Sharemarket Crash!!! What do you do now?

[insider]

Last night I was thinking about an inevitable scenario... A SHARE MARKET CRASH... That's right it is inevitable, we have had a magnificent bull run since 2003, we are overdue for a recession in Australia, US markets are getting wobbly so what are you going to do about it... What are alternative ways of making money in these conditions?

Discuss

 

[Kimosabi]

Last night I was thinking about an inevitable scenario... A SHARE MARKET CRASH... That's right it is inevitable, we have had a magnificent bull run since 2003, we are overdue for a recession in Australia, US markets are getting wobbly so what are you going to do about it... What are ways to make money in these conditions?

Discuss

Pimping...

 

[vishalt]

US markets are hardly getting wobbly, companies are still producing record profits and the economy is (seemingly) growing at a moderate pace.

But yeah i'm with you on the "inevitable" bit, but its a bloody hard one to judge. This commodities boom is obviously much more different from the tech bubble, China/India need all these materials because they really are trying to up their country's infrastructure and its gonna take a hell of a lot more time/supply to get it done.

I'm thinking that this dream run will continue for a while yet (maybe till mining companies profits fall) - but I am expecting not a crash of 50%, but major corrections of 15-20% in the future.

 

[Realist]

If the sharemarket crashes the best way to make money is to buy shares.

If it keeps going up as quick as it has the past couple of years the best way to make money may be to leave it in the bank. Property in Sydney is showing more value now though and rental yields are higher so maybe property.

 

[insider]

If the sharemarket crashes the best way to make money is to buy shares.

If it keeps going up as quick as it has the past couple of years the best way to make money may be to leave it in the bank. Property in Sydney is showing more value now though and rental yields are higher so maybe property.

I checked out house prices in the US and they are much better value than houses here in Australia... Real estate is definitely going to slide IMO

 

[insider]

US markets are hardly getting wobbly, companies are still producing record profits and the economy is (seemingly) growing at a moderate pace.

But yeah i'm with you on the "inevitable" bit, but its a bloody hard one to judge. This commodities boom is obviously much more different from the tech bubble, China/India need all these materials because they really are trying to up their country's infrastructure and its gonna take a hell of a lot more time/supply to get it done.

I'm thinking that this dream run will continue for a while yet (maybe till mining companies profits fall) - but I am expecting not a crash of 50%, but major corrections of 15-20% in the future.

I'm thinking of applying for an ING savings maximizer just for safe keepings... (unless ING go bankrupt) lol

 

[Kimosabi]

I'm thinking of applying for an ING savings maximizer just for safe keepings... (unless ING go bankrupt) lol

These accounts are great. Don't underestimate the power of Compound Interest, low risk, and, no fees...

 

[Uncle Festivus]

What do I do - buy GOLD! It's telling a story no one wants to acknowledge - central banks printing excess money. Until the crunch comes, go long banks & other money shufflers, but get out quick when it turns.

An insight to how much the US market is dependant on non productive money shufflers -

"The investment bank and brokerage stocks are so crucial this quarter that if you stripped out the 7 companies that fall under that category, overall S&P 500 earnings growth would fall to less than 2 percent from 3.3 percent"

 

[Kimosabi]

What do I do - buy GOLD! It's telling a story no one wants to acknowledge - central banks printing excess money. Until the crunch comes, go long banks & other money shufflers, but get out quick when it turns.

An insight to how much the US market is dependant on non productive money shufflers -

"The investment bank and brokerage stocks are so crucial this quarter that if you stripped out the 7 companies that fall under that category, overall S&P 500 earnings growth would fall to less than 2 percent from 3.3 percent"

And then when you factor in the depreciating US dollar, it looks even sicker

 

[professor_frink]

Last night I was thinking about an inevitable scenario... A SHARE MARKET CRASH... That's right it is inevitable, we have had a magnificent bull run since 2003, we are overdue for a recession in Australia, US markets are getting wobbly so what are you going to do about it... What are alternative ways of making money in these conditions?

Discuss

If you don't want to sell and trigger CGT, you could always look into hedging.

 

[wayneL]

What do I do - buy GOLD! It's telling a story no one wants to acknowledge - central banks printing excess money. Until the crunch comes, go long banks & other money shufflers, but get out quick when it turns.

An insight to how much the US market is dependant on non productive money shufflers -

"The investment bank and brokerage stocks are so crucial this quarter that if you stripped out the 7 companies that fall under that category, overall S&P 500 earnings growth would fall to less than 2 percent from 3.3 percent"

The anecdotal evidence is that CBs are going to crank up the printing presses even more than they are now, hence agree with you here.

I would add that most commodities would do the same job as gold, possibly better as gold is such a (allegedly) manipulated market.

A quick scan across the long term chart of just about any commodity will show up the increase in money supply over the last 6 years.

Commodities will be where it's at. Rogers is right.

 

[noirua]

Here is a report in 1974 from "The Parliament of the Commonwealth of Australia" on the biggest mining boom the world had ever seen. It shows and reports the truth about the stock POSEIDON and how it rose from $1.10 to $280.00. How the mining boom got the extra fuel it needed, and how the Worlds Greatest Mining collapse began: http://www.takeovers.gov.au/content/545/Download/rae_part1_vol1.rtf

"It's all different this time", they said in 1969. "It's all different this time", they said in 2007?

 

[Uncle Festivus]

Commodities will be where it's at. Rogers is right.

Up to the point where input costs (commodity prices) reduce a companies profitability, which we may be approaching now. If analysts are correct then US companies earnings will be lower this qtr. Even allowing for the absurdly low consensus (around 3%), they could be still lower than the previous qtr.

If you include oil as a commodity, the latest trade figures are either pointing to a sharp slowdown in the US or a rapid increase in fuel efficiency - vis -

"The petroleum trade deficit was the smallest since June 2005, as crude oil import volume fell 21 percent to its lowest since February 2003"

So I wouldn't count on commodities providing the same percentage returns as the past 3 years, in fact each year lower prices are negotiated eg coal, eventually to be in equilibrium then decline.

The multi hatted commodity/currency called gold will always eventually rise or fall depending on global liquidity imbalances, in spite of central bank intervention, as shown recently when they swamped the market with tonnes of gold and the price actually jumped $10. There is a make or break battle going on at this very minute to suppres gold from breaking out. Maybe this is golds week?

 

[wayneL]

Up to the point where input costs (commodity prices) reduce a companies profitability, which we may be approaching now. If analysts are correct then US companies earnings will be lower this qtr. Even allowing for the absurdly low consensus (around 3%), they could be still lower than the previous qtr.

If you include oil as a commodity, the latest trade figures are either pointing to a sharp slowdown in the US or a rapid increase in fuel efficiency - vis -

"The petroleum trade deficit was the smallest since June 2005, as crude oil import volume fell 21 percent to its lowest since February 2003"

So I wouldn't count on commodities providing the same percentage returns as the past 3 years, in fact each year lower prices are negotiated eg coal, eventually to be in equilibrium then decline.

The multi hatted commodity/currency called gold will always eventually rise or fall depending on global liquidity imbalances, in spite of central bank intervention, as shown recently when they swamped the market with tonnes of gold and the price actually jumped $10. There is a make or break battle going on at this very minute to suppres gold from breaking out. Maybe this is golds week?

Fair comment.

I should add that, long term commodity buys should be at or close to inflation adjusted minimum value. A subjective measure, but for sure most commodities are well above that at the moment, as measured by long term charts and producers actions.

But, if they fit a supercharger to the printing machine in response to the sub-prime apocalypse as mooted, it will certainly get very interesting.

 

[Uncle Festivus]

Fair comment.

I should add that, long term commodity buys should be at or close to inflation adjusted minimum value. A subjective measure, but for sure most commodities are well above that at the moment, as measured by long term charts and producers actions.

But, if they fit a supercharger to the printing machine in response to the sub-prime apocalypse as mooted, it will certainly get very interesting.

Yes, the bears conundrum - jump on board an illogical bull or get left behind while waiting for the (logically) inevitable adjustment to fiscal liquidity equilibrium. I'm sitting on the chair closest to the exit, but still bidding at the action.

This ties in with your "capitalism broken" thread I think - overconsumption.

 

[Julia]

Pimping...

Kimosabi,

That's probably in questionable taste but it did make me laugh!
Thanks.

 

[son of baglimit]

this raises several questions...

1. what is a crash - from the recent media reports on the 'march correction' the 'hundreds of points, billions of $' lost were clearly a mere blip on the screens. but it was portrayed as a major crash in some segments - and plenty of 'naive traders' reacted accordingly. god bless em. the drop the market suffered from june 02 till mar 03 could be construed as a major correction, after the post 9/11 surge. as for crash, surely you need to go back to october 87 for any real major dump.

2. looking at a crash or major correction scenario, what stocks could be seen as crash proof to some extent. supermarkets (cos everyones gotta eat) are commonly seen as a nice oasis to park the cash. what other industries are considered safe from a major correction/crash. i have my thoughts on a particular area, but i'll be accused of ramping so i'll leave it for now.
any thoughts on these crash proof industries ???

 

[Kimosabi]

But, if they fit a supercharger to the printing machine in response to the sub-prime apocalypse as mooted, it will certainly get very interesting.

Mate, their already warming up printing presses...

Subprime bailout? $120 billion

More than 1 million borrowers may be at risk of defaulting on their mortgages. Assisting them all wouldn't come cheap.

By Stephen Gandel, Money Magazine senior writer
April 13 2007: 4:21 PM EDT

NEW YORK (Money) -- Want to pick up the check for every homeowner who got saddled with a risky mortgage? It's a big one - on the order of $120 billion.

Lawmakers and consumer groups in recent weeks have been calling for assistance for those at risk of defaulting on their mortgage.

On Wednesday, Congressional Democrats led by Charles Schumer (D-N.Y.) advocated steering hundreds of millions of dollars into nonprofits to help the growing number of homeowners who are having trouble paying their mortgage.

But economists and industry experts say the cost of a bailout would be significantly more than that.

Christopher Cagan, director of research at First American CoreLogic, says rising mortgage payments on adjustable rate loans will force 1.1 million homeowners into foreclosure over the next 6 years. He estimates the cost of paying off the debt for those borrowers would be $120 billion.

A spokesperson for Sen. Schumer says the senator is not suggesting the government should pay off borrowers' loans in full. The spokesperson says Schumer believes a mixture of counseling and restructuring of the loans would bring down the costs of the program considerably. He says Schumer hasn't finalized a plan, and that Schumer has said banks and lenders should foot part of the bill.

But even a partial bailout plan would cost far more than a few hundred million dollars.

Larry Litton, whose company Litton Loan Servicing oversees the payments on 400,000 subprime loans, says on average it costs his company $16,000 to put one of its customers through a "loan modification" program if which borrowers get moved into loans with slightly lower rates. That would put the price tag of a nationwide program to assist troubled borrowers at $17.6 billion, using Cagan's default estimates.

"The numbers are going to get very large," says Raphael Bostic, a professor of economics at the University of Southern California. "I don't think this is a feasible plan."

A historic rise in delinquency rates among borrowers with low credit ratings has raised concerns that a record number of Americans in the next few years will be unable to pay their mortgage. Many of those borrowers were put into loans with low teaser rates that are now adjusting upward, sometimes doubling their monthly mortgage payment.

Consumer advocate groups say those loans, with steeply rising payments, were pushed on borrowers who didn't understand the terms. Advocates say a government bailout, even a large one, is appropriate because regulators didn't do enough to stop predatory lending, and because of the high cost of foreclosures.

"The cost of not doing anything would be devastating to many communities around the country," says Lisa Rise, a vice president at the nonprofit National Fair Housing Alliance.

Rise notes that even a $120 billion bailout would not be without precedent. Economists estimate the federal government spent upwards of $150 billion to resolve the Savings and Loan Crisis of the late 1980s and 1990s.

Still economists say bailout could have the effect of causing more defaults. "If the plan is to pay off loans when people quit, then I plan to quit paying my loan," says Michael Englund, chief economist at Action Economics.

What's more, some economists say a bailout could encourage more risky lending in the future. "A bailout would validate what some of these lenders and borrowers did, which we now understand was reckless," says Carl Tannenbaum, president of the National Association of for Business Economics.

"I don't think that's what we want to do."

http://money.cnn.com/2007/04/13/rea...ost.moneymag/index.htm?postversion=2007041316

 

[wayneL]

If they do that, I'm hocking myself up to the eyeballs and going on the dole.

What motivation for financial responsibility is there left? This is seriously bad news.

 

[Kimosabi]

If they do that, I'm hocking myself up to the eyeballs and going on the dole.

What motivation for financial responsibility is there left? This is seriously bad news.

Ha, I'm warming up my laser printer.

If it's good enough for the government to print money whenever they feel like it, why can't I?