skc
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SPI 4145 is being defended quite valiantly... but the bodies of the longs are piling up. I doubt it will be able to last much longer...
The official "ASX is tanking!" panic thread
- Thread starter RexBudman
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This should be the last leg down. Have been waiting been patiently waiting in cash a while for this. 9th of August was the low. We need to test to test the 4100-3800 region again however before one can be sure.
Obviously if the low if broken convincingly I am wrong.
Obviously if the low if broken convincingly I am wrong.
Sammy, i am in the same boat & have cash waiting for a short term trade if the market drops enough. But what is enough? What level would entice you back into the market? Unless the US continues to drop heavily for several more days it is unlikely we will get close to 3800 IMO.
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I would like to see a wide ranging bar in the 4100-3800 area. Closing near it's high and increased volume. Also don't want to see heavy volume in the down days proceeding it. Pretty much looking for a reversal bar.
Thanks Sammy, so a day like August 9 would be it i guess, will watch with baited breath !!!
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When you can buy great companies for less than a resonable longterm business owner would pay for the whole business.
tech/a
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But then your basing it on worth now.
If the current downturn/recession/depression/boom or whatever is included in the price of the company going forward then it may not be the bargain it appears to be today!
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Yeah exactly. Except I would imagine we would get a range like that day! A similar looking bar but on a much smaller scale.
skc
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Completely off topic...Are there any owners of private businesses here?
I've always wondered why businesses on the share market are valued so much higher than small private businesses?
For instance, RFG sells donuts and they are trading at >9x earnings. But if you are buying a coffee shop, a restaurant, a franchise donut shop etc, I bet you no one would pay 9x earnings. I don't know exactly how much one would pay for it, but I am guessing 2.5-4x earnings at most. Same with other industries...
What are the differences?
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Hi SKC,
It is not only small scale businesses either. The company I used to work for owned a private college (Net Profit was $15m p.a.) and it was sold to a small private equity firm for 6 x earnings.
A couple of months later there was an article in the AFR about the company buying up a heap of colleges that they were going to list on the stock market with an anticipated PE of 10.
Im not sure if they endd up listing cause of the GFC etc but it was interesting to see and read about their strategy.
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I am a Director/Co-founder of a private business. In our industry we see businesses changing hands from anywhere from 6-9 times EBIT, rarely much higer. Larger businesses generally will achieve a higher multiple due to added strategic value and lower perceived risk due to scale.
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Yes I own a private business,
If you spoke to an owner of a cafe and asked him how much it earned and how much he could sell it for he might say it earned $150,000pa and was worth $300,000.
This does not mean it is trading at 2 X earnings, because not doubt he spent many hours working and if an investor was to buy it he would have to hire a manager earning perhaps $100K a year to replace the owner operator,
So the true earnings are $50Kpa so it would be 6 times earnings if he sold for $300,000.
When you own a share in a company, you are a non managing partner, you are not required to take part in any of the day to day operations etc because you have a board of directors and management working for you, So obviously the amount you are willing to pay would be higher than you would pay if you had to dedicate time to running the businesses your self.
skc
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Yup the consolidator model can do quite well. ABC learning was a prime example until...
Thanks Falcon... listed businesses often go for 10-12x EBIT so definitely a premium there.
Fair enough. Still a little bit cheaper for private vs listed but I guess the ability to access capital, the possibility of attracting high quality management and the perceived reduction in risk due to scale seem to justify higher multiples for listed entities. Offset against that are loss of control, the high cost of management and risks related to agency theory...
Well good food for thought. Thanks all for the responses.
Back to panicking.
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Yes private are cheaper than listed, but also most private have the owners performing some function, so it's never a truly passive investment as owning a share is.
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Gee, a lot of posts on recent news, but not the problem.
Yes, the WORLD economy had great years from the 80's, 10% rises on average per year, these days have stopped. The problem that is a house of cards is still massive debt, compounded by the fact that a lot of the debtors are also creditors.
US banks are being sued, by the same Gov that bailed them out. Why are not the ratings agencies being sued as well(due diligence)?
No-one really knows how this will turn out, causing doubt, which changes sentiment. People have seen their investments/super decline substantially because of basic fraud and deceit, which seemed to be rewarded by the US Gov in the very recent, they are wary of this and do not wish it to happen to them again.
More money printing (quantitative easing) will not help pay off debt. And it raises more moral questions for the rest of the world. Why should the US have this ability, when others, say in the Euro zone, cannot? They might like to beggar thy neighbour as well, but cannot.
Debt is the elephant in the room as I see it, and am wondering what will happen when the first default happens, if it ever does.
I think tech/a said it a couple of hundred posts ago, what has changed?
:fan:horse:
Yes, the WORLD economy had great years from the 80's, 10% rises on average per year, these days have stopped. The problem that is a house of cards is still massive debt, compounded by the fact that a lot of the debtors are also creditors.
US banks are being sued, by the same Gov that bailed them out. Why are not the ratings agencies being sued as well(due diligence)?
No-one really knows how this will turn out, causing doubt, which changes sentiment. People have seen their investments/super decline substantially because of basic fraud and deceit, which seemed to be rewarded by the US Gov in the very recent, they are wary of this and do not wish it to happen to them again.
More money printing (quantitative easing) will not help pay off debt. And it raises more moral questions for the rest of the world. Why should the US have this ability, when others, say in the Euro zone, cannot? They might like to beggar thy neighbour as well, but cannot.
Debt is the elephant in the room as I see it, and am wondering what will happen when the first default happens, if it ever does.
I think tech/a said it a couple of hundred posts ago, what has changed?
:fan:horse:
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When I value a company I am not simply taking the last years good results and applying multiple to it.
I am trying to establish what the earning power of the assets are over time, factoring in good years and bad, and then buying them when I can get them at a price that includes a margin of safety.
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What are you expecting him to say/fix?
Fridays generally move the market one way or another. If the market tanks until then one would expect some degree of a relief rally.