Australian (ASX) Stock Market Forum

The official "ASX is tanking!" panic thread

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I'm no expert, but I do have my take on how this could pan out. Looking at the All Ords in 2007, the index was trending very positively for a long long time before it all of a sudden came tumbling down from its all-time high. Sentiment was overly positive, everyone was in love with stocks, so when the bad news started pouring in, it was a recipe for disaster as all those bulls turned into bears almost at the flick of a switch.

The difference this time is that we are not into all time highs, and we have a very extensive trading zone (..well sideways market) to the left which is caused by long term nervousness. Hence, assuming the stock market does get hit as hard as some are predicting, I reckon the damage this time round shouldn't be nearly as bad as the first dip. Most of the nervousness has already been priced into the market.

Fear not fellows - my two cents - I suppose no one knows what will happen but this is what I think.
 
Just a general comment the if the US addresses their dept problem they will certainly slide into recession, US market fall 40% on average on recessions.

Still we will see how far we go markets can and do over shoot.
 
tech/a said:
It's pretty clear few here trade with any real capital if at all.
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Seems an unusualy sweeping statement for you t/a,
When you say "trade" are you talking a specific instrument (spi, currency, options, asx) or just in general?
When you say "here" do you mean the posters in this thread or on the ASF forum generally?
What do you consider 'real capital" to be?

Just asking because I sometime wonder if the definitions of "trading" aren't sometimes applied in too limited a perspective in this forum from time to time.
 
I'm actually very surprised that no one knows the reason for the big sell-off. Even today's article in smh couldn't explain why, and papers usually come up with all sorts of reasons explaining market movement.

It's also funny, because they say "the market" knows this, "the market" knows that...but we are the market, so then why don't any of us know the reasons for movement?
 
nulla nulla said:
Seems an unusualy sweeping statement for you t/a,
When you say "trade" are you talking a specific instrument (spi, currency, options, asx) or just in general?
When you say "here" do you mean the posters in this thread or on the ASF forum generally?
What do you consider 'real capital" to be?

Just asking because I sometime wonder if the definitions of "trading" aren't sometimes applied in too limited a perspective in this forum from time to time.
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In this thread.
200K +
Suggesting running ---trading it--a stock portfolio.
 
IFocus said:
Just a general comment the if the US addresses their dept problem they will certainly slide into recession, US market fall 40% on average on recessions.

Still we will see how far we go markets can and do over shoot.
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The US "austerity measures" will mean nothing. They are cutting $45B this year in an economy that is worth $3,800B, or 0.12%... the impact is negligible. What it does mean, however, is that people can no longer count on further US debt funded stimulus.

Back in the GFC days, most people analysed with hindsight that we didn't have a great depression because of government stimulus. Now that tap is turned off before the US economy can stand on its own two feet... and hence we are running scared.

drsmith said:
On a scale that includes the GFC, there's no tangable panic on the Ted Spread,

http://www.bloomberg.com/apps/quote?ticker=.TEDSP:IND
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The TED spread is intrabank. The last crisis was intrabank where people are worried about toxic assets on bank balance sheets and not knowing who will blow up next.

To measure the scale of the crisis now you need to look at the spread between German vs Italy/Spainish debt imo.

Tyler Durden said:
I'm actually very surprised that no one knows the reason for the big sell-off. Even today's article in smh couldn't explain why, and papers usually come up with all sorts of reasons explaining market movement.

It's also funny, because they say "the market" knows this, "the market" knows that...but we are the market, so then why don't any of us know the reasons for movement?
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See above. The other thing you need to be aware of is that share prices have fallen from the recent high. What you don't know is whether we are cheap now, or if we were expensive back then.
 
skc said:
The TED spread is intrabank. The last crisis was intrabank where people are worried about toxic assets on bank balance sheets and not knowing who will blow up next.
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A sovereign debt crisis wouldn't feed down to the banks ?

A question, not a criticism of the above viewpoint.
 
wayneL said:
Sometimes real men cut and run ;)

The trick is to do it early enough.
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Agree. Real women do the same.:)


Tyler Durden said:
I'm actually very surprised that no one knows the reason for the big sell-off. Even today's article in smh couldn't explain why, and papers usually come up with all sorts of reasons explaining market movement.

It's also funny, because they say "the market" knows this, "the market" knows that...but we are the market, so then why don't any of us know the reasons for movement?
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Tyler, have a read of Stephen Bartholomeusz's piece which explains the situation clearly.

Facing up to a perfect economic horror
Stephen Bartholomeusz
Published 11:49 AM, 5 Aug 2011 Last update 11:19 AM, 5 Aug 2011

What happened overnight was a financial massacre more than two years in the making as investors finally realised that policymakers in the US and Europe have failed to address the weaknesses in their economies which were exposed and exacerbated by the financial crisis.

In the US, the destructive politicking over the debt ceiling which produced a compromised compromise exposed how intractable the government debt and deficit issues are in the US, even as data emerged to show its economy was sliding back into recession.

In Europe, the ham-fisted attempts to plaster Band Aids over the Greek crisis have failed in their central objective of containing the European sovereign debt problem, with red flags now popping up all over southern Europe.

If they couldn’t deal with the relatively small Greek economy, there’s no confidence that the European policymakers could cope with a collapse in confidence in the far larger economies of Spain and Italy. And there is now a realisation among investors that there could be very significant losses on what are supposedly risk-free bonds.

It is within Europe that the potential for another global financial crisis lies. The interconnectedness of the European banking systems and the banks’ exposures to the sovereign debts of southern Europe mean that a loss of confidence could trigger a new round of liquidity and solvency crises and infect the global system.

The European Banking Authority’s stress tests last month (which didn’t include any potential for sovereign debt defaults or losses) might have shown only eight banks failed the test but another sixteen only barely scraped through and there is still significant government support for the system’s capital base.

More disturbing, the funding structure for the European banks is dangerously short term, with more than €5 trillion of funding maturing within two years. At least in the US most of the significant banks have been recapitalised and most of the taxpayer capital that was pumped into them during the crisis has been repaid.

The belated realisation that policymakers haven’t been able to gain control of the structural deficiencies in their economies was reflected in the sheer level of fear and panic that was evident in markets overnight and which spilled into our markets today, with the sharemarket plunging and the Australia dollar cracking again.

It is perverse, and an indicator of the level of fear, that the funds being yanked from almost every asset class are pouring into US treasuries, where in real terms yields are negative. In effect, investors are paying the US government to provide what they obviously regard, despite the state of the US economy and its public finances, as the only real safe haven. Even the gold price fell yesterday.

The 2008 financial crisis exposed the extent to which European and US public finances have been mismanaged over the past decade or so and, because of the massive bailouts and stimulus programs, further weakened their economic foundations.

The best case outcome was always probably a decade of painful rehabilitation and low growth, even if the markets didn’t properly appreciate the implications of the crisis’ legacy.

The worst case outcome was another crisis in a weakened global economy. Unless the policymakers act quickly and decisively to generate some confidence in their ability to manage their economies and get their public finances under some semblance of control, we may be on the cusp of that second crisis.

The Australian economy, where the non-resource sector already appeared to be on the brink of recession, won’t necessarily be immune to the shockwaves flowing from offshore, even if China’s economy holds up in the face of another global recession and provides continuing support for the resources sector.

The meltdown in financial markets will simply reinforce the conviction among consumers and business, reflected in the collapse in their confidence in the economy and the near-unprecedented risk-aversion demonstrated by their deleveraging, that more than two years after the markets signalled their belief that the worst was behind them the world remains too unsafe to contemplate taking any kind of risk.
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I'd ask just one question of those who are relishing being able to 'grab bargains' in this storm: What will have actually changed in the global situation on Monday, Tuesday, etc? i.e. why will it be any safer to buy when nothing has changed?

In the GFC governments were able to prop up/buy out financial institutions and provide stimulus to economies.

Now they're pretty much broke.

Even Germany can't go on bailing out the other European nations without risking its own position.

So why would you anticipate a rapid return to postive sentiment?
 
Now that's a really good comment!


skc said:
What you don't know is whether we are cheap now, or if we were expensive back then.
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I dropped a couple of bucks today too, but not really unexpected... perhaps just un-hoped for.....

I wonder what will happen come Monday
 
skc said:
The US "austerity measures" will mean nothing. They are cutting $45B this year in an economy that is worth $3,800B, or 0.12%... the impact is negligible. What it does mean, however, is that people can no longer count on further US debt funded stimulus.
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Problem for the US is to address the dept problem before the bond market makes judgment call the US must pay down its dept levels.

If they chose a glide path its means pretty much knocking off 1% growth (cutting government expenditure and raising taxes) that means recession (current growth well below 2%)






The TED spread is intrabank. The last crisis was intrabank where people are worried about toxic assets on bank balance sheets and not knowing who will blow up next.

To measure the scale of the crisis now you need to look at the spread between German vs Italy/Spainish debt imo.
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Again bond markets will decide the fate of the Italy / Spain etc, Italy at the moment is looking shaky...........

This has a long way to play out early days yet.

The threat on the world stage remains war rather than financial.
 
This is the double dip we had to have!

At least that's one way of looking at it...all the great market pull backs have had a double dip and this is clearly the GFC double dip, how far we are into the dip is what's uncertain...i remember the pull back of May/June last year, this forum was full of double dip panic merchants..they were right about the dip just got the timing wrong by 14 or so months. :)

Looking at the 3 year chart below we are clearly well above the GFC bottom and only a couple of hundred points below Post GFC support, so all in all its just not that bad....my portfolio is down around 12% from the recent highs and my open profits have fallen about 16% ~ what hasn't fallen are my closed trade profits :) profits that ive taken from buying stocks that are falling and selling when they have risen.
~
 

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Tyler Durden said:
Ok, that's a very good read. But now I ask, why now? Why didn't all this happen before the US debt ceiling was raised?
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Tyler, if you have a think about it, you will probably be able to come up with some suggestions. This is more useful to you than people 'telling you stuff'.

Look forward to seeing what you think.
 
drsmith said:
A sovereign debt crisis wouldn't feed down to the banks ?

A question, not a criticism of the above viewpoint.
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Yes but I guess we are only at the start. And this time the starting point is at the sovereign level.
 
skc said:
Yes but I guess we are only at the start. And this time the starting point is at the sovereign level.
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Unfortunately a large number of banks are holding government dept, its as safe as you know the government.......... the main problem with the GFC was no one knew who was going to fall over hence price of capital went through the roof.

That was solved by governments backing the banks (how did that work out for Ireland?)

Now it gets ugly as who will believe governments are solvent........
 
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