Recovery or Dead Cat Bounce?

[UPKA]

Helicart, you make some great points here. Especially the one about markets being behind the 8-ball re; sub-prime back in 07/08.

Yet, I think there's a difference between being oversold vs. being forward looking. I think the recent rally is a slight recovery from the former.

Nonetheless, history has shown that it's less costly to be late than too early.

Another factor to consider, with the US interest rate at record low, and retail consumers losing their confidence in banks, the usual fixed income products are becoming less and less attractive, so where are they going to put their savings/spare cash in? This is not just limited to US, even China and the rest of the world, there are still plenty of cash around waiting to be invested.

especially in the case of China, over the past 10-20yrs, while the west has borrowed and spent their money away, the east has bulked up their inventory -- cash. now with international pressure for china to re-value their currency and the central bank's expansionary monetary policy, one would be stupid leaving their cash in the bank and watch it to "devalue" over time.

And this is where Australia comes into the picture. we have some of the most desired assets wanted by the Chinese, with established infrastructure and stable democratic government compared to their investments in Africa. Along with the plummeting resource price, our assets are becoming very very attractive to the Chinese.

http://www.news.com.au/business/story/0,27753,25357473-462,00.html

If there's a continuing interest from the Chinese, we should see our economy and possibly stock market escape from the worst of the slump.
The only thing stand in the way is the government and their foreign investment policy.

 

[MrBurns]

Hey Mr Burns seems like Charlie was right.

BSL up another 25c today.

You should of held for a profit....lol

Yeah right Charlie -

http://www.abc.net.au/news/stories/2009/04/20/2546898.htm

Regional Australia is being hit hardest by the current recession, and it shows, with double digit unemployment rates in many parts of the country.

It's easy to see why. When Four Corners started filming in Wollongong, the crew went to the industrial complex of Port Kembla to gauge economic activity - but there was none.

Bluescope, Australia's largest producer of steel, wasn't shipping any.

Worldwide demand has slumped and the workers are being laid off.

At the port I met Garry Burley, a casual waterfront worker who felt lucky to get one shift a fortnight.

 

[seasprite]

This rally seems to be playing out on a compressed version of 2002 , timewise. It would be interesting to see if Bank of America exceeds it's estimated earnings of 4cps. Boeing and McDonalds to report this week as well.

I'm with Aussiest with XJO to 3500 and DJIA to 6900 . However in the meantime I imagine the S&P 500 may break through the 875 mark after being sucked in to my picking of 915ish then down we go.

 

[Uncle Festivus]

And this is where Australia comes into the picture. we have some of the most desired assets wanted by the Chinese, with established infrastructure and stable democratic government compared to their investments in Africa. Along with the plummeting resource price, our assets are becoming very very attractive to the Chinese.

When China releases statistics I apply my new filter - halve the good news & double the bad news

 

[helicart]

And this is where Australia comes into the picture. we have some of the most desired assets wanted by the Chinese, with established infrastructure and stable democratic government compared to their investments in Africa. Along with the plummeting resource price, our assets are becoming very very attractive to the Chinese.

At this point, China is trying to acquire mining companies, not increase their purchases of the raw materials mined (apart from copper). The more equity China has in AUssie mining companies, the poorer Australia will become.........a greater portion of Aussie mining profits and company growth goes overseas.....that's wealth we don't get to spend on infrastructure, research and development, big houses, educating our children....

China does intend ramping up state funded infrastructure building, but it would be wise for them to buy foreign mining companies first before sending all that related cash overseas.

There's no easy way out of this for the west. China has the cash and labour. The West has obesity, debt, money printing presses, welfare mentality, low birth rate, and a culture of outsourcing anything that requires getting out of a chair. The west has some harsh light of day coming its way.

 

[Trembling Hand]

The West has obesity, debt, money printing presses, welfare mentality, low birth rate, and a culture of outsourcing anything that requires getting out of a chair. The west has some harsh light of day coming its way.

 

[UPKA]

At this point, China is trying to acquire mining companies, not increase their purchases of the raw materials mined (apart from copper). The more equity China has in AUssie mining companies, the poorer Australia will become.........a greater portion of Aussie mining profits and company growth goes overseas.....that's wealth we don't get to spend on infrastructure, research and development, big houses, educating our children....

China does intend ramping up state funded infrastructure building, but it would be wise for them to buy foreign mining companies first before sending all that related cash overseas.

There's no easy way out of this for the west. China has the cash and labour. The West has obesity, debt, money printing presses, welfare mentality, low birth rate, and a culture of outsourcing anything that requires getting out of a chair. The west has some harsh light of day coming its way.

no doubt abt the outlooking of Australia's future if this is the path we are walking on. however, in terms of equity growth which is wat this thread's topic is, I still hold a bullish view short term.

 

[wonderrman]

There's no easy way out of this for the west. China has the cash and labour. The West has obesity, debt, money printing presses, welfare mentality, low birth rate, and a culture of outsourcing anything that requires getting out of a chair. The west has some harsh light of day coming its way.

That is very good and sums up my thoughts exactly. Economically, the global economy is quite screwed, either way debt has to go and it will be painful. China is going to be ready to pounce.

There is quite a good article on China and its history authored my Armstrong over here http://d.scribd.com/docs/2n1b52p41n9yzy8aljwf.pdf. It is about 18 pages long. A good read.

w

 

[matty2.0]

well gold prices are up ... maybe that explains where people are putting their money as an alternative to treasuries ... especially US treasuries.

 

[aleckara]

especially in the case of China, over the past 10-20yrs, while the west has borrowed and spent their money away, the east has bulked up their inventory -- cash. now with international pressure for china to re-value their currency and the central bank's expansionary monetary policy, one would be stupid leaving their cash in the bank and watch it to "devalue" over time.

And this is where Australia comes into the picture. we have some of the most desired assets wanted by the Chinese, with established infrastructure and stable democratic government compared to their investments in Africa. Along with the plummeting resource price, our assets are becoming very very attractive to the Chinese.

http://www.news.com.au/business/story/0,27753,25357473-462,00.html

If there's a continuing interest from the Chinese, we should see our economy and possibly stock market escape from the worst of the slump.
The only thing stand in the way is the government and their foreign investment policy.

We may see this in the short term but in the long term I hate to say it - we can say that in Australia a lot of desired assets will reside in this country. What we can't say is that we will own these desirable assets. The Saudi's and other oil nations are increasingly interested in our food assets, and China is interested in our resource assets.

The rate that China with its centrally planned government is using this crisis to talk about their own currency, to break America and Europe's (the western cultures) dominance on the world even now tells me that unlike the Japanese the Chinese all along had different intentions. If they become the superpower of the world and their culture spreads across the globe I would find it interesting how the world will look like. A lot more armies in countries, a lot more control of the people? I don't know.

In the future Australia may just be land to extract value of for foreign nations.

I hope that this doesn't occur. I really do. In the end though debt is a nations greatest enemy. I'm sure that when people take on debt they don't think that they will have to give up so much.

 

[jonojpsg]

There's no easy way out of this for the west. China has the cash and labour. The West has obesity, debt, money printing presses, welfare mentality, low birth rate, and a culture of outsourcing anything that requires getting out of a chair. The west has some harsh light of day coming its way.

Funny you should point this out - I teach at a high school and was just talking this morning about the tendency of kids to want to do as little as possible in terms of hard work. I commented that having a generation coming through who have that sort of attitude means that we as a country aren't too far away from fading into obscurity - note that I'm only 36 so only talking about the generation below me. Sorry a bit OT but worth noting IMO

 

[helicart]

well gold prices are up ... maybe that explains where people are putting their money as an alternative to treasuries ... especially US treasuries.

Matt you must be referring to gold etf's on the asx.
Gold in USD is actually down today. The upwards movement in the etf is due to the AUD moving down.
But gold has been moving down for weeks now. I was trading gold (long) from Sept 08 to early March. Since, I have open shorts on nyse GLD and HUI. I don't see gold moving up significantly (above 975) until some new shock drives money out of stocks and US treasuries. That mightn't happen anytime soon.

This will be an interesting week. I see the Dow pushing against medium term resistance this week. It might flail around a bit over the next 2 weeks not knowing what to do. Then it will either push through timidly, or pull back, slightly at first. All speculation though......best to just watch for momentum trades imho....and stay on the sidelines until then.

 

[helicart]

Funny you should point this out - I teach at a high school and was just talking this morning about the tendency of kids to want to do as little as possible in terms of hard work. I commented that having a generation coming through who have that sort of attitude means that we as a country aren't too far away from fading into obscurity - note that I'm only 36 so only talking about the generation below me. Sorry a bit OT but worth noting IMO

I am a baby boomer and don't blame Gen YZ for being slack.
I blame boomer parents. They let the rot set in through the 60s and 70s. Spoilt their kids rotten. Blindly swallowed too much Leftist and enviro ideology without any understanding of how a country generates and keeps wealth.

The pendulum has swung too far in the west, turning us into undisciplined overly emotive dependents on Big Brother govt. The Coalition and Labor have been equally lacking in vision for the future. Australia should have specialized in key strategic industries 40 years ago. Sth Korea, Finland, Ireland, Sweden all did so with predictable results.

There's never been and never will be a free lunch canteen.....and anyone who outsources personal responsibility to big govt will realize their mistake too late.

rant off

 

[Sunder]

If the majority of us are bearish about the future, does that mean now is the time to be accumulating?

 

[GumbyLearner]

I am a baby boomer and don't blame Gen YZ for being slack.
I blame boomer parents. They let the rot set in through the 60s and 70s. Spoilt their kids rotten. Blindly swallowed too much Leftist and enviro ideology without any understanding of how a country generates and keeps wealth.

The pendulum has swung too far in the west, turning us into undisciplined overly emotive dependents on Big Brother govt. The Coalition and Labor have been equally lacking in vision for the future. Australia should have specialized in key strategic industries 40 years ago. Sth Korea, Finland, Ireland, Sweden all did so with predictable results.

There's never been and never will be a free lunch canteen.....and anyone who outsources personal responsibility to big govt will realize their mistake too late.

rant off

I blame cheaply available credit, the mirage of temptation and ill-discipline that many people have exercised in accessing it.

I agree the parents of baby boomers are just as much to blame as Gen Y or Z.

But when a professional goes driving down the road in a new sportscar I don't think of it in terms of wealth, I want to see the loan document from the bank or the hire-purchase agreement they entered into. The same goes for people who have borrowed up to 100% with nothing down for a newly built 4 bedroom estate home in the burbs or a highly inflated one in an established inner-city surburb. This unsustainable borrowing is to blame.

Many that lived through the Great Depression realised that they should have lived within their means. Today's society wants more for less and is going to get the smack of this century for not reigning in their use of cheap credit and lack of saving.

I agree that Governments of all flavours have played a part in creating this credit crunch phenomena. Take the western provinces of Canada as an example. During the past few decades the Canadian Governments encouraged drift net fishing for years in places like British Columbia and Newfoundland. So boats went further out to increase their catch. This meant those willing to do so could build bigger houses and improve their standard of living. That's all fine in the microcosm of a neighborhood. But then the Government step in and try to enlarge the tax base on increases in local property values and increases in the availability of local services. This eventually resulted in Joe Blow next door having to keep up with the Jones in order to purchase a local property that is now far more expensive to purchase. Also, his local taxes and living costs increased, so he had to buy a bigger boat and go further out to sea to catch his quota of fish to sustain himself within his local area.

The fishing industry in Western Canada has now been devastated and destroyed beyond repair. In turn so have the livelihoods of many of it's residents. Why you ask?

Because maximum sustainable yield is only true to a point, when you have stupid governments/businesses demanding too much from citizens/consumers.
And I agree with you the green movement can point the finger at the fisherman if they like but I prefer to firmly point the finger at those who ultimately profited through taxes. Fishing can be an economically sustainable industry but not when it's been used and abused as a porkbarrel fund for the incumbent's next election campaign or in collaboration with "keeping up with the Jones cheap credit mentality" of the private sector.

Was there a need to fish that much? Did these fisherman just try to improve their standard of living and pay taxes to the powers that would eventually provide them the dole?

The same analogy can be applied to this crisis IMO. Unsustainable growth and unfortunately many will be thrown on the scrap heap again.

Just my

Rant over

 

[helicart]

Was there a need to fish that much? Did these fisherman just try to improve their standard of living and pay taxes to the powers that would eventually provide them the dole?

Just my

Rant over

I like the use of the fishing anecdote. It highlights that growth is not sustainable forever. There is a ceiling on how much production and consumption can be done with finite resources.

One of my pet hates are these wealth creation spruikers who say we can have it all if only we have the right mind set......they really are ignorant twats. If 6 billion people had gas guzzlers and mcmansions, we'd be out of oil by....say 2013. and electric cars aren't going to help because lithium is a scarce resource too.

Apart from having it in for the extreme green movement, I still respect the need to conserve natural resources. The greens just don't balance economic and conservation considerations.

Interestingly, a lot of the cheap credit floating around was due to Japan's surplus and domestic deflation......which caused the carry trade.....in addition to the stupid leverage allowed by congress in the USA. 30 and 40 to 1. These idiots don't seem to get that leverage is a form of money - credit money, that causes asset bubbles.... etc etc blah blah grumpy old fart rant off.

 

[CanOz]

The fact remains that regardless of what Western societies ever do ever again, China if it continues at this rate of growth will need an entire new planet earth to satisfy its hunger for resources by 2050.


Cheers,


CanOz

 

[sammy84]

The fact remains that regardless of what Western societies ever do ever again, China if it continues at this rate of growth will need an entire new planet earth to satisfy its hunger for resources by 2050.z

Are you suggesting its time that we start looking for companies outside of earth to invest in?

 

[Uncle Festivus]

Interestingly, a lot of the cheap credit floating around was due to Japan's surplus and domestic deflation......which caused the carry trade.....in addition to the stupid leverage allowed by congress in the USA. 30 and 40 to 1. These idiots don't seem to get that leverage is a form of money - credit money, that causes asset bubbles.... etc etc blah blah grumpy old fart rant off.

Exactly, not much said about this, but this has been the financial lube for our debt binge & hence [insert asset bubble here] always goes up over time. 2 generations have a rude shock coming to them soon?

GE Corp about to make the news soon......for the usual reasons......

The fact remains that regardless of what Western societies ever do ever again, China if it continues at this rate of growth will need an entire new planet earth to satisfy its hunger for resources by 2050.


Cheers,


CanOz

Canoz, what's it like on the ground there - is there more unemployed, is the stimulis going to fuel excesses ie glut's of materials? Or have they de-coupled into a self fulfilling demand economy. Can we believe the government stats?

Somehow this is tied into the other thread on too many people in the world..

 

[Beej]

I blame cheaply available credit, the mirage of temptation and ill-discipline that many people have exercised in accessing it.

I agree the parents of baby boomers are just as much to blame as Gen Y or Z.

But when a professional goes driving down the road in a new sportscar I don't think of it in terms of wealth, I want to see the loan document from the bank or the hire-purchase agreement they entered into. The same goes for people who have borrowed up to 100% with nothing down for a newly built 4 bedroom estate home in the burbs or a highly inflated one in an established inner-city surburb. This unsustainable borrowing is to blame.

You know, this comes across as being a little bit jealous and/or bitter towards those who may have been more successful for whatever reason? Eg, not everyone who drives down the street in a sports car, or purchases an "expensive" (maybe for you) house in the inner city, has done so with bucket loads of borrowed money. Many people I know have bought marque sports cars and "expensive" houses for cash, or bulk cash (50-80% of cost) plus very moderate borrowing in the case of houses. That cash is what they saved, earned, and/or gained through returns from other investments etc. Likewise for people that build their dream home out in the burbs - many have saved for years and years, already owned a house that they sold etc. Very few purchase assets of this kind on 100% borrowed funds, yet world views such as that expressed above suggests a view that the majority have done this! If this is what you truly believe, then I would argue that is a very naive view of the world.

Recessions certainly sort out the chafe though! After a recession you could be almost certain that the next expensive sports car you see is owned outright and not on a lease or hire purchase

Anyway back on topic now.....

Cheers,

Beej