Stock Market Crash - End of the Bull!

[champ2003]

I think the market is in quite a bit of troulbe at the moment. Let's say, the Feds cut rates. This would only confirm that there is a serious problem, and will get people thinking, perhaps the risks are indeed a lot greater than what they have been valued to be. Of course, if things turn out to be bullish again, we'll just run into the same problem a little later down the track as debt continue to increase. Then what? Cut rates again? Until the interest rate is zero?

Alternatively, they don't cut rates, people will think that the Feds don't know what they are doing, and since they are unwilling to bail out the large investors (e.g. hedge funds), they'll have sooner or later have no other choice but to de-risk their highly leveraged portfolio purely for survival.

So, either way, I think a crash is imminent. The question is not if, it's when.

The Fed has already confirmed that there are major problems by cutting the discount interest rate and this has all been factored into the market. The market is already betting on the Fed to cut the regular interest rate and when this is confirmed it should bring stability back into the market IMO as by cutting interest rates promotes economic growth and puts more liquidity into the market.

I wouldn't go as far as saying that they could hypothetically cut interest rates to zero even though i understand that you are being facetious. It's understandable fo interest rates to be cut a percentage over time though. Who said that rates need to be continuously cut anyway? What's to say that rates are cut and then put on hold once stability has been obtained?

 

[insider]

I think the market is in quite a bit of troulbe at the moment. Let's say, the Feds cut rates. This would only confirm that there is a serious problem, and will get people thinking, perhaps the risks are indeed a lot greater than what they have been valued to be. Of course, if things turn out to be bullish again, we'll just run into the same problem a little later down the track as debt continue to increase. Then what? Cut rates again? Until the interest rate is zero?

Alternatively, they don't cut rates, people will think that the Feds don't know what they are doing, and since they are unwilling to bail out the large investors (e.g. hedge funds), they'll have sooner or later have no other choice but to de-risk their highly leveraged portfolio purely for survival.

So, either way, I think a crash is imminent. The question is not if, it's when.

I think people need to realize that The Feds really can't do anything about it... Having said that a crash is inevitable because it is a result of over investing... Can't wait to see Monday... I reckon the All ords will go down 2.5%...

 

[noirua]

Problems remain as lending between banks continues to dry up, forcing countries to pump money into the system. Most Banks have not declared their potential sub-prime losses and until this is done the credit-crunch is set to stick around.
Australian Banks have kept quiet and their interests may well be substantial.
Banks are now starting to raise rates to claw in cash, whoever goes the highest may have the biggest problem.

 

[GreatPig]

If the all-ords goes down about the same as the US last night then it will end up on the support just below 6200.

GP

 

[Pommiegranite]

How about this:

Inflation has fallen significantly. 2 years of interest rate cuts have achieved what they were meant to.

Therefore a .25% cut in interest rates.

The economy is strong and is expected to continue its growth supported by lower interest rates.

So we get a correction/volatility in the meantime. Then by October's Fed meeting economic growth, housing market, inflation will all have stabilised on a sustainable growth 'curve'.

Sub prime....sub what?

 

[explod]

How about this:

Inflation has fallen significantly. 2 years of interest rate cuts have achieved what they were meant to.

Therefore a .25% cut in interest rates.

The economy is strong and is expected to continue its growth supported by lower interest rates.

So we get a correction/volatility in the meantime. Then by October's Fed meeting economic growth, housing market, inflation will all have stabilised on a sustainable growth 'curve'.

Sub prime....sub what?

Who is the author, a bland statement without qualification is meaningless.

Ahhh....welllllll remember in cool hand luke, the great line of the gaoler

"...some people you just can't help"

 

[nioka]

. Can't wait to see Monday... I reckon the All ords will go down 2.5%...

If enough people say that and think that then it will. Whether it needs to or should is another matter. Day traders have a vested interest in ramping and downramping the market so some of all this is market manipulation.

 

[krisbarry]

If enough people say that and think that then it will. Whether it needs to or should is another matter. Day traders have a vested interest in ramping and downramping the market so some of all this is market manipulation.

Completley agree, could go either way on Monday, most likely down, but the Aussie market has endured many of the Dows down days, ending in positive territory.

Day traders do tend to ramp or downramp the guts out of the "xjo" etc to suit there short or long positions.

 

[Pommiegranite]

Who is the author, a bland statement without qualification is meaningless.

Ahhh....welllllll remember in cool hand luke, the great line of the gaoler

"...some people you just can't help"

Sorry...should have made myself a little more clear.

The author is me. I'm just trying to predict some kind of Fed statement this month. Of course they would have to qualify the statement.

Is this really beyond the realms of possibilty??...i.e inflation having been reigned in.

P.S...I reckon Greenspan should just **** *** *** ***. He helped create a mess and now is preaching about it as though he had nothing to do with it.

 

[Porper]

Completley agree, could go either way on Monday, most likely down, but the Aussie market has endured many of the Dows down days, ending in positive territory.

Day traders do tend to ramp or downramp the guts out of the "xjo" etc to suit there short or long positions.

Don't think it can go either way, if the XJO finishes up on Monday it will be a bloomin miracle.

Day traders have no influence on the overall direction of the market in my opinion.Think of all the billions going in and out of stocks, day traders are only a spec on the globe. Manipulation undoubtedly goes on but able to move the direction of the XJO? Not a chance.

 

[explod]

Completley agree, could go either way on Monday, most likely down, but the Aussie market has endured many of the Dows down days, ending in positive territory.

Day traders do tend to ramp or downramp the guts out of the "xjo" etc to suit there short or long positions.

I think there is plenty of that in the spec stock area though, some of us guilty in various degrees on these forums. Hard to avoid

 

[vvguru]

Have you guys noticed on Wiki:

"The next solar eclipse takes place on September 11, 2007", is it a sign? or just me superstitious?

http://en.wikipedia.org/wiki/Solar_eclipse

 

[dhukka]

How about this:

Inflation has fallen significantly. 2 years of interest rate cuts have achieved what they were meant to.

Therefore a .25% cut in interest rates.

The economy is strong and is expected to continue its growth supported by lower interest rates.

So we get a correction/volatility in the meantime. Then by October's Fed meeting economic growth, housing market, inflation will all have stabilised on a sustainable growth 'curve'.

Sub prime....sub what?

Which economy are you talking about? Cutting interest rates has lowered inflation, that must be the bizzaro world economy you're talking about.

 

[numbercruncher]

Inflation has lowered, what a farce, the whole Inflation reporting system is a farce.

I know i pay tones more for Petrol, Food, Accomodation, Power, nearly everything infact, and it seems to increase every quarter, except now a days i can go get a trailer load of Kids toys, Dvd players, Microwave ovens etc for not much more than the weekly grocery bill, its a crackup!

They need to bump interest rates to 10pc

 

[wayneL]

Inflation has lowered, what a farce, the whole Inflation reporting system is a farce.

I know i pay tones more for Petrol, Food, Accomodation, Power, nearly everything infact, and it seems to increase every quarter, except now a days i can go get a trailer load of Kids toys, Dvd players, Microwave ovens etc for not much more than the weekly grocery bill, its a crackup!

They need to bump interest rates to 10pc

Agree

CPI = Chinese Price Index

Real inflation is MUCH higher

 

[Knobby22]

And they will, in my opinion.
The liquidity crisis has saved us from 10% interest rates for at least an extra 6 months.

I have trouble understanding why the US yield curve is strongly positive yet Australia's is negative.
Am I missing something?

 

[explod]

And they will, in my opinion.
The liquidity crisis has saved us from 10% interest rates for at least an extra 6 months.

I have trouble understanding why the US yield curve is strongly positive yet Australia's is negative.
Am I missing something?

Would not feel confident about that. One of the reason for liquidity drying up is because of low cost money (low interest rates) in the first place. Money has been lent out in essence against a weak collateral base. Banks no longer trust each other so have withdrawn the availabilty of money (the liquidity). They will only do that now against tangible assets and then only at ever increasing interest rates. On the way the market is playing out the last week or so, this transition from a promise to lower rates to an actual increase will be swift. The fact that the media noise is so loud in reassurance says that things are much worse than anyone wants to admit.

We cannot postulate, we have to follow what pans out as the future is known only to itself. A lot is canvassed on market psycholgy, the herd instinct. People are now very concerned which will probably, quite apart from fundamentals, be self fulfilling and drive the markets down for some time from the action unfolding now.

Not able to postulate on the second part of you question. Of course the economies of the US and Australia are very different and our trading partnership becoming smaller than is generally realised

 

[Pommiegranite]

Which economy are you talking about? Cutting interest rates has lowered inflation, that must be the bizzaro world economy you're talking about.

lol...yep...i meant rises...of course the US has been raising interest rates

 

[dhukka]

lol...yep...i meant rises...of course the US has been raising interest rates

OK then, Now we have identified the economy,

How about this:

Inflation has fallen significantly. 2 years of interest rate cuts have achieved what they were meant to.

Yes the Fed has successfully choked 'core inflation,' a narrow measure which doesn't capture the real cause of inflation, as others have alluded to. Not to mention the flawed approach to monetary policy by targeting an inflation rate.

Therefore a .25% cut in interest rates.

After yesterday's employment figures the market is pricing in 70% chance of 0.5%. guess we'll have to wait and see whether cool-hand Ben goes the whole hog or just a quarter point.

The economy is strong and is expected to continue its growth supported by lower interest rates.

The economy is not strong, employment is the latest shoe to drop, corporate profits are peaking, credit markets are shrinking, housing still tanking.

So we get a correction/volatility in the meantime. Then by October's Fed meeting economic growth, housing market, inflation will all have stabilized on a sustainable growth 'curve'. Sub prime....sub what?

This is little more than wishful thinking. Housing is nowhere near stabilizing, economic growth is slowing rapidly, inflation...whatever. Funny how people keep throwing sub-prime out there as if it were a cause, it's a symptom of a much larger problem.

 

[sassa]

Don't think it can go either way, if the XJO finishes up on Monday it will be a bloomin miracle.

Have a read of this article
http://www.theage.com.au/news/busin...f-rollercoaster/2007/09/08/1188783556754.html
Particularly interested in these comments-
"We will see the predictable knee-jerk response...." &
"A survey of brokers' stock forecasts for the next 12 months predict the S & P/Asx 200 will gain 17.7%."