The Bears Den (Bears only!)

[IGO4IT]

Hi guys,

was reading on the beginning of the thread & read the bankrupt bank scenario due to the crash of property market (no one can afford to pay back their loans)

I think we'll be looking more in "insurance" companies crashing when the property market falls. (not banks) every loan has insurance & every bank (I would assume) has an insurance policy againist loss in any transaction.

insurance companies busting means less consumer security, lower intrest rates & bright future for everyone.

am I right or just started losing my mind

 

[mit]

good work

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

However, if you came out of the crash with most of your money intact you could have recovered very quickly. That's why I am not a long term buy-and-hold trader.

If you look at the weeks leading up to the 1987 crash in detail you can see that from a peak in September there was a 10% drop in the markets before it fell of the cliff. This is equivalent to an almost a 500 point drop currently. This would allow most medium term traders to be stopped out of their positions in a fairly orderly way and some to get their shorts in order.

MIT

 

[mit]

I've included the Dow Jones from 1940 with a log scale. Showing charts from 1980 is misleading because it seems to indicate that the except for some brief retracements markets only go up. You can see here that for over a decade from 1966 to 1982 the market went sideways. Note that currently the DOW has been moving sideways for about a half a decade.

MIT

 

[Knobby22]

From the Age today.

Reserve Governor Ian Macfarlane yesterday said standards had been steadily slipping as lenders jostle for market share in the super competitive home loan market, leaving families and the economy vulnerable.

"Lending standards have been progressively eroded so that lenders are now engaging in practices that would have been regarded as out of the question five or 10 years go," Mr Macfarlane told a parliamentary committee.

"The classic example is that we now have advertising on television encouraging people who have got no money at all to borrow 100 per cent for a house," he said. "If you own none of the house, how much commitment are you going to have if things turn tough?"


My take is that the rise in house defaults is more to do with reckless lending than some bearish downturn however if we do get a shock or collapse, it will probably snowball and hit a lot harder due to the middle class love affair with debt occurring at present. Cash will be king.

 

[Smurf1976]

In his speech yesterday, the RBA Governor also noted that house prices nationally have on average been flat since 2003 and are falling in Sydney.

 

[Ann]

I am not a Bear at all....more your brassyknocks.....rhymes with :

But I am The Fool who dares to go.

I reckon the XAO is just going to *#&! itself next week. Look out below. With all of the companies going ex-divie and the look of the chart, I thought a nice wee Teddy Bears Picnic might be in order. Honey sanger anyone? Perhaps a nice cup of Mead?

 

[Goin' For Broke]

This has been very interesting reading. I might as well add my two bits.
First bit: If housing is so unaffordable, why is it everywhere I look whole new suburbs are going up, chockers with brand new homes? And big ones at that! Peoples standards keep going up. We want a bigger and better house than our parents had. We want the absolute best house that we can possibly afford pushing our finances to the max. But what happens to those who have to sell? An embarrassing downsize, or go back to the rental trap? More rental demand - higher rent, more money for the investors who can ride out the storm. Rich/poor divide increases a little more.
Second bit: People want nice stuff - cheap. Can't buy that here, hence China. They are working for peanuts, we won't. Australia keeps selling a piece of the farm as many of you put it, to pay for it. Obviously unsustainable eventually. Now rather than actually work and produce something for money, more and more people are investing their money to work for them. Great, but what is being produced? Trading shares and making money but not actually producing any products! Oopps, I think I just upset everybody here! I just know I'm going to catch all kinds of krap for this one. You just got to have a sence of humour though? The investors finance the business that produces the stuff in the factories, giving the poor bloke a job. Rich/poor divide widens further. I don't know I'm just rambling.

 

[clowboy]

Goin for Broke?

Where do you live (if you dont mind disclosing?)

By the sounds of things it would be perth(or WA) as WA is the only state to still have suburbs poping up everywhere (and a large amount of investment activity).

While I aggree with what you say in that everyone wants to do nothing(or next to it) for something, this only becomes flawed when those doing lots for nothing lose interest in what we have to offer.

By that I mean that while the likes of China want our comodities we can as a whole just sit back and enjoy the vast growth in wealth.

Just the other day at work a collegue was telling me how he is going to work in the mines. No Qualifications, starting package of $60,000 PA with increases after first three months, and all he will be doing is pushing buttons on a computer.

I also read an article on the expectations of generation Y or X or whatever late teen early 20's is called which was saying that they where all deluded itno thinking that they would one day live the dream of starting/running a business and become filthy rich never having to do anything again. It was saying that this thought process was basically a result of people such as Boost bars founder etc etc.

Eventually reality will set back in and times will be tough again it is just a case of When and not If IMO.

Having said that it was argued that it could be a long wait for a downturn/recession......How long did Japan substain economic growth before it fell of the perch?

Someone like me (25) having never seen anything but the good times might be in for a rude awakening one of these days.

 

[Goin' For Broke]

I'm in Adelaide. From my limited research, Adelaide house prices are still rising in general, albeit slowly. Don't quote me on that.

 

[michael_selway]

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

Hmmm the BULL is back today/this week?

Please explain!

thx

MS

 

[wayneL]

Hmmm the BULL is back today/this week?

Please explain!

thx

MS

The article was about housing? You refering to the share market I believe?

However, the bear is patient

 

[Knobby22]

The nightmare scenario has made the Age in Melbourne!

Bush's Iran plan a time bomb with explosive results
By Kenneth Davidson
March 20, 2006
THE updated version of the Bush Administration's 2002 national security strategy, released in Washington last week, identifies Iran as the country that may pose the biggest danger to the United States.
According to Reuters, the strategy document, which reaffirms pre-emptive military action as a central tenet of US security policy, raises fears the Bush Administration will resort to force to prevent Iran acquiring nuclear weapons.
If force is used, it will come in the form of air strikes, as US land forces are already overstretched in the occupation of neighbouring Iraq.
One question still to be confronted is the impact such a strike would have on the US economy and how that would affect the global economy, particularly Australia, which is, after the US, the largest-deficit country in the advanced industrial world.
At the very least, a broadening of the war in the Middle East would be certain to push up interest rates in the US and Australia, because the central banks there would have to protect the currencies' value by increasing yields. How far and fast would depend on judgements about the likely outcome of the military intervention.
An air strike against Iranian nuclear facilities is unlikely to be surgical. There are about 50 sites associated with nuclear development in Iran and they are mainly sited in towns where civilian populations would be at risk. An attack would be certain to inflame the Islamic world against the US, almost certainly lead to a full-scale civil war in Iraq with the support of the predominantly Shiite Iranian people, and the US fleet in the shallow and narrow Persian Gulf would have to withdraw or be vulnerable to Iranian missile attack.
Worse, any air strike against Iran is unlikely to get the support of the United Nations Security Council, given that China and Russia would likely veto any resolution put up by the US.
Why would the Bush Administration risk widening Gulf War II to include Iran when it still has the chance to limit its losses to Iraq? The most popular explanation is that the US wants to pre-empt the Iranian decision to set up a Tehran oil bourse to facilitate the selling and buying of oil in euros instead of US dollars.
The idea is that this would cause a chain reaction in which more and more oil producers and their customers would trade in euros and eventually force the US to pay for its oil in euros too. This would mean the US would have to do what every other country in the world has to do, namely earn foreign exchange through exports in order to pay for its oil imports.
Last year the US trade deficit for petroleum products was about $300 billion. While the $US remains the international reserve currency and oil continues to be traded in dollars, the US can pay for its oil simply by printing more IOUs in the form US treasury bills.
If the US had to find euros (or yuan) to pay for its oil, it would have to increase taxes, cut consumption and increase exports. In short, according to this scenario, the US could no longer afford to be a military superpower and would have to cut back its global adventures.
In the process, the $US would collapse, wiping out the accumulated financial assets of America's major creditors and probably causing a depression of 1930s dimensions. More generally, such a development opens up the question of whether the reserve status of the $US is supporting US superpower status, or whether US military power is propping up the reserve currency status of the $US.
WHILE the possibility of oil trading in euros and the yuan present a possible long-term threat to US economic and military hegemony, it doesn't have to be dealt with immediately.
Similarly, the threat of a nuclear-armed Iran is at least some years into the future. But even with nuclear weapons and the missiles to deliver them and the control systems to guide them, deterrence and the doctrine of mutually assured destruction (MAD) applies to Iran as much as it did to the Soviet Union.
The main strategic change is that if Iran gets the bomb, the US (and Israel) can't attack Iran unless they are prepared to risk MAD.
The cynical explanation for the Bush Administration's threats against Iran is that, like the build-up to the invasion of Iraq, the real objective is "regime change", which has been re-enforced by the slump in President Bush's approval rating to 34 per cent.
The only thing on the political horizon that might restore Republican fortunes is a new and credible national security threat in order to keep control of Congress in the November elections.
If the Republicans lost control of Congress, the way becomes open for hearings into the constitutionality of the Bush Administration's use of wiretaps on Americans without warrants as required by legislation.
The Republican majority in both the Senate and the Reps has blocked examination of the legality of this and other actions by the Bush Administration.
How far the Bush Administration is prepared to go in Iran in order to avoid losing control of Congress to a hostile Democrat majority, which might opt for impeachment, will have fundamental consequences for the global economy in 2006.

 

[Mofra]

I think we'll be looking more in "insurance" companies crashing when the property market falls. (not banks) every loan has insurance & every bank (I would assume) has an insurance policy againist loss in any transaction.

I don't mean to be technical sorry, but deposit holding lenders generally don't insure loans with an LVR below 80% (lower for low doc loans).

Some smarter lenders (such as, in a few weeks, my new employer!) insure every loan, then package the debt and sell it to investors so they are holding little (and in some cases none) of the risk themselves.

Negative equity is a reality in many areas (not just Sydney) and some Mortgage Lending compacies have blackballed some suburbs completely.

You are right in mentioning insurance companies though - in my experience, they are much more likely to engage in forced debt recovery than the banks, who despite their reputation will try many ways to re-package the debt into a manageable way first.

 

[brerwallabi]

I just came across this and I don't think anything much has changed lately in fact its probably got worst. After reading the comments below click on the link and check out the US national debt, maybe I have posted this on the wrong thread maybe it should be in the gold thread - all the more reason to buy gold and gold stocks.,

High Interest Kills Consumers
We live in a "buy it today, pay for it next year society." For the first time in a decade, people loaded with debt will now have to pay more money back due to the rising cost of interest.

Already, big spenders are in a crunch. Credit card debt is so bad that in the second quarter of 2005, the American Bankers Association reports that 4.81% of credit card accounts had payments that were past due by 30 days or more.

For the consumer, who is laden with credit card debt, the cost of interest is rising. The average penalty rate was 22.91% on credit cards and penalty rates are as high as 29.99%. You might as well be borrowing money from the Sopranos.

The ABA warned that personal loans, auto loans, home equity loans, and lines of credit are showing substantial increases in delinquent payments. Add to that the problem farmers are having paying back loans and the problem just keeps growing. Today, we all owe far more money than any of us can really imagine. The “Perfect Financial Storm” won’t be complete until there is a massive wave of loan defaults, bankruptcies, and corporate failures. It’s coming– sooner than later.

Is this the death knoll for our consumer driven U.S. economy?

http://www.brillig.com/debt_clock/

 

[michael_selway]

The article was about housing? You refering to the share market I believe?

However, the bear is patient

hehe yeah how patient?

thx

MS

 

[wayneL]

hehe yeah how patient?

thx

MS

He waits until the moment of maximum complacency and arrogance

 

[Dr Doom]

The trouble with being a "bear" is that I/we still have that part of the brain that is responsible for logic and common sense intact. I have therefore come to the conclusion that a surgical procedure whereby this part of the brain is removed and replaced with an entire Lemmings brain is needed to trade the current "weight of money" market.
Let's face it, until the US and other central banks stop creating liquidity then the bull will keep pummelling the bears, although the time is also fast approaching when the US's role as reserve currency will be put to the test.
Gold is the key.
What's also been bullish for gold is that it has strengthened with the US dollar has strengthened also.
Fellow bears, be patient and our time will come (unfortunately for the rest of the world).

 

[bullmarket]

Below is a post from late January - 2 months on I don't see anything to change my view atm - and currently waiting for the :fan

cheers

bullmarket

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.

 

[wayneL]

The trouble with being a "bear" is that I/we still have that part of the brain that is responsible for logic and common sense intact. I have therefore come to the conclusion that a surgical procedure whereby this part of the brain is removed and replaced with an entire Lemmings brain is needed to trade the current "weight of money" market.
Let's face it, until the US and other central banks stop creating liquidity then the bull will keep pummelling the bears, although the time is also fast approaching when the US's role as reserve currency will be put to the test.
Gold is the key.
What's also been bullish for gold is that it has strengthened with the US dollar has strengthened also.
Fellow bears, be patient and our time will come (unfortunately for the rest of the world).

Yes agree!

Lemming brain is great in this market. One should leave the incision open however, to expedite a quick transfer of brains as the occasion arises. Keep the old brain hooked up to the life support machine also...

Hmmmmm....maybe leave just a few neurons of the old brain in also, so we still have the sense to know when to swap over...

Cheers

 

[Dr Doom]

Unfortunaltely, my simple mathematics suggests that the current economic experiment is unsustainable. The US requires the rest of the world to continue to finance it to the tune of some $3B per DAY, something that China & Japan are increasingly hesitant to do.
Also, there are increasing signs that the US interest rate mechanism has little to do with controlling inflation but rather a calculated attemtp to sustain the US dollar as the default world currency.
Warren Buffet got his fingers burnt to the tune of a couple of billion following logic, but the US fed and their electronic printing presses are too greater match for even the so called "worlds greatest investor".
If the price to pay for continued US dollar dominance is a recession, then the feds have already decided this course.
This will also have the effect of "cancelling" a great proportion of those dollars printed over the last 20 years or so, and so the cycle starts all over again.