lot of support.

With the Moody’s downgrade, these Bonds won't have the same appeal to investors, who in turn will be looking for some other safe assets to hedge their risk, outside of the Greenback.

Watch out for other Rating Agencies moving in on US Debt valuations, they may assist a major market shift.

Full Story on our Forex Blog, 'A View From Afar'. http://forexblogviews.blogspot.com/

Semr TheLFB's Man In Europe

 

[MS+Tradesim]

AMP are late to the party, but at least they are starting to face the facts:

In other words, there is increasing evidence that the US downturn
is spreading from the housing sector. What’s more, the latest surge
in energy prices has only added to pressure on the US consumer and
inflation worries have arguably slowed the Fed in cutting interest
rates. These considerations suggest that it is now a 50/50 call as to
whether the US will go into recession or not.

Given the high risk of a US recession, it’s worth being aware of
what it could mean for shares. Recessions are normally bad for
shares, as profi ts slump undermining valuations. Every US recession
since 1960 has been associated with a sharp fall in US shares. The
average decline has been 30%, spread over an average 15 months.

Australian shares have had a bad run through past US recessions,
with an average decline of 33.8%.

http://www.ampcapital.com.au/K2DOCS...A6CB-46E1-B4DB-FBC8900FA3B9/OINo43.pdf?DIRECT

 

[dhukka]

AMP are late to the party, but at least they are starting to face the facts:





http://www.ampcapital.com.au/K2DOCS...A6CB-46E1-B4DB-FBC8900FA3B9/OINo43.pdf?DIRECT

It really boggles the mind how shills like Oliver keep their jobs. How far behind the curve can you get? Maybe it's time to get bullish, Oliver could be a good contrary indicator.

 

[treefrog]

and ending this week.........

MARKET SNAPSHOT
U.S. stocks sink on write-downs in financials
B. of A. seals deal for Countrywide; J.P. Morgan reportedly eyes WaMu
By Kate Gibson, MarketWatch
Last update: 3:28 p.m. EST Jan. 11, 2008
NEW YORK (MarketWatch) -- Stocks dropped steeply Friday, with the Dow headed toward its most dismal first-eight-trading-days-of-a-year run in 17 years, as write-downs and slashed earnings forecasts signaled slowing consumer spending and sparked increased talk of a recession.
"From an earnings perspective, we're already in recession," said Jack Ablin, chief investment officer at Harris Private Bank.
The major indexes fell to new session lows after a top Federal Reserve official said investors have been too focused on individual interest-rate cuts rather than the overall direction of monetary policy.

http://www.marketwatch.com/news/sto...x?guid={9384C3E2-4648-4F0A-96D0-16CA32881444}