Stock Market Crash - End of the Bull!

[Wysiwyg]

I reckon it`s a great time to jump .

(gee wysiwyg that`s intelligent)

 

[BIG BWACULL]

I reckon it`s a great time to jump .

(gee wysiwyg that`s intelligent)

Out of the frying pan into the fire AAAAAAHHHHHHHH

 

[KIWIKARLOS]

At the moment the losses are confined to financial markets there are heaps of companies eg. miners, services and health which are posting huge profits and continued strength.

The banks which have been posting record profits have been the ones taking on the risk to acquire those profits even if they have a downturn they won't post losses.

Perhaps this is Karma coming back to bite them for charging ridiculous fees and lending to every man and his dog. In my opinion the big financial insto's were getting to head strong and thought they were invincible and profits would always grow and this reality check will bring things back into balance.

 

[nioka]

What do people think ??? Are we in for another week of stocks falling hard or a day !? Do I sell now or sell in 2 days when I take a bigger lose!

Good time to look for bargains.

 

[tasmanian]

Good time to look for bargains.

I personally dont think today is a good day too look for bargains.dow closed on its low expect it too go lower tonight.un less you like catching falling knives.

the last rally was the time to sell when the market was back up near old support 6187 which is now new resistance.add to your shorts on the rally today which is now

 

[sassa]

I personally dont think today is a good day too look for bargains.dow closed on its low expect it too go lower tonight.

Most likely.The S & P 500 has fallen 2.3 up to 9.30pm(New York time) and the Nasdaq has fallen from a positive of 2.5 to 0.25 in the same time.Still plenty of time to go till opening.

 

[jman2007]

at the moment the losses are confined to financial markets there are heaps of companies eg. miners, services and health which are posting huge profits and continued strength.

The banks which have been posting record profits have been the ones taking on the risk to aquire those profits even if they have a downturn they won't post losses.

Perhapes this is Karma coming back to bite them for charging ridiculous fees and lending to every man and his dog. In my opinion the big financial insto's were getting to head strong and thought they were invincible and profits would always grow and this reality check will bring thins back into balance.

Yeah good call Kiwi,

This is probably the rap over the knuckles the finance sector needed, although it probably feels more like a king hit to some people.

Personally I think this is a very difficult time to make meaningful gains, as I don't think anyone really has a clear idea what is going to happen. Kennas pointed out that now is a good time to be sitting on the sidelines whilst this volatility is going on. Imo, we're seeing the herd mentality in full-swing with a healthy dose of over-reaction, all it takes at the moment is the sound of a sparrow farting to have panicked investors rushing to their computer screens and panic selling, convinced that the sky is about to fall on their heads.

I think a lot of people forget that a sp at a particular point in time does not necessarily reflect the true value of the stock, so bargains to be had? Sure, if you're brave! To support Kiwi's assessment, I don't think anyone can underestimate the position of the mining juggernaut at the moment, the fundamentals are still in place, and the demand for raw materials is as strong as ever. I do believe however, that new high-risk spec floats such as in the U sector, will be treated with a healthy dose of scepticism, and more people will turn back to operations which are generating cash flow, and have some semblance of a operating track record.

I'm still cautiously bullish... although I think I just saw some bear tracks in the woods this morning!

 

[TheRage]

Perhapes this is Karma coming back to bite them for charging ridiculous fees and lending to every man and his dog. In my opinion the big financial insto's were getting to head strong and thought they were invincible and profits would always grow and this reality check will bring thins back into balance.

I think perhaps you are referring to investment banks and low doc lenders because the top four banks actually have very little comparitive defaults occuring and have little exposure to subprime lending.

This is Westpac's doubtful debts expense for the past 10 years. The figures are expressed in millions.
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
-78.0 -168.0 -171.0 -202.0 -433.0 -461.0 -485.0 -414.0 -382.0 -375.

As you can see Westpac has had declining defaults over the past 3 years due to tougher lending conditions. ANZ are also in a similar position. NAB and CBA have Doubtful debts that go up and down but overall don't trend upwards. Cashflows are still strong for the top 4, their relative PE compared to overall industry is lowish 14 Vs 16 and most banks are actually making good money from their investment arms such as Westpac through BT etc. Not to mention business banking and the positive effect this has been having. All those wonderful resource stocks are funded primarily through equity or debt and guess where the debt is coming from. To summarise as long as the resource boom continues so will profits from banks.

 

[KIWIKARLOS]

yeah i agree with the aussie home morgage market is fairly strong but what im referring to is investment funds run by these same banks and mac bank etc. the ones which are highly geared etc. Although they only have small amounts overall in overseas securities and only in the higher risk products, which is a good thing.

You also have to remember that even though they have little exposure alot of the money that these banks lend is foriegn cash. they may start decreasing their profit margins if the cost of their loans increases.

Does Aus have the same practice of bundling morgages into securities and selling them on market?

We have to also remember our massive foriegn debt, how will this effected by current probs?

 

[TheRage]

I will conceed you make some interesting points. I am sure that some securitisation of loans does occur in Australia but probably confined to lower level lenders. I am unsure whether the big 4 do it but would be surprised if they did.

 

[nioka]

I personally dont think today is a good day too look for bargains.dow closed on its low expect it too go lower tonight.un less you like catching falling knives.

You don't have to try to catch falling knives to trade today. It is a good time to trade one stock for another. If you have a stock which you calculate will fall further and there is one which you think has fallen further than it should have then it is a good opportunity to switch. I have both bought and sold today and I'm happy with the result so far. I'm still looking for more opportunities. I'm not always right but this tactic works for me on most occasions.

 

[dhukka]

I think perhaps you are referring to investment banks and low doc lenders because the top four banks actually have very little comparitive defaults occuring and have little exposure to subprime lending.

This is Westpac's doubtful debts expense for the past 10 years. The figures are expressed in millions.
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
-78.0 -168.0 -171.0 -202.0 -433.0 -461.0 -485.0 -414.0 -382.0 -375.

As you can see Westpac has had declining defaults over the past 3 years due to tougher lending conditions. ANZ are also in a similar position. NAB and CBA have Doubtful debts that go up and down but overall don't trend upwards. Cashflows are still strong for the top 4, their relative PE compared to overall industry is lowish 14 Vs 16 and most banks are actually making good money from their investment arms such as Westpac through BT etc. Not to mention business banking and the positive effect this has been having. All those wonderful resource stocks are funded primarily through equity or debt and guess where the debt is coming from. To summarise as long as the resource boom continues so will profits from banks.

Where to start with this, replete with errors and false conclusions. Firstly WBC's bad debt expense is a perfect reflection of the credit cycle. Notice the doubling of bad debts from 2000- 2001 - coinciding perfectly with a turn in the credit cycle. How do I know? I was a bank analyst at the time and co-wrote a 100 page document on the major banks ability to absorb losses.

You can see the cycle played out by 2003 and the subsequently WBC's provision for doubtful debts declined - although surprisingly not to any great extent.

By the way what was WBC's 1H07 bad debt expense? Let me answer that for you,$232m. So on a half yearly basis WBC's past 3 halves look like this:

1H06 -185, 2H06 -190 1H07 -232, want to have a guess where this trend is headed?

For comparison here are the last 3 halves for ANZ 1H06 -224, 2H06 -183 1H07 -240, doesn't look to bad. However what did McFarlane say at the interim?

"While the credit environment is benign, we expect provisions to be significantly higher in the second half "

To summarise as long as the resource boom continues so will profits from banks.

Absolutely ridiculous statement and testament to your lack of understanding of what you're talking about.

 

[KIWIKARLOS]

I think short term / day trading is very difficult at the moment. I have bought 3 medium to long term positions that I expect to hold between 6- 18 months before seeing any sort of decent return.

I think the Chinese and Indian financial markets have alot of growth and reform to do and the growth in India alone is very large. Unfortunatly they have alot of Iron ore but little energy.

So my investments are now focused on Iron ore for China and Energy for India. No companies who's main interests are in Aus or US but I think at this stage the Aus gas industry is the best local bet.

Wouldn't touch the financial stocks eg Mac bank etc and even aus banks with a ten foot pole at least for 3-6 months.

 

[dhukka]

I will conceed you make some interesting points. I am sure that some securitisation of loans does occur in Australia but probably confined to lower level lenders. I am unsure whether the big 4 do it but would be surprised if they did.

Prepare to be surprised. In the year to August 3rd, total securitzation stood at $59.3 billion . $53 billion or 89% of which are Residential Mortgage Backed securities. The good news is that only 2.7% of those are sub-prime.

Who originated them? The biggest chunk, 40% was orignated by the major banks. The next biggest chunk, 25% was made by regional banks.

Educate yourself

 

[explod]

I think short term / day trading is very difficult at the moment. I have bought 3 medium to long term positions that I expect to hold between 6- 18 months before seeing any sort of decent return.

I think the Chinese and Indian financial markets have alot of growth and reform to do and the growth in India alone is very large. Unfortunatly they have alot of Iron ore but little energy.

So my investments are now focused on Iron ore for China and Energy for India. No companies who's main interests are in Aus or US but I think at this stage the Aus gas industry is the best local bet.

Wouldn't touch the financial stocks eg Mac bank etc and even aus banks with a ten foot pole at least for 3-6 months.

Agree totally. For the more conservative to ballance the above. We need to keep eating food and good highway toll roads will just keep on. Sssoooooooo WOW and TCL on the dips (and there will be some good ones) could be worthwhile.

First 15 minutes of ASX opening after good falls on the Dow are good times to buy. Sometimes some good day trades on the fear factor too.

 

[dhukka]

For comparison purposes

 

[noirua]

Banks turned south in New York and London as Barclays Bank is the latest to come in the firing line over mortgage based loans. One Barclays fund, alone, is said to be in deficit of hundreds of million of pounds and rumours abound that the ABN bid is now less certain to proceed.

Announcements from Australian Banks, Governments, and Councils may spread the problems a good deal wider.

Aussie Hedge Fund, US$100 million, "Basis Yield Alpha Fund", has applied for bankruptcy protection in the United States after a default notice was served. The fund has ties with high risk US sub-prime mortgages.

 

[noirua]

Aussie Hedge Fund, US$100 million, "Basis Yield Alpha Fund", has applied for bankruptcy protection in the United States after a default notice was served. The fund has ties with high risk US sub-prime mortgages.

Barclays Bank has admitted borrowing US$1.6 billion from the UK Bank of England to cover problems in one of their funds, Cairns Capital. Barclays also admitted borrowing US$600 million to cover other funds last week.

 

[Awesomandy]

Barclays Bank has admitted borrowing US$1.6 billion from the UK Bank of England to cover problems in one of their funds, Cairns Capital. Barclays also admitted borrowing US$600 million to cover other funds last week.

That's not a bad sign, I think. It appears that banks are leaning on the optimisic side, and is willing to lend large amount of money to funds to help ride out the correction.

 

[adobee]

What will happend when the federal reserve lifts interest rates.. If so many people are defaulting in the states at very low interest rates wait till the interest rates rise a % or two and they will... even at the possible talk of it then we will see the full extent of the credit crunch.. say 12-18months and crunch..