Recovery or Dead Cat Bounce?

[Gundini]

So what is the chance that 3100 will be revisited? Ask, what is the new driver(s)? What is the new fear factor? The recent low of 3100 was achieved through a series of severe fear factors - subprime, bad banks, write off, credit crunch, credit freeze, export freeze, economic meltdown and wholesale global panic. Currently most people in my view are quite well conditioned by all these bad news, the chance that they will get into some kind of panic attack and dump their shares, frankly is quite low.

My opinion? It is certain we will revisit 3100, and maybe lower.

Reason?........All this Global stimulus will have to stop. You can't just keep printing money. When it does stop, reality will become apparent to all who have lost their jobs. Many will be fearful of their job. Spending will pull back, business will cut staff, further pressure on Real Estate, and Commercial, non competitive business will go broke.

If the US would have let toxic assets fail, we would see an earlier recovery, but bailing out toxic assets just delay the recovery in the long term.

Ultimately, they are trying to transfer the debt to future generations. Society in general is like that, they don't want to take responsibility for there own actions.

We are lucky in Aus... While we borrow like the best of them, we do have substancial resources (Both Minerals and Education) that cashed up countries desire! Therefore, we are less at risk to melt down as the US is in it's economy.

This is the changing of the guards, a new world currency will be born, and it may just well be based on a Gold standard.

Having said that, we will be lucky we stop at 3100, but the US has to suffer the responcibility of their actions. Let's face it... The US has played poker with China, and lost.... Lost big time....

What happens next? The USD becomes so weak that they either create a war with somebody to kickstart their economy, or they become globally competitive with their dollar and lead the Globe out of Recession, maybe both!

Disclaimer: The above are ramblings only. Ramblings are toxic assets! If you are looking to sell these, please send to: Obama- PO Box 7000 -WDC

 

[haunting]

.All this Global stimulus will have to stop. You can't just keep printing money. When it does stop, reality will become apparent to all who have lost their jobs. Many will be fearful of their job. Spending will pull back, business will cut staff, further pressure on Real Estate, and Commercial, non competitive business will go broke...

1) QE is meant as a last resort to unfreeze the earlier credit freeze that was plaguing the global economy. Right now there are signs that the freeze may be over, albeit slowly. At some point, QE will end and mopping up this excess liquidity will be set into motion. Bernanke and TimG know full well this is what has to be done, and with it, the threat of hyperinflation will likely to be alleviated. So, right now the concern of excessive printing of dollar although is a valid concern, it's a bit too early. The real concern is if and when the mopping up has failed.

Right now, Bernanke and TimG's problem is to generate a cushion of growth to reduce the full impact of a severe recession. They seem to have succeeded with many forecasts indicating the US economy will get back into some kind of growth by the latest, end of '09.

Time will tell. But really there is no need to rush to any conclusion especially the overly negative conclusion because the data available right now don't seem to support this view.

2) Australian economy in specific - how much does the US economy affect us over here? If I can draw a comparison between the Canadian economy against ours - both are commodity economies, yet theirs is in some kind of trouble because of their over exposure to the US economy, with the USA being their major export destination. Whilst the Aussie economy, according to Krudd and Swan has avoided a recession. Luck?

Probably not. I would suggest that has a lot to do with the Chinese economy and the other Asian economies. They are still importing our commodities and they are still investing into our local economy.

So seriously, how much threat is the US economy to us? Even assuming if it goes into a serious recession?

Not much I reckon.

3) Fear, due to our imagination sometimes appears much worse than reality. If you find this hard to accept, just look back at the last 6 months and try to relive what the market has been through. Do a google or bing and see if the future is still looking this bleak.

Alternatively try to get a feel on why RIO back then was worth only 30 a pop and 3 days ago it was selling at around 79?

Fear can be irrational.


Cheers.

 

[MrBurns]

Reality is there is very little business being done out there, businesses are hanging on by their fingernails. Ths will not get better any time soon and without brisk and growing business trade we're stuffed.

 

[Beej]

Reality is there is very little business being done out there, businesses are hanging on by their fingernails.

Got any evidence to back up this claim? I know of many businesses still doing well; additionally several people I know have told me that their businesses have picked up quite a bit since Q1 this year (Q4 last year seemed to be the worst). The GDP numbers certainly don't back up your assertion....

Ths will not get better any time soon and without brisk and growing business trade we're stuffed.

I agree with the statement above though!

PS: I think Haunting is pretty much on the money with the likely outlook for the market from here with solid, well thought out reasoning. I see this current re-tracement as a buying opportunity (with a long term outlook).

Beej

 

[Gordon Gekko]

1) QE is meant as a last resort to unfreeze the earlier credit freeze that was plaguing the global economy. Right now there are signs that the freeze may be over, albeit slowly. At some point, QE will end and mopping up this excess liquidity will be set into motion. Bernanke and TimG know full well this is what has to be done, and with it, the threat of hyperinflation will likely to be alleviated. So, right now the concern of excessive printing of dollar although is a valid concern, it's a bit too early. The real concern is if and when the mopping up has failed.

Right now, Bernanke and TimG's problem is to generate a cushion of growth to reduce the full impact of a severe recession. They seem to have succeeded with many forecasts indicating the US economy will get back into some kind of growth by the latest, end of '09.

Time will tell. But really there is no need to rush to any conclusion especially the overly negative conclusion because the data available right now don't seem to support this view.

2) Australian economy in specific - how much does the US economy affect us over here? If I can draw a comparison between the Canadian economy against ours - both are commodity economies, yet theirs is in some kind of trouble because of their over exposure to the US economy, with the USA being their major export destination. Whilst the Aussie economy, according to Krudd and Swan has avoided a recession. Luck?

Probably not. I would suggest that has a lot to do with the Chinese economy and the other Asian economies. They are still importing our commodities and they are still investing into our local economy.

So seriously, how much threat is the US economy to us? Even assuming if it goes into a serious recession?

Not much I reckon.

3) Fear, due to our imagination sometimes appears much worse than reality. If you find this hard to accept, just look back at the last 6 months and try to relive what the market has been through. Do a google or bing and see if the future is still looking this bleak.

Alternatively try to get a feel on why RIO back then was worth only 30 a pop and 3 days ago it was selling at around 79?

Fear can be irrational.


Cheers.

I can already hear the sucking sound starting!

I still can't believe that people are buying into this recovery based on " green shoots" Spun out by the media.
Didn't this "recovery" started on a leaked rummor that a bank was going to make money. Then the toxic or "legacy assets" where able to be taken off the balance sheets by the mark to market changes.
Whats changed in the U.S?
Increased mortgage/ credit card defalts.
Growing unemployment
Record debt
Oh we are decoupled from the U.S cause we can ride on the coat heals of china? Rubbish.

http://www.321gold.com/editorials/pento/pento061609.html

http://www.marketskeptics.com/2009/06/california-leads-nation-to-bond-default.html

Best
G

 

[Gundini]

I can already hear the sucking sound starting!

Oh we are decoupled from the U.S cause we can ride on the coat heals of china? Rubbish.

http://www.321gold.com/editorials/pento/pento061609.html

http://www.marketskeptics.com/2009/06/california-leads-nation-to-bond-default.html

Best
G

I haven't looked at those links yet but,

We have to decouple from the US.... the US is unfinancial.. China has money of worth + gold. China will have huge stockpiles of all resources at the end of this strategic play.. Because we will either sell it to them, or they will control some assets...

Outside of a master stroke from Uncle Sam (Possible? Resiliant?) they are doomed.... until of course their dollar becomes export competitive....

 

[Gundini]

1)
So seriously, how much threat is the US economy to us? Even assuming if it goes into a serious recession?

Not much I reckon.



Cheers.

Failure in the US economy are felt throughout the world.... " A butterfly that flaps in wings in Christchurch can cause a massive sell off in oil in the US"...

China will soon be a Global provider of cars... GM just fell over... Therefore, China will need to get steel and aluminium etc.. from Australia to build these cars. We have heaps of raw materials for China. But, If demand for vehicles subside in the US, China will have less demand for raw materials, Australia will have less exports and we will lose jobs locally. People who lose their jobs can't afford mortgages, and so on, and so on.....

 

[Gordon Gekko]

Here is some more bearish info for you all.

Its a couple of months old I lost the link but it's all the same since then. nothing changed but more debt.

http://www.globalpolitician.com/25449-depression-recession-stimulus-europe-recovery

Best

G

 

[MrBurns]

Got any evidence to back up this claim? I know of many businesses still doing well; additionally several people I know have told me that their businesses have picked up quite a bit since Q1 this year (Q4 last year seemed to be the worst). The GDP numbers certainly don't back up your assertion....

No official figures, they're always old news anyway, I go on what I see in the street.
Shops advertising sales, you can smell the rot, a cab driver the other day told me business is the worst it has ever been and he wasnt kidding, the way he described it actually shocked me, those sorts of things tell me the story, there is no optimism it's just a great chasm, like the hole thats left when a cancer is removed (I imagine).

 

[MrBurns]

Here is some more bearish info for you all.

Its a couple of months old I lost the link but it's all the same since then. nothing changed but more debt.

http://www.globalpolitician.com/25449-depression-recession-stimulus-europe-recovery

Best

G

I think there's a fair chance that's on the cards.

Also - recovery to what ?????? what we had was a bubble of unprecedented proportions propped up by dodgy financial structures, thats all gone now we cant go back to that, so what do we recover to ?

 

[seasprite]

Eeeeek,

Sensing some faith like statements here and in the gold thread.



All based on the same fundamentals and emotions that drive the overall market.

Nothing is certain.

Only perceptions of reality.

I'm going against the trend and picking a green day tomorrow (currently -6 on the futures ) .

 

[Gundini]

I'm going against the trend and picking a green day tomorrow (currently -6 on the futures ) .

Hahaha.... Now that will fix the problem.... lol

 

[pilots]

Got any evidence to back up this claim? I know of many businesses still doing well; additionally several people I know have told me that their businesses have picked up quite a bit since Q1 this year (Q4 last year seemed to be the worst). The GDP numbers certainly don't back up your assertion....



I agree with the statement above though!

PS: I think Haunting is pretty much on the money with the likely outlook for the market from here with solid, well thought out reasoning. I see this current re-tracement as a buying opportunity (with a long term outlook).

Beej

Beej, have a look at British Airways, how well are they doing?? you will find that at the end of this year you will see the real rot set in.

 

[GumbyLearner]

Where's WHEEP0 ?

 

[Beej]

I think there's a fair chance that's on the cards.

Also - recovery to what ?????? what we had was a bubble of unprecedented proportions propped up by dodgy financial structures, thats all gone now we cant go back to that, so what do we recover to ?

Fair enough - I'm not saying it's all rosy by any means, but around where I live/work things don't seem to be anywhere near as down as they sound like where you hang out? Everything is pretty normal around here, cafe's still full every morning/weekend, shops full, I do notice some restaurants are a bit easier to get a table at, but still plenty of turn-over. Still just as much bloody traffic on the roads as ever. Everyone I know who runs a business is still going and whilst they have seen a downturn things are currently improving from what I get told, plus the four people I know who got laid off late last year etc have all found gainful employment, in most cases earning more $$$ then they were before, and with a big fat redundancy pay-out having landed in their bank account or on their mortgage to boot!

Beej, have a look at British Airways, how well are they doing?? you will find that at the end of this year you will see the real rot set in.

What does the performance of BA have to do with the Australian economy???? Even if we were talking Qantas, airlines are highly cyclical in the best of times!

Beej

 

[gfresh]

Depends on the business (of course!).. company I work for is suffering a slowdown, but still getting business, and has not deteriorated recently. I have my own business, and I am still getting calls for work coming in. (have to tell them too much work, bugger off). There is no broad brush to describe every industry, other than things are probably not as easy as the last few years, but not everybody is shutting up shop, or crying crocodile tears.

I'm no expert, I don't speculate. I don't try to pick the bottom or listen to others who try. I am 100% fully invested and continue to average down every fortnight. Those who buy at or near the bottom will be rewarded in the long term.

I'm interested as to what your strategy or general perspective actually is So you're averaging down, yet believe this is not the bottom, and believe there must be a further bottom somewhere below at 3100 so you refuse to average 'up' ?

I would have thought, if one continued to average down, one would be imagining there would be recovery sooner rather than later, in expectation that they are getting closer to the bottom, in order to realise profit without waiting many many years? If not, surely you'd simply wait much longer to do so.

What will be your indicators when a recovery has occurred? I know as things deteriorated I had a few that I knew would be important, and most of these have turned. They may turn back again, but it's a long fall to do so.

 

[Real1ty]

I won't always be a bear but for know I'm cashed up and happy to wait.

G

While you were sitting on the sidelines as the market rallied 20+% a lot of us were taking advantage of this rally and not giving two hoots as to why it was happening.

If the trend turns, then many of us will simply about face and attempt to make money out of the ride down.

Glad to hear you are happy

 

[moXJO]

I say Dow to a million... Go inflation go!!:bananasmi

 

[Gordon Gekko]

Depends on the business (of course!).. company I work for is suffering a slowdown, but still getting business, and has not deteriorated recently. I have my own business, and I am still getting calls for work coming in. (have to tell them too much work, bugger off). There is no broad brush to describe every industry, other than things are probably not as easy as the last few years, but not everybody is shutting up shop, or crying crocodile tears.



I'm interested as to what your strategy or general perspective actually is So you're averaging down, yet believe this is not the bottom, and believe there must be a further bottom somewhere below at 3100 so you refuse to average 'up' ?

I would have thought, if one continued to average down, one would be imagining there would be recovery sooner rather than later, in expectation that they are getting closer to the bottom, in order to realise profit without waiting many many years? surely?

What will be your indicators when a recovery has occurred? I know as things deteriorated I had a few that I knew would be important, and most of these have turned. They may turn back again, but it's a long fall to do so.

Hi Gfresh,

That quote of mine you posted is rather old. I still and always will maintain that I am no expert but I have been learning (with the help of fellow posters) more and more to have faith in my convictions.

I sold in Aug 07 at 6000asx (luck rather than good financial management) and spent the year schooling up.
Aug 08 I started buying back in with a goal to be fully invested in 6 to 9 months, however I was a bit of ahead of myself and after I was fully invested I continued to watch my portfolio drop. I wasn't worried about losing 10% or so and as the market started to flatten out I continued to buy every fortnight even though it only brought my cost base down a couple of cents.
I sold again when the market was at 3700 as I'm just not buying into this ****. Granted long term that may have been a great entry point however (I buy index funds for now)The run up was to far to fast with no retracement. It was over sold in March (or was it) and my feeling now is its over bought and until there is a pull back and consolidation on significant volume over months rather than days, then I start to average in again.
To be honest I am a long term bull in bears clothing but at this stage I am very happy to sit on a small fortune on the sidelines. If there were to be a capitulation moment from here I would drop the hammer and move it all back in but it would have to be a level under 3300 as that is where I see fair value for the index for a long term 5 to 15 year hold.

Time will tell but I don't think we will have to wait to long.

Best of luck

G

 

[grace]

Where's WHEEP0 ?

He is not looking at the screen until 4600 is reached I hear. Ooops, 4600 did he say???