Imminent and severe market correction

[macca]

Sell the banks !!

This is from Macquarie's free research email today

<The Australian credit markets have deteriorated more in the past eight weeks than they have in the past six months. Credit spreads are widening rapidly for all asset qualities including AAA. MRE believe the bad debts must inevitably rise as the cost of debt spirals and the availability declines. Corporates with extended balance sheet ratios will increasingly find the debt markets are simply closed to them.

For the Australian banks, even though overall credit quality at present remains good, the scope for asset carrying values to deteriorate over the medium term is rising rapidly. Forced selling of assets from financially distressed companies is likely to accelerate over coming months as banks move aggressively to access the cash. Accordingly MRE have moved their model portfolio to underweight Australian banks and removed ANZ from the portfolio completely.>

When a banks says sell the banks should we all run and hide ?

 

[dhukka]

Sell the banks !!

This is from Macquarie's free research email today

<The Australian credit markets have deteriorated more in the past eight weeks than they have in the past six months. Credit spreads are widening rapidly for all asset qualities including AAA. MRE believe the bad debts must inevitably rise as the cost of debt spirals and the availability declines. Corporates with extended balance sheet ratios will increasingly find the debt markets are simply closed to them.

For the Australian banks, even though overall credit quality at present remains good, the scope for asset carrying values to deteriorate over the medium term is rising rapidly. Forced selling of assets from financially distressed companies is likely to accelerate over coming months as banks move aggressively to access the cash. Accordingly MRE have moved their model portfolio to underweight Australian banks and removed ANZ from the portfolio completely.>

When a banks says sell the banks should we all run and hide ?

Geniuses, now that every major bank has fallen around 25% they come out with a sell. Analysts horribly behind the 8-ball as usual.

 

[wavepicker]

Geniuses, now that every major bank has fallen around 25% they come out with a sell. Analysts horribly behind the 8-ball as usual.

They are good at telling you what has already happened and what caused it. Unfortunately too few can give you warning before hand.

If the market rallies 10% from here they will come out with buy signals and bullish reasons why it rallied and the bull is back!!

That's the time to sell the market again.

 

[josjes]

They are good at telling you what has already happened and what caused it. Unfortunately too few can give you warning before hand.

If the market rallies 10% from here they will come out with buy signals and bullish reasons why it rallied and the bull is back!!

That's the time to sell the market again.

How can the average investor have any hope of beating the market if she follows broker house recommendation by buying high and selling low ?
The average investor will get burned by all of these developments. He or she was likely a buyer last year near the top of market (Oct 07), and will suffer from the current correction. He/she will probably do some selling in a panic near the January 2008 low. In the middle of Mar 2008 when market bounces 10%, this same poor bloke will buy again near the peak, just in time to get wiped out by the subsequent bear market crash. Our bloke will shift most of his/her money into safe bank deposit near the bottom in April and May 2008, after which in May 2008 market will soar and he/she will get wiped out a second time when he/she could have participated in the one of the greatest come back of the bull markets through 2008 -2009.

Would you like to be this imaginary person. Do yourself a favour prepare thoroughly in advance for all of these developments through rational proactive strategy rather than reacting emotionally.

 

[dhukka]

I noted on my blog yesterday that according to Aspect Huntley, of the 16 brokers covering ANZ, 5 have STRONG BUYS on the stock, 4 have BUYS and 7 have a HOLD. I don't know what their recommendations were prior to the declines in the banks, but I'm willing to bet they were very similar if not identical. Same story with the other majors.

 

[dhukka]

How can the average investor have any hope of beating the market if she follows broker house recommendation by buying high and selling low ?

They can't. Being an 'average investor' implies average returns. Besides, we need average investors if we are going to beat the market. A better question is, how do I become an above average investor?

 

[Uncle Festivus]

I noted on my blog yesterday that according to Aspect Huntley, of the 16 brokers covering ANZ, 5 have STRONG BUYS on the stock, 4 have BUYS and 7 have a HOLD. I don't know what their recommendations were prior to the declines in the banks, but I'm willing to bet they were very similar if not identical. Same story with the other majors.

It probably applies to all the tipster services but I remember the Huntley advert in the AFR in particular back last November/December, basically telling all to hold the line, buy & hold etc etc.

Buy & hold is dead for all intents in this climate.

Now we will see who's been swimming naked as the tide goes out. I see Warren Buffet is out there looking for flotsam; what he doesn't know is that the tide is out because a tsunami is building. Maybe all those bull market jocks will actually have to work for their bonuses this year, if they still have a job.

 

[Whiskers]

Was looking at some US mid qtr results earlier. Apart from financials, many companies are doing Ok to quite well.

BREAKING NEWSWal-Mart reports fourth-quarter earnings from continuing operations of $1.02 a share; sales rise to $106.3 billion. Details soon.
http://money.cnn.com/

Could make for a bright start for the US week.

 

[sam76]

Feb. 19 (Bloomberg) -- Wal-Mart Stores Inc., the world's largest retailer, said fourth-quarter profit rose after it stepped up holiday discounts and added more brands of computers and flat-screen televisions.

Net income climbed to $4.1 billion, or $1.02 a share, from $3.94 billion, or 95 cents, a year earlier, the Bentonville, Arkansas-based merchant said today in a regulatory filing. Excluding one-time items, profit exceeded analysts' estimates by 2 cents. Revenue increased to $107.4 billion.

 

[dhukka]

Was looking at some US mid qtr results earlier. Apart from financials, many companies are doing Ok to quite well.

BREAKING NEWSWal-Mart reports fourth-quarter earnings from continuing operations of $1.02 a share; sales rise to $106.3 billion. Details soon.
http://money.cnn.com/

Could make for a bright start for the US week.

If the US market goes up tonight it won't be because of Wal-mart. Earnings were bang on expectations, however their outlook was at the lower end of expectations.

Thomson est Q1 74c, FY $3.44

Wal-Mart forecast Q1 seen 70c to 74c, FY $3.30 to $3.43

 

[Whiskers]

If the US market goes up tonight it won't be because of Wal-mart. Earnings were bang on expectations, however their outlook was at the lower end of expectations.

Thomson est Q1 74c, FY $3.44

Wal-Mart forecast Q1 seen 70c to 74c, FY $3.30 to $3.43

I think the main thing was that Wal-Mart's last year income DID come in slightly above the average forecast of $1.02 to beat last year, ie that there were no surprises.

Overall though, as I said above, a number of other companies are reporting positive mid qtr results to help dampen recession fears. A couple of further bank write downs I think were dissapointing but not unexpected.

 

[wayneL]

Due to the lagging effect of crunched credit, next quarter might be more telling for retailer stocks like ChinaMart.

 

[dhukka]

I think the main thing was that Wal-Mart's last year income DID come in slightly above the average forecast of $1.02 to beat last year, ie that there were no surprises.

The market is not particularly interested in the past. Google and a number of other techs had great earnings last quarter but their outlooks disappointed and their shares got slammed. Wal-mart is looking OK, margins holding up well but for how long? 0.5% same store sales in January versus 2.0% expected.

Overall though, as I said above, a number of other companies are reporting positive mid qtr results to help dampen recession fears. A couple of further bank write downs I think were dissapointing but not unexpected.

This platitude has been doing the rounds for the last 3 months. "If you take out financials, homebuilders and retailers corporate earnings look strong." Problem is you can't exclude them. If I exclude the 6 hours it rained today the weather was fine. Does everyone expect earnings to fall for all sectors in unison? If there is a recession in the US and it is deeper than economists currently expect, then other sectors will follow.

 

[chops_a_must]

Well... the futures are certainly going nuts.

Can't see a correction happening tonight at least.

Looks like we are going to get some kind of rally due to the bond insurers dodging a bullet. Can't see that happening forever, they look to be stuck in a bit of a crossfire....

Time to get back on the commodity train with everything I feel.

Kiss of death. Lol!

 

[Whiskers]

Due to the lagging effect of crunched credit, next quarter might be more telling for retailer stocks like ChinaMart.

Quite possibly wayne. Not into Wal-Mart too much but seems like maybe some expansion plans going on hold or changing.

The most recent quarter's results included charges of 3 cents per share for dropped real estate projects and a restructuring charge for its Japanese operations, and a 1 cent per share benefit from the sale of certain real estate properties.

Excluding the items, Wal-Mart reported earnings of $1.04 per share, above analysts' average estimate of $1.02 per share, according to Reuters Estimates
http://www.reuters.com/article/ousiv/idUSWEN398620080219

Dhukka, I think last years results exceeding the previous and on target is more about credability. The market is sorting out whose forecasts they can believe and rely on. Obviously some positive mid qtr results, Bush's rescue passing and hitting the floor running, the bond insurers getting some time to work out something in an orderly fashion and the fed interest rate cuts collectively restoring a bit of confidence.

The day is not lost just because it rains for awhile, similarly US consumers and economy doesn't drop dead just because some elements of it's economy went bad. Afterall this problem was essentially to do with the certain lending practices by financials and the home building industry. That doesn't necessairly equate to problems with all sectors of the economy or a recession.

I told you earlier that poeple strive to be happy and avoid disaster however they can. I'm wondering whether you are very cynical or just won't be happy until the worst eventuates. :

 

[ithatheekret]

Looks like we are going to get some kind of rally due to the bond insurers dodging a bullet.

Strewth if that's a bullet I'd hate to see one of the bombs ..........

 

[dhukka]

Dhukka, I think last years results exceeding the previous and on target is more about credability.

There was never any doubt Wal-mart would beat last years numbers. As stated previously the numbers were in line, margins held up, inventories low. Wal-mart are price leaders and should do better than most retailers in the current environment. Going forward is what matters, their guidance was on the low end.

Obviously some positive mid qtr results, Bush's rescue passing and hitting the floor running, the bond insurers getting some time to work out something in an orderly fashion and the fed interest rate cuts collectively restoring a bit of confidence.

Bush's resuce plan is a dud, the bond insurer drama has to end badly for somebody. Fed rate cuts.... whatever. However I have undying faith in stockmarket participants into deluding themesleves that everything is fine in the short term.

The day is not lost just because it rains for awhile, similarly US consumers and economy doesn't drop dead just because some elements of it's economy went bad.

Of course it doesn't, it never does. In a recession, economic activity does not come to a grinding halt, consumers do not stop spending, the rate of growth slows, and may dip into negative territory. We have recessions and we get through them. Just because someone is bearish on the economic outlook does not mean they think the end of world is nigh.

Afterall this problem was essentially to do with the certain lending practices by financials and the home building industry.

Essentially you're grossly oversimplifying, there was much more at play than lax lending standards and a few too many planned commnuities.

I told you earlier that poeple strive to be happy and avoid disaster however they can. I'm wondering whether you are very cynical or just won't be happy until the worst eventuates. :

I just prefer not to plant my head firmly up my arce and hope everything turns out just peachy.

 

[Whiskers]

You sure are in an irritable mood again tonight dhukka!

Don't worry so much. I promise... it aint gonna be that bad.

 

[dhukka]

You sure are in an irritable mood again tonight dhukka!

Don't worry so much. I promise... it aint gonna be that bad.

On the contrary, I'm in a great mood, I'm not worried about things getting bad, bring it on I say.

 

[chops_a_must]

Why do I always get the distinct impression that bears would be the sort of people that would go beserk in a war and kill piles of enemy troops in a last ditch effort while laughing at the situation?