Where are all the bears now?

[Trembling Hand]

No I mean it's not fair that the market is being moulded to such an extent that there maybe no relationship between the market and the economy.

Says you. Its only a few times in retrospect one can look back at the market in general and say its out of whack with where we end up.

Tech 2001
Euro/US Housing 2007
Market bottom 2008
etc

The market, derivatives etc are meant to help trade in real objects. Does it make sense that the paper gold market as an example is 100X the real one?

Err?! Not sure where you have got that beauty?! Open interest in the gold futs is about 1300 tons. Wiki is telling me that 2011 world production was 2700 tons.

Does it make sense to artificially prop up companies and markets? What happens when things get back to the real economy?

No not really but its the system we have and the way its always been. Which I suspect is a large part of where we are at. The ones that know where the system is going know/think that that will continue to be the game, thus looking 6 months to a year ahead and running with it.

 

[skc]

No I mean it's not fair that the market is being moulded to such an extent that there maybe no relationship between the market and the economy. The market, derivatives etc are meant to help trade in real objects. Does it make sense that the paper gold market as an example is 100X the real one? Does it make sense to artificially prop up companies and markets? What happens when things get back to the real economy?

The market and the economy are related but there's nothing wrong with it moving out of sync or even in opposite direction. Remember the market (i.e. share price) is nothing more than the supposed present value of future cash flows. And the key to any present value type calculation is the discount rate.

What drives the discount rate is both perception of risk and opporutnity costs. Right now, perception of risk is reducing while opportunity costs are falling (via lower interest rates). So what you are seeing is a rising share price / market even in the absence of earning growth... or what you might have read as PE expansion in the press.

There's nothing fair or unfair about it.

 

[McLovin]

Exactly. Not everyone has a SMSF. For the majority,investing in the stock market is via super or long term holdings and in many cases they might be misinformed about the risks associated with their investments. Or what if you happen to retire during the crisis?

Over the last 10 years the total return of the All Ords has been ~9%/annum. Considering that mixed into that is the worst crisis since the Great Depression, I'd say passive long term share ownership has proven itself a sound investment.

I realise that isn't a popular view because the end of the World is coming etc.

The market and the economy are related but there's nothing wrong with it moving out of sync or even in opposite direction. Remember the market (i.e. share price) is nothing more than the supposed present value of future cash flows. And the key to any present value type calculation is the discount rate.

What drives the discount rate is both perception of risk and opporutnity costs. Right now, perception of risk is reducing while opportunity costs are falling (via lower interest rates). So what you are seeing is a rising share price / market even in the absence of earning growth... or what you might have read as PE expansion in the press.

There's nothing fair or unfair about it.

Exactly. Prices were too low. In 2011 it was like shooting fish in a barrel. IMHO, the market isn't ignoring the risks in Europe it understands them better than it did 2-3 years ago and is pricing accordingly.

 

[Julia]

Or what if you happen to retire during the crisis?

One of the reasons for having a SMSF is to have the hands on control needed to move quickly to preserve capital if necessary.

 

[sinner]

Over the last 10 years the total return of the All Ords has been ~9%/annum. Considering that mixed into that is the worst crisis since the Great Depression, I'd say passive long term share ownership has proven itself a sound investment.

I realise that isn't a popular view because the end of the World is coming etc.

lulz, easy to take some random day and say hey we performed good since that day. Hell over the last 25 days the total return of the XAO has been 5.9% or 59% annualised!

Fact is tho (from 2011):

Research from the Industry Super Network shows that over 14 years from 1996, the average performance of a super fund was just over 5 per cent.

Retail funds on average performed at 3.66 per cent while cash over the same period was 4.23 per cent.

and when you take volatility into account, the RaR on passive buy/hold/pray stocks is crap compared to Aussie cash. Plain and simple. Nobodies buying the XAO, they're all scrambling over the top and bottom ends of the market.

 

[FlyingFox]

Says you. Its only a few times in retrospect one can look back at the market in general and say its out of whack with where we end up.

Tech 2001
Euro/US Housing 2007
Market bottom 2008
etc

hmm only 3 times in the last decade......

Err?! Not sure where you have got that beauty?! Open interest in the gold futs is about 1300 tons. Wiki is telling me that 2011 world production was 2700 tons.

And how much physical gold is actually backing the futs? I understand your point that it futures are designed in that manner but its the abuse of some of these systems that is concerning.

No not really but its the system we have and the way its always been. Which I suspect is a large part of where we are at. The ones that know where the system is going know/think that that will continue to be the game, thus looking 6 months to a year ahead and running with it.

Agree with you on most of that. Not sure if this is the way it's always been.....

 

[FlyingFox]

Nobodies buying the XAO, they're all scrambling over the top and bottom ends of the market.

+1. An undamped, driven system..... Reminds me of the interview with some broker during the GFC and how he said something along the lines of that volatility is great because we make more money. Can't seem to find that video.

 

[notting]

Just thought I'd throw in a bit of growl here for all the bears who have been scratching down gold stocks over the last few months.
The other place the bears might be is looking at the coal situation and the Chinese asphyxiation issue.

China is faced with a choice,
1. Choke off growth by stopping the electricity production or
2. Choke the people.

As we saw with uranium and Japan this kind of thing can be quite detrimental to a commodity.

Coal burning in the home is also a common way for 'the people' to keep warm in their little dog boxes.
They are having a rather cold winter partly because the sky is black during the day from pollution.

It's not certain how this is all going to play out but if it starts hitting headlines because babies and old people are well, dropping dead, as in the Japanese Nuclear meltdown, well a bear could only be too pleased, unless he's a panda.

Hmmm How's Whitehaven going today?

 

[Trembling Hand]

And how much physical gold is actually backing the futs? I understand your point that it futures are designed in that manner but its the abuse of some of these systems that is concerning.

Huh?! Just stating that the system is "abused" doesn't make it true. You are wrong about paper 100X physical now you are being even more vague!

Which is normally where the bears argument ends.

 

[FlyingFox]

Huh?! Just stating that the system is "abused" doesn't make it true. You are wrong about paper 100X physical now you are being even more vague!

http://en.wikipedia.org/wiki/Gold_Anti-Trust_Action_Committee

See second paragraph under activities and appropriate citations.

Which is normally where the bears argument ends.

Just because I question the status quo does not make me a bear. I have never said that you can't or shouldn't make money from the markets nor that the world is going to end tomorrow. It would be much better if we refrain from putting labels on people and making fun of them just because the facts and/or opinions they provide are different from yours.

 

[Trembling Hand]

http://en.wikipedia.org/wiki/Gold_Anti-Trust_Action_Committee

See second paragraph under activities and appropriate citations.

Oh god! Thats where a little knowledge leads this discussion done a path of angst and frustration!! Its completely bogus. The OPEN INTEREST is only 1300 tons less than HALF the years production.

For f sake this argument is universal wrong with people who state the paper to physical line. Just because I buy and sell a futs today causing the open interest maybe to momentarily increase by 100 ounce of physical does not make it a manipulated market.

You cannot add up all the transaction in the futures today, tomorrow, Monday, Tuesday and then on and on till the end of the year and arrive at a value to say "look the amount is 100 time the physical market".

Do you understand where you are being taken for a ride on that calculation?

 

[Tyler Durden]

In the last week or so there's been many headlines in the news about the stock market reaching x, y, z year highs.

I always come back to the line "buy low, sell high". I wonder if this is a good time to sell? My friend in finance once told me, when news gets into the mainstream, it's pretty much the beginning of the end.

 

[Garpal Gumnut]

In the last week or so there's been many headlines in the news about the stock market reaching x, y, z year highs.

I always come back to the line "buy low, sell high". I wonder if this is a good time to sell? My friend in finance once told me, when news gets into the mainstream, it's pretty much the beginning of the end.

A timely post,

I have sell orders in tonight, the first for some 6 months.

Who knows whither?

gg

 

[Struzball]

In the last week or so there's been many headlines in the news about the stock market reaching x, y, z year highs.

I always come back to the line "buy low, sell high". I wonder if this is a good time to sell? My friend in finance once told me, when news gets into the mainstream, it's pretty much the beginning of the end.

Most people cut their profits short and let their losses run. Wouldn't selling now be cutting profits short?

 

[McLovin]

I'm horrible at predicting where markets are going but from what I can see it doesn't look overcooked at the moment. Down at 4,000 there was value everywhere. I'd say the market is somewhere around fair value. It's not that the risk has changed it's just that the perceived risk was much, much higher.

The tanking thread makes interesting reading.

 

[Klogg]

I'm horrible at predicting where markets are going but from what I can see it doesn't look overcooked at the moment. Down at 4,000 there was value everywhere. I'd say the market is somewhere around fair value. It's not that the risk has changed it's just that the perceived risk was much, much higher.

The tanking thread makes interesting reading.

Agreed - except I'm of the opinion that the banks are a little overcooked... Let them pull back a bit and the market is spot on IMO.

 

[tinhat]

Agreed - except I'm of the opinion that the banks are a little overcooked... Let them pull back a bit and the market is spot on IMO.

I completely disagree. The earnings outlook for the major banks is stable to mildly positive- at least that seems to be the market perception (and mine).

Funding costs are easing as international credit markets continue to thaw and the no-one is anticipating that the banks will have any trouble raising their tier one capital requirements through the issuance of hybrids at moderate spreads. This will ease the pressure on the banks to raise funds via retail deposits and ease pressure on margins.

With the interest rates on deposits continuing to fall, for the medium term at least I see further demand for bank shares which are still yielding around 7-8% grossed up. I think a lot of investors will be willing to tolerate a lower yield than that.

The one sector that could drag on the indexes is the materials sector.

 

[tech/a]

While money continues to be created then the Bull will rage.
When it stops beware the Bear and the Stag.

 

[db94]

http://www.businessinsider.com/walt...sis-2013-2#the-wealth-effect-is-an-illusion-7

EDIT: dunno how credible this guy but i found it an interesting read none the less. Also keep in mind it is the US markets

 

[RandR]

Time for a little 'sequester' to bring the bears back from their cave?

http://www.abc.net.au/news/2013-03-02/obama-signs-order-for-budget-cuts-after-talks-fail/4549136?section=business

Sounds exciting.