The Bears Den (Bears only!)

[Smurf1976]

I can't post a link for this, have to take my word on it.

Paddington in Sydney is upmarket and has 7 or 8 pubs that people come to from the very top end of Suburbs and City. A stop of before and after a game at SCG or Rugby. Biz lunches, deals to be done, etc.

Yet one of the pubs is thinking of closing at 11pm (lisenced to 12) because it's so quiet. Why would that be? I don't know, but something is happening.

Certainly housing affordability (or lack thereof) is part of it. I see a lot of buildings not getting maint anymore as a backlash.

OK WA is powering on, QLD doing well, but just as the US is a world guide, Sydney is an OZ guide to a degree and is looking uncomfortable imho.

There is anecdotal evidence that all is not well pretty much everywhere IMO. A bull market in precious metals, high oil prices, ridiculously low yields on real estate, houses sitting empty and so on.

I'm not wishing for a recession but I do think it's prudent to acknowledge that a 14 year economic expansion is unusually long and it's running into some pretty strong winds right now.

NSW economic growth is at a virtual standstill. More consumers and general business activity than anywhere else and yet its economy is going basically nowhere. I consider this highly relevant since (1) Sydney boomed before the other major cities and (2) this is happening at a time when the national economy is benefiting from the commodities boom which ought to bring at least some minor benefits to NSW. It's arguable that without the flow on benefits from the commodities boom benefiting other states, NSW would be literally in recession since it's so close already.

Only Tasmania is still achieving strong growth but that is heavily propped up by one-off capital works relating to energy. Look beyond that and there's plenty of empty houses and tourism is visibly struggling. It's unusual that Tasmania's economic growth tops the nation, but when it's done so in the past it's been due to deteriorating conditions in the other states rather than genuine local strength and it's the same this time.

Just as NSW tends to lead, Tas tends to lag. When the leading state is on the edge of recession and the lagging one is the strongest performer I think that ought to be sounding all sorts of alarms about what lies ahead.

I don't wish for a recession but IMO the warning signs are very much there and it is prudent to consider the possibility. If people are staying away from pubs etc then that's another piece of evidence which points in the same direction.

 

[phoenixrising]

Smurf, well said, sums it up well.

I to can feel a recession coming on. In the big scheme of things tho are they a bad thing? It could clear the ineffiencey's away, things become cheaper, people focus on making do with what's here and now rather than chasing big expensive dreams, at least for a while. Taking a breather in other words.

Just like shares really, don't we like to buy low, dips, etc and make a proffit on highs later. Pehaps 10% or 20% cheaper realestate and not taking off again for a number of years.

Would be sad for the retrenched workers tho.
Some food for thought.

 

[wayneL]

Check out this video

http://tvnz.co.nz/view/tvone_minisite_story_skin/653276?format=html

Is 2006 the year to hunker down, stock up the pantry with tins and torches and horde coins to use in a crisis, as barter or bribe? British financier and multi-millionaire Jim Mellon believes it's sound. He's just co-authored a book 'Wake Up - How to Survive and Prosper in the Coming Economic Turmoil" [due out in NZ in February]. In New Zealand for just a few days Jim Mellon spoke with Jendy Harper.

 

[Porper]

Check out this video

http://tvnz.co.nz/view/tvone_minisite_story_skin/653276?format=html

I watched this guy being interviewed in New Zealand this week.A doomsayer and a bit odd.I think you answered your own question as he is writing a book, the more he can scare people the more money he will earn presumably.

The Dow is getting volatile though which is a sign that something is around the corner.At least I can go short next week when my CFD account is up & running.!!

 

[wayneL]

... as he is writing a book, the more he can scare people the more money he will earn presumably.

I can understand this sort of cynisism, I really can...and thats not meaning to be derogatory at all. But what would be the motivation for writing on such a topic? What would be the sponsoring thought?

If it was purely profit, he would write on how to get rich quick or some such nonsense. Thats what I would do. Rather, I think he believes his message, and a jolly important message it is.

The Dow is getting volatile though which is a sign that something is around the corner.At least I can go short next week when my CFD account is up & running.!!

Good luck! You will enjoy the flexibility of being able to short sell...heck, you may even become a bear!!

Cheers

PS What part of NZ are you living in?

 

[wayneL]

Branson fears oil will cause biggest recession

http://business.timesonline.co.uk/article/0,,19149-2010779,00.html

Sir Richard Branson, the billionaire entrepreneur, has warned that any conflict with Iran could push oil prices over $100 a barrel and trigger "the biggest recession we have ever seen".

Iran is the world’s fourth-largest oil producer. International concerns over the country’s nuclear developments have risen in the past month, but Sir Richard warned that any military intervention in the region would prove "disastrous" for the world economy.

I think we'll see $100 oil anyway

 

[bullmarket]

Morning everyone

I think we are a long way off a recession, given that a recession is defined as 2 successive quarters of negative GDP growth.

But I think our and US economic growth will slow in 2006. A commentator/analyst on Nightly Business Report on SBS last week said he expected US growth to slow to 2.5% in 2006.

I think oil will stay in the $60-$70 range for the forseeable future unless of course there is an escalation in tensions at some of the current global 'hot spots' and/or an unforseen rise in global demand for oil. I think $100 oil is a long way off unless one of the above concerns is triggered.

Locally, consumers are becoming increasingly cautious on at least discretionary spending. Although inflation fell from 3% to 2.8% in the last quarter, oil has shot up sharply since those numbers came out and so I feel inflation will continue to hover around the RBA's upper limit of 3% for at least the next quarter in terms of a potential trigger for raising interest rates. The RBA said a few months back that the next rate move, whenever that turns out to be, is more likely to be up.

So to summarise all of the above, I don't think it's all doom and gloom but there are greying storm clouds, economic and political, on the horizon we should keep a weather eye on.

Having income as my number 1 priority, I decided to go more defensive in mid 2005 and so am solely invested in lower risk LPT's (with little or no exposure to property development) and energy/infrastructure trusts for their high yields.

The above is just food for though and how I see things atm.

cheers

bullmarket

 

[grumpee boi]

I posted this on Reefcap:

Interesting article here.
http://www.news.com.au/story/0,10117,17951471-421,00.html

I do think that they should also take into account apartments v. standalone accomodation and in addition to that the area of the accomodation. For instance, Tokyo outside the top 20 is a bit of a joke as I know I guy that just bought a place for around $700,000 and it is tiny. So maybe adjusting for what your money buys you would be a better indication.

Having said that housing prices are still ridiculous in some areas and now we have silly 'current affairs' shows (and I use the term loosely) suggesting that Sydney has bottomed and is ready to go again. That must make young couples, middle class and uni grads extremely optimistic.

Adam

 

[mit]

I posted this on Reefcap:

I do think that they should also take into account apartments v. standalone accomodation and in addition to that the area of the accomodation. For instance, Tokyo outside the top 20 is a bit of a joke as I know I guy that just bought a place for around $700,000 and it is tiny. So maybe adjusting for what your money buys you would be a better indication.

Adam

It would be an interesting activity as my feeling is that expectations in cities in Australia are high. Young people want to leave home and live near the city and live on a largish block of land.
My feeling is that though we will go through some volatility over the next couple of years but we will end up with property values the same as now or a little higher if you directly compare properties but the average price will appear to have fallen because people have gone smaller or further from the CBD.
When I visit Sydney I can already see this happening around where my wife and I grew up (Matraville/Rockdale) houses are being pulled down and duplexes/townhouses and units are replacing them.

Note that near where I live you can still buy a house near an urban area and close to the bush and beaches for around $200k.

MIT

 

[wayneL]

U.S. IN TECHNICAL DEFAULT
by Dr. M
(AKA Dr. Chris Martenson)
January 27, 2006

http://financialsense.com/fsu/editorials/2006/0127b.html

In a shocking development, the Treasury Department website is openly stating that as of January 24, 2006 our national debt stood at $8,185.3 billion and on January 26th at $8,190.5 billion.

http://www.publicdebt.treas.gov/opd/opdpenny.htm

Yet the US national debt ‘ceiling’, the maximum amount of debt the US government may hold at any one time, stands at $8,184 billion – a full $5.5 billion less. Although called upon by John Snow, Congress has not yet passed an expansion of the debt ceiling and so the US government is now operating in technical default.

You may recall that when last the debt ceiling was approached in the months surrounding the 2004 elections, the Treasury department furiously employed every accounting trick in the book (and then some) to avoid breaching the limit. They even went so far as to take the unprecedented step of borrowing $14 billion from the Federal Financing Bank to cover up the shortfall.

But they never breached the ceiling.

On January 24th they breached it brazenly and openly and with nary an accompanying explanation. Neither have any lawmakers have broached this indelicate subject.....................

 

[wayneL]

Lifted from another forum:

Soros Says Bernanke May Not Be as `Pragmatic' as Greenspan
Jan. 27 (Bloomberg) -- Billionaire investor George Soros said he's concerned Ben Bernanke may not be as pragmatic as Alan Greenspan has been when he takes over as U.S. Federal Reserve chairman next week.

``I'm a little bit worried because Bernanke is an academic,'' Soros, 75, said in an interview today in Davos, Switzerland, during the annual meeting of the World Economic Forum. Greenspan ``had the insight to be very pragmatic and look at everything and not be guided by any particular dogma.''

Bernanke, 52, a former Princeton University economics professor who's now chairman of the White House Council of Economic Advisers, has advocated setting a specific inflation goal for managing interest rates. Greenspan, whose 18-year term as Fed chairman ends on Jan. 31, has said he prefers the flexibility to manage risk, constantly adjusting policy to shocks and innovation transforming the U.S. economy.

Bernanke ``may carry the academic principles which are supposed to guide the Fed but actually don't,'' Soros said. ``So he may be a little bit more theoretically ready to adopt doctrines with which I personally disagree.''

Soros, who wrongly bet that the U.S. currency would decline in 2005, said the dollar has been propped up by a robust U.S. housing market and Fed interest-rate increases.

``When you reach the point where interest rates might be turning around, then the dollar might become more vulnerable,'' said Soros, founder of the New York-based hedge fund Soros Fund Management LLC.

 

[wayneL]

http://business.guardian.co.uk/story/0,,1697724,00.html

Spectre of bear casts shadow over Goldilocks' party in the fairytale snows of Davos

Signs abound of something big and nasty lurking in the midst of complacency

Larry Elliott, economics editor
Monday January 30, 2006
The Guardian

Scroll the film forward a year. It's January 2007 and time for Davos again. Only one topic of discussion interests the "fat cats in the snow" (as Bono calls them) - that's how on earth they missed the glaring signs a year earlier that something big and nasty was about to happen.

Davos 2006 had a low-key, complacent feel about it. The hefty contingent from the United States corporate sector was spectacularly unconcerned about the possibility of a hard landing, and airily dismissed talk that the chickens were about to come home to roost.

Article continues
Many of the world's leading economists gathered at the World Economic Forum shared this upbeat view. Jim O'Neill, chief global strategist at Goldman Sachs, believes that 2006 could complete a three-year period in which the global economy grows more strongly than at any time since the second world war. Even if the US should slow this year, the growing strength of the BRICs - Brazil, Russia, India and China - will take up the slack.

Laura Tyson, once part of Bill Clinton's economic team, thinks 2006 will be like 2005 - "another Goldilocks kind of year", in which the global economy is not too hot or too cold, but just right.

Stuff and nonsense, says the Cassandra of Wall Street, Morgan Stanley's Stephen Roach. Fairytales are no basis for sustainable economic growth, he says, and the reality is that US growth is dependent on "funny money" - the proceeds of a speculative bubble in housing that is about to burst. As it happens, Roach was saying exactly the same thing in Davos last year, and probably the year before that. The financial markets certainly don't share his view; equity prices have been rising and volatility is low. The baseline case is that America's import-led growth will be balanced by Asia's export-led growth and that there will be a soft landing in the US as a result of judicious increases in interest rates.

Larry Summers, a former US treasury secretary, injected a note of caution on Saturday. If you've been waiting for a bus for a long time, he said, and one hadn't arrived, there were two possible explanations. One was that the buses were not running; the other was that the buses would all arrive together. The period of maximum risk, said Summers, was not the moment of maximum alarm, but the time when the maximum alarm had passed. "That's when complacency sets in," he commented.

Historically, Summers is right. As he noted, the markets were more relaxed about the Nasdaq when it was at 4,500 - and close to the point where it crashed - than they were when it was 3,500. Kevan Watts, chairman of Merrill Lynch International, noted that when the financial markets closed on July 31 1914, they had failed to spot that the first world war was about to start the next day.

Dangerous words

It is, of course, entirely plausible that the optimists are right. The sheer resilience of the US economy should never be underestimated, and it may be that the imbalances in the world economy are part of the natural process of global integration. Normally, economists would expect interest rates to be pushed up by America's appetite for global savings to fund its enormous trade deficit. But that has not happened. Long-term interest rates are unusually low, in large part because markets assume that inflation will stay low. They are not especially concerned about excess demand in the US when there is excess supply from China and other countries reliant on exports for their growth.

This, though, is getting perilously close to saying "it's different this time" - traditionally the four most dangerous words in financial markets. It's what people said in 1999, 1929 and almost certainly in 1720 when the South Sea Bubble was about to pop. When anybody starts to mention the words "new paradigm" (as they were in Davos this week) it's a good idea to get the tin helmet out of the cupboard - just in case.

So, if in a year's time the Davos regulars gather in chastened mood, what signs of danger might they have ignored? Imagine that a decade ago, you had had a crystal ball and could have read today's news, January 2006 - unspun and uncommented on. The first story is about Iran being at odds with the west over its nuclear programme. The president of Iran, you discover, would like to wipe Israel off the map, as would the new ruling Palestinian party, Hamas.

The next story is about growing concern in the US over the number of military casualties in Afghanistan and Iraq: two countries that neighbour Iran. As a switched-on reader, you wonder what all this is doing to the price of oil. Turning to the financial pages, you find out. Oil prices are no longer $20 a barrel, but touching $70, with expectation that they may go higher.

Staying with the business pages, you find that Alan Greenspan, the grand old man of the Federal Reserve, is about to retire. He will mark his departure by raising US short-term interest rates for the 14th consecutive meeting.

Natural disaster

Greenspan, the report says, cut interest rates to 1% in the wake of the terrorist attacks in September 2001, and cheap money has pumped up the US property market, allowing homeowners to borrow money against the rising price of their main asset. The US is now running a current-account deficit of 6% and rising, the cost of military action and clearing up an immense natural disaster blamed on climate change has been to push the budget deficit to 3.5% of GDP, and the savings rate has fallen to zero. You read the figures again because you can't believe they are true. They are.

What does this mean for the dollar? Surely, you think, it must be dropping like a stone. It isn't, because, as you discover, central banks in Asia are buying greenbacks in huge quantities so they can keep their own currencies at artificially low levels in order to keep enjoying export-led growth. The ability of American consumers to continue living beyond their means, you find, is now dependent on the actions of the communists still in power in Beijing.

A couple of other stories catch your eye. There is concern about something called avian flu which, according to the World Economic Forum, has the potential - small, admittedly - to turn into the 21st century equivalent of the Black Death. And Russia is playing hardball with its neighbours over gas supplies.

What's your response? Yes, there's a bit of encouraging news from Germany, and reports that Japan may have at last turned the corner after more than a decade in the doldrums. But that's not what leaps off the page. The world of 2006, seen from the perspective of 10 years ago, has a profoundly unbalanced economy, high energy prices, a volatile Middle East. It is threatened by climate change, terrorism and a pandemic.

Perhaps you would be sanguine about all this. Perhaps, though, you would be worried sick that any one of these risks could set off a chain reaction that would make 2006 a year to forget. One thing is for sure. You wouldn't bet too much money on a soft landing. And rightly so.

 

[wayneL]

This was posted in another forum by Smurf (good spot m8)

http://www.smh.com.au/news/national/huge-rise-in-repossession/2006/02/01/1138590568709.html

Huge rise in repossession


By Matt Wade and Michael Pelly
February 2, 2006

THE number of properties repossessed by banks was higher last year than after the recession of the early 1990s, as a growing number of overstretched investors were burned by Sydney's house-price slump.

There were a record 4873 cases lodged in the NSW Supreme Court's Possessions List in 2005 - a 59 per cent rise on 2004, and more than double the number of cases in 2003.................

 

[mit]

I don't know if anybody has noticed this as well. Among other things I run a medium term mechanical portfolio system. Tracking daily it most usually goes up higher than the market on an up day and goes down less than the market on a down day. It does this on about 75% of days.

Of course it would do this or I would just use an index fund. One thing I have noticed is that a week or so before each of the corrections we have had it flips and it underperforms the market for a while.
I assume it is because gains are being made in fewer stocks.

However, it has flipped for the last month or so. I wonder if this is a sign that we are in for a large correction. I've noticed it also in Don's portfolio on his website.

 

[Happy]

XAO chart left shallower trendline after 02 - 03 correction, to follow steeper one similar to 84 – 87 run.

All will come to sudden end and 61% correction a possibility (as after 87), if this is just a correction.

Timing extremely difficult, but it will happen rather sooner than later, as some cherries lined up already. October might be good excuse?

 

[bullmarket]

Hi happy

Below is a monthly chart of XAO on a logarithmic scale from 1982 to the present.

I use log scales in this case as a given vertical distance on the chart represents the same percentage change in the value of XAO as the same vertical difference anywhere else on the chart.

So you can see that the percentage change in XAO in the 83-87 run up was very much larger than the percentage increase we have had in XAO in the Mar03 to present run up. And the percentage increase in XAO from late '90 to the present (about 15 yrs) is still a little less than the meteoric rise we had in the 4 years from 83-87. (by eye-balling the chart)

I've also displayed on the chart the Fib retracement levels for the Mar03 to present upleg. Barring any major global political or economic disasters I still think we'll mainly trade sideways for at least the next 5 months. I mainly look at the ASX200 index (XJO) and I doubt it will break 5000 with any real conviction, if at all for at least the first 6 months of 2006 and probably for all of 2006. But if there is a correction, then what level XJO drops to will largely depend on the significance and severity of the trigger that caused the correction....so who knows..

cheers

bullmarket

 

[nizar]

good work

wow i cant believe it took 6 years 2 recover from oct87 crash...

 

[Happy]

Semi-log chart can make us feel safe, all we need now is some time to go by and action to make it happen.

I cautiously move closer to the emergency exit, trying to pinch some OP Money as I move along.

 

[bullmarket]

no problem happy

Semi-log chart can make us feel safe, all we need now is some time to go by and action to make it happen.

I cautiously move closer to the emergency exit, trying to pinch some OP Money as I move along.

I usually use linear scales on my normal daily charts but I tend to use log scales on charts over very long time frames and with a huge range in the data.

When comparing sizes of price, index or whatever ranges over a long time period I believe it is more meaningful to have a look at the % changes rather than the changes in the absolute values....but that's just me...

But I agree in general with you. I think there is more downside than upside risk atm and last June I decided to go more defensive with my investments and so am currently solely invested in relatively low risk 'blue chip' listed property and infrastructure/energy trusts to lock in a high yield and income for at least this year - but this is in accordance with my objectives, plans and risk tolerances.

Looking at the PER's I posted in a spreadsheet yesterday for the main ASX market indexes I see the market as at best fair value and probably starting to look a little expensive atm.

I think even blind-freddy can see the greying geo-political and global economic storm clouds coming up over the horizon.

cheers

 

[Smurf1976]

http://www.gloomboomdoom.com/marketcoms/mcdownloads/060202.pdf

It relates to the US markets but I think this article is worth reading. It draws comparissons with various indicators such as the level of foreign buying, managed fund cash holdings etc and US stock market moves in the following months.

In short, it argues that there are multiple pointers towards a looming significant decline.