The official "ASX is tanking!" panic thread

How I wish I had stayed in my 2 SPI contracts around 5500 :O

I wonder if we will find some (maybe temporary) support around the previous support area not too much further down.

Property is having a rather bad day.
Haven't seen such negative action for quite some time.
Wondering what might have triggered that?

notting said:

Property is having a rather bad day.
Haven't seen such negative action for quite some time.
Wondering what might have triggered that?

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I got cash handy and not afraid to use it... a little afraid but yea

When oil dipped below 50 last night I thought
'There she is the blow off low, and it came back up over 50, Now it's just taken a stab at 48.47!

Dr Copper is doing similar things. DRRR COPPER! Remember Dr Copper?

Oh they say historically US stocks do well when there is US dollar strength.
Just not commodity stocks I guess.

Golds up.

Somethings up.

Frankly, Europe has gone nowhere, cheap oil gives it some breathing space.

Given US earnings are 40% gathered from OS, you'd think if that starts to show, you gonna get some real action. This thing could be blown over with a whiff of earnings downgrades from weak US top and bottom line stuff from that 40%.

Puff.

What can save us now?

I like this guy ~

airfax Media: How do you think 2014 panned out in investment markets?

Gerard Minack: People look at the S&P 500 and think it was a good year; it was a rubbish year for equities in US dollar terms. The S&P is the Steve Bradbury of financial markets – the only one that has kept on skating while the others wobbled and fell over.

Aussie shares are in a full-blown bear market, in US dollar terms. Credit markets are starting to wobble, commodities have been smoked. After two years of broad-based gains in risky assets, we're down to the last man standing.

Fairfax: So it's worth owning bonds, not equities this year? With bond prices sky high, will there be a day of reckoning as interest rates normalise?

GM: I can't see a day of reckoning any time soon. The forces of disinflation still have the upper hand. You can't look for bonds to give you the same returns as the past couple of years, or the past 30 years, but as we saw in Japan for over a decade, there's a time to own bonds not because of what they were but because of what they weren't: they weren't things that were going down.

Fairfax: With that grim kind of outlook, as a local investor wouldn't you just buy Telstra and other high-yielding blue-chips and hope that share prices don't go down?

GM: That's been a marvellously successful strategy for three years, and for the industrial yielders that makes sense. If we cross the Rubicon into full-blown recession then you don't want to own banks. The two hardest things for investors to find is growth and safe yield, and companies like Telstra and the utilities offer some safe yield. I'm not sure they will continue to re-rate as they have – they may a little – but it's the tallest pygmy out there at the moment. But even if you don't get into offshore equities, you should at least get out of the country and have a more diversified global asset mix. That said, no asset mix that will give you great returns.

Fairfax: What's your outlook for the iron ore price?

GM: From here, iron ore will halve in US dollar terms, in my view. In the boom all the other commodities went up six- or seven-fold, while iron ore went up 15 times. So, sure, it's halved already, but it has further to go.

http://www.smh.com.au/business/the-bear-is-back-a-cautionary-tale-of-global-gloom-20150112-12mahk.html

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Aussie shares are in a full-blown bear market, in US dollar terms. Credit markets are starting to wobble, commodities have been smoked. After two years of broad-based gains in risky assets, we're down to the last man standing.

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I just exited all stock holdings and went to cash on that opinion. There is no way I am gonna be the last man standing. [jokin]

I love when they wheel out these guys "who predicted the GFC" with no mention of any other predictions they might have made.

McLovin said:

I love when they wheel out these guys "who predicted the GFC" with no mention of any other predictions they might have made.

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Real question is.
Are the Saudis' just trying to get the cartel working as one again by rattling cages and maybe trying to get the Russians and Venezuelans on board to cut together and maintain my turf status qua, or is it really as much a global demand issue as much as an oversupply issue.
If it's a demand issue as with copper and plenty of other commods.
We have a significant global slowdown.
Markets will respond that mark my words.

notting said:

Real question is.
Are the Saudis' just trying to get the cartel working as one again by rattling cages and maybe trying to get the Russians and Venezuelans on board to cut together and maintain my turf status qua, or is it really as much a global demand issue as much as an oversupply issue.
If it's a demand issue as with copper and plenty of other commods.
We have a significant global slowdown.
Markets will respond that mark my words.

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That position of course assumes that the oil price was being correctly valued before the Saudis started talking it down. A few people I talked to mid last year thought oil was way above where it should be.

(I don't really have an opinion on oil, just making an observation)

McLovin said:

I love when they wheel out these guys "who predicted the GFC" with no mention of any other predictions they might have made.

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Minack is a Perma-Bear, who thinks we should all be in cash.

I set little store on his pronouncements. The glass is always half-empty.

Logique said:

Minack is a Perma-Bear, who thinks we should all be in cash.

I set little store on his pronouncements. The glass is always half-empty.

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He was actually in hibernation and was hunted out for this. I like a good "shooting off your mouth, without a vested interest."

The danger I see is the fact that people are struggling to get food that they are used to getting in some of these oil nations. That usually shakes things up, one way or another. If oil stays where it is, things will get interesting!

Could be worse but ~ Goldman Sachs, the bank that called $200 oil now says it will hit $40. Not a bad random guess!

notting said:

Oh they say historically US stocks do well when there is US dollar strength.

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Did you check? You'll be surprised to see how "well" stocks were doing during US dollar countertrend rallies(historically)

Logique said:

Minack is a Perma-Bear, who thinks we should all be in cash.

I set little store on his pronouncements. The glass is always half-empty.

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Nonetheless, he reflects what many people think. I'm probably more the half empty than half full view also, and I recall sydboy saying the same recently.

It was all those people who saw the glass as full and flowing over who got so burned in the GFC.

Logique said:

Minack is a Perma-Bear, who thinks we should all be in cash.

I set little store on his pronouncements. The glass is always half-empty.

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You got that right. I did a bit of Googling on him and pretty much going back to 1999 he's been saying the end was nigh. His record is pretty poor, as it is with most who try and forecast these things. The negative can always sound the more intellectually convincing argument which is in part why it grabs the headlines. I wouldn't trust a perma-bear anymore than a perma-bull. The Howard Marks approach of knowing where you are on the pendulum because it always swings back, makes more sense to me.

Now where's that wombat Harry Dent? The last thing he picked right was his nose.

notting said:

I like this guy ~

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I read that article with interest. I did a google search for anything that may point out if any of his predictions in the past have been wrong, couldn't find anything, but I suppose if one maintains a particular point of view of the market, it would be right eventually, right?

It's all good to say "the market will crash" or "the market will rise", but the more critical question is: when?

Yeah I know.
I love them all,(accept that Harry Dent who I would enjoy watching go under a bus) it's most entertaining, and what I think of most markets apart from ours which trades on more than just, 'We have no where els to put all this fricken cash.'

I mean this is how desperate they are to buy anything "Trophy office tower the Crown Building will be sold for $1.75 billion." in NY.
That pile of **** is going to return them 1.5% fully rented.

That is simply insane.
As are the 10 and less year Bonds all over the joint.

notting said:

Real question is.
Are the Saudis' just trying to get the cartel working as one again by rattling cages and maybe trying to get the Russians and Venezuelans on board to cut together and maintain my turf status qua, or is it really as much a global demand issue as much as an oversupply issue.
If it's a demand issue as with copper and plenty of other commods.
We have a significant global slowdown.
Markets will respond that mark my words.

Click to expand...

Sometimes it's easier to just look to the bland microeconomic theory. As growth in demand has outstripped growth in supply market equilibrium has settled at higher prices for oil (and other hydrocarbon substitutes) resulting in investment in production at higher marginal cost. Growth in demand has stalled while the pipeline of higher marginal cost projects continues to bring more supply online.

If the market demands quantity X of a commodity, the spot price of that commodity will be determined by the marginal cost of production within the industry to supply quantity X.

Obviously, in the short term, markets are more turbulent and overshoot this way and that, but the underlying economics really explains what is going on more than analysis of geopolitics in my humble opinion.

If the rate of growth in demand does pick up that will quickly see recovery in price because the current price shock will lead to a reduction in investment decisions in new supply.

In the longer term, transition away from hydrocarbons towards alternative energy sources is a factor that will determine the demand for hydrocarbons. This is not a trivial issue in my opinion.

ECB has been granted a legal mandate to print, provided it's not used to hold up any individual sovereign.
WOW, There really are terrified of the interest rates on bonds rising and exposing the inability of sovereigns being able to manage let alone pay back debt. The only way out is inflating everything to make the sovereign debts look small and manageable with taxes from all the mahuala slopping around all over the place.

My God it looks like it's going to happen.

More hydrocarbons for everyone. That's a weird name from money dude. (see post above)
So guess we'll see bonds buying at negative interest rates and god knows what else.

What's China going to do? Now that it's largest trading partner is going to maintain a cheaper currency? Guess it will have to 'broaden the Yuans' trading band' in a southerly direction in order to maintain it's manipulated manufacturing affordability, which was kind of the source of all this in the first place all those years ago. (No jobs anywhere just a billion slaves in China) With Maos’ saggy @rse sitting on the Yuan so no democracy could compete

The case for the recent gold run somewhat justified.
Yikes put a few shorts on yesterday and today.

We're all cashed up with no returns found on anything anymore.
Maybe we should just feed the starving and be done with it.

Doing some background work on the ASX indexes. Here are the >= 20% drops since 1987 (duration of drop).

1987 - 50% (12 months)
1989 - 30% (15 months)
1992 - 20% (6 months)
1994 - 20% (12 months)
2002 - 20% (12 months)
2007 - 50% (18 months)
2011 - 20% (6 months)

So XAO 5350 will need to reach 6400 just to remain at 5350 after the next 20% correction.

I'm also assuming any dividend yield on an index fund can be matched (4-5% by another fixed interest asset, cancelling each other out, so capital gains is the important factor ).

Nobody can predict what is going to happen but getting an idea of the equation and historical information can be handy.

I've been looking out for 4600 for a while now, and am looking forward to the April-May period where things generally get interesting.

tinhat said:

If the rate of growth in demand does pick up that will quickly see recovery in price because the current price shock will lead to a reduction in investment decisions in new supply.

In the longer term, transition away from hydrocarbons towards alternative energy sources is a factor that will determine the demand for hydrocarbons. This is not a trivial issue in my opinion.

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Agreed although there's some complexity with "alternatives".

In general, most "alternative" energy sources produce electricity as their output. They do not produce process heat or liquid fuels. Solar, wind, geothermal etc - they all produce electricity. With the exception of ethanol (relatively small) and biodiesel (trivial) they don't produce liquid fuels.

Now, in most places most electricity is not produced from oil. Major sources at the global level are coal, gas, hydro and nuclear with small but significant production from wind and oil. Minor amounts from other things like geothermal and solar. But oil is a minor source in most countries, generally used for supply in remote areas, as peaking plant rarely operating to feed the main grid, or as a backup fuel in gas (most commonly) or coal (generally limited to combustion stabilisation and startup) plants. Oil is very rarely used as a fuel for baseload generation these days.

Looking at Australia, we use a bit of diesel in remote areas but that's really it so far as oil is concerned. It's less than 2% of our total electricity production, and most of that isn't going into a main grid. We do have a few small to medium sized oil-fired plants in the grid, but they're very rarely used (only when demand is extreme eg during heatwaves or failure of other generation). Same broad concept in most countries with a few exceptions such as Saudi Arabia.

So a transition toward alternative energy tends to reduce the use of coal mostly and gas to a lesser extent. Nuclear plants are high cost in total but cheap to run once built, so they tend not to cut output where renewables are developed (though renewables may avoid building a nuclear plant in the first place). Oil just carries on with its' peaking and backup role, and nobody's going to abandon a hydro scheme in order to use solar unless for purely political reasons. It's coal and gas which cut output when renewables are built.

So, so far as the oil market is concerned, wind and solar etc aren't a real alternative. They produce electricity whereas most oil is used for transport with the rest largely for direct fuel (industry, heating etc) or petrochemicals. Not much oil is used to generate electricity in most countries these days (it was a major source 40 years ago but that's long gone).

All that said, there's a greater long term threat to LNG in the Australian context. If the cost of LNG exceeds that of obtaining intermittent power from wind and solar etc, then any rational electricity company is going to build wind and solar and make less use of their gas-fired generation. Import dependence may encourage such moves even where the cost isn't strictly viable as such but is reasonably close. There are political, national security, economy (keep the money at home rather than spending on imported fuel) and environmental motives to go down that track. There is thus a realistic limit to the price that anyone would sensibly pay, at the margin, for LNG in the long term and that price cap is set by the full range of available alternatives. Even if you keep the gas plant as backup, there's no point running it 24/7 if wind etc becomes cheaper or otherwise preferred.

Long term, demand for oil is more subject to changes in use rather than energy production per se. Eg an electric car reduces the use of oil, and does so even if the power to run it is coming from a very conventional source such as coal or hydro. Same with an electric train versus diesel. Likewise a more efficient plane uses less fuel outright. Any mass adoption of electric vehicles, or a move away from car transport (noting that peak driving per capita has already occurred in some countries) will hit oil demand hard. In contrast, wind turbines and solar panels impact primarily in the demand for coal and gas, not oil as such.