Webdiary - Founded and Inspired by Margo Kingston

In my opinion, if we see the yen continue to rise, most of the asset markets will slide a lot further. The yen carry trade is now being seen for the risk it is and if it unwinds quickly, there will be lots of selling pressure in lots of different asset markets to repay the yen loans.

Just a few random points.

David, I believe that as at the end of Wednesday’s close, the ASX200 is higher than it closed at both the end of 2006 and January this year. Not much of a crash in the greater scheme of things. Ben Graham (Buffet’s major influence) used to say that investor’s (as opposed to speculators and trader’s) would be better off ignoring the day to day fluctuations of the market.

Stuart, I personally favour holding oil and gold stocks rather than the underlying commodities themselves (similar to Peter’s point I guess), I’m in BHP and Santos myself. If you really like oil and gold, look for miners with low levels of hedging.

A gentle spiral downwards that doesn't stop is maybe still a crash. More detailed analysis from the Guardian's finance editor here.

A small bounce on Wall Street yesterday pulled the FTSE up from a fall below 6000, but then after London closed, the Dow itself lost the early gains and did a small dive into negative territory in the last half-hour of trading, giving a mixed lead to the ASX today ...

Hi David R, I don't spend much time on Webdiary these days, but was interested to read this thread of yours. 

As someone who has expressed an interest in peak oil in the past, you would be aware that the equivalent of your 300-point-drop-in-the-Dow-Jones-signalling-a-stockmarket-crash in the peak oil arena is: we will know that world oil production has peaked when Saudi Arabian production goes into decline.

Well - guess what just happened. Stuart Staniford just posted an article on The Oil Drum indicating that Saudi Arabian oil production declined by 8% in 2006. It never ceases to amaze me how people like Jay White carp on about the 'fundamentals' while ignoring peak oil. The only question that remains in my mind is how long it will take 'the market' to realise the arrival, and consequences, of peak oil.

My recommendations:

• Buy - gold bullion, oil.
• Hold - oil and gas equities.
• Sell - everything else (including cash).

I have been reading the various comments, and especially Craig’s with interest.

Question is, who is trading what. Shares bought for investment ought not be a worry, unless they have been bought in the past year, which would leave one nervous.

If anyone is trading shares ---  looking to make money on price movement --- this move probably involves losses.

Everyones point of view could be correct, depending upon the time frame they trade. Alternatively, without knowing what time frame is being discussed, the observations mean nothing.

Trading futures. Profit so long as the market is moving!  (When it is going sideways as well.)

I haven’t touched shares since the early ‘70's.

Futures? Trading the indexes. Assuming that you have access to a screen, volume is the indicator.

I am not trading at the present time, but the time and lack of market movement suggests to me that it is not over sold.

However, assuming that you know the recent average daily volume on a particular index, looking at the level/s at which the volume came in, at the buy and sell volume, and with electronic trading the volume of resting buy and sell orders gives a clear indication of market direction.

If volume builds at the current values then the market is not going anywhere, soon.

Craig, stop losses give a false sense of security.  During the ‘87 crash prices on the S&P moved four to six hundred points in a single move. That is both up and down. Good luck with a stop loss!

Yes, I was trading the US markets and particularly the S&P for a living at the time.

I would be watching gold, if I were in the market.   At the first rumour that Middle Eastern countries were dumping gold, I would be out of the market.   It will come after a period of a weak US $ when money has been moved into gold, and then gold will plummet.

At least that is what the signs say!

Hello Frère Jihad, Ja.  Swedes? Staple diet in my country.  Boiled, mashed, lots of pepper and butter. Fine food, one of my favourite vegetables. 

 

... pretty much across the board in Asia, though Philippines was 8% down and Shanghai is 2.5% up (but still more than 6% down from Monday).

In the way of these global things, European markets open soon, and New York 7 hours after that - looking more like a hiccup than a storm at this point.

G'day David, the SSE composite at 12.37 AEDT was just shy of 1% up.  I'll be watching it more closely for a while.

Ernest William: "Several experts in the field have recently been warning that the "New Order" Liberal "prosperity" has not factored in the record foreign debt and its ultimate effect on the consumers who, after all, will pay the price of governmental neglect."

Just out of interest who are these experts? And no, Sharron Burrows does not count. She could well be a nice person, but I would not be putting a dollar each way on her tips.

Ernest William: "The foreign debt has increased rapidly per year since the Liberals took office in 1996."

Yes it has, in line with prosperity. A good way to cut back on this "debt" is to increase savings and exports. A good way would be to encourage superannuation. Something I note the Liberal government has done in the way of taking tax off super. They have also removed taxes from exports. Who would tax super and exports? The Labor party of course and they did. Economic illiterates.

Another situation is that Costello has a lot of money to play with in this up-coming budget. The fear, though, is inflation; the downside being rising interest rates. With the type of correction Ernest predicts (even half the type) this allows a ton of room to stimulate the economy. Problem solved.

We really do make our own luck in life. Giving yourself options (Labor never does) goes a long way to helping the cause. The fundamentals in Australia are sound because the last ten years of the "new order" have made them sound. Probably why Kevvie pretends to be joined at the hip with John on all things economic.

Angela, the correction in Asia answers your question as to why people keep pouring money into US treasuries. Safety my dear. When it comes to greed and fear, fear always wins out. If this correction continues throughout Asia it will also do a fair swag of damage to Russia.

Take the money out of the US, and can you tell me again where it is going to go?

Asia namely through China has undergone a huge boom over the past couple of years. This was always going to correct. Bust? I don't think so.

As for Australia the fundamentals if not a little heated are sound. You will also find large amounts of cash switching from the housing boom into equities.

Ernest William you being such a Labor man and all I would not start jinxing myself if I were you. Read the Reserve Bank statements closely. If this continues I can see one maybe two interest rate drops coming on. Just in time for an election lucky enough.

Got yourself some spare cash not doing much? Go and find yourself a three to six month term deposit.

Craig, I'd say wait for Shanghai to open. The ASX fall on opening pretty exactly matched the Wall Street close, and so did the Tokyo opening a few minutes ago - the question is whether that's it, or whether the whole thing spirals down, and the Shanghai opening (at 12.15AEDT) will give another clue as to whether it goes down and around again or stops at this correction.

Interesting opening to this story in The Age this morning:

By 10.10am (AEDT), the S&P/ASX200 benchmark index was down 3.26 per cent or 195.5 points to 5798.3.

Brokers had tipped the market to lose between 2 and 3 per cent when it opened.

But they also say that any falls today may represent good buying opportunities for local investors.

I'd called my broker before the market opened this morning to talk about setting a series of stop loss orders. He mentioned the good buying opportunities. And also the fact that for the past three months the market has been looking for reasons to pull back a bit.

I'm in a strong financial position and I've got capacity to buy. I can increase my share portfolio by more than a politican's annual pay packet at the moment. "Start of the slide, or a hiccup and a good buying opportunity?" is the question I'm contemplating today.

My broker emphasised the localised nature of the issues that caused the 9% fall in Shanghai and the estimate of real value in many Aussie stocks being 90% solid. I will be looking for good buy opportunities, but I'll still be setting some stop loss triggers.

Yes David, I really believe that the world's economic boom is in dire straits.

In the 1930's the Corporations were so de-regulated in the U.S. that they had a lot to do with the "profit comes first" desire that helped to cause the "Great Depression".

For some five years I have been claiming that the Howard/Costello "prosperity" is based mainly on the false, and debt ridden Australian economy.

Several experts in the field have recently been warning that the "New Order" Liberal "prosperity" has not factored in the record foreign debt and its ultimate effect on the consumers who, after all, will pay the price of governmental neglect.

The foreign debt has increased rapidly per year since the Liberals took office in 1996.

The Federal Government allowed the de-regulated Banks and Financial Institutions to provide enormous loans to people without collateral and who now have NO security of employment due to the "Work[non]Choices" legislation.

Add to that the destruction of unfair dismissal protection, then the  obvious result is that they have NO choice but to "live to work" per se - IF they can find a job with a "living wage".

The fatal financial mixture is already causing thousands of people to be underemployed and unable to meet the commitments that they MAY have been able to service IF the "New Order" had not conned them into a "Pinnochio good life".

Bob Hawke said before the last election that the biggest con of the Howard Liberals is the false economy.  The "prosperity" and the riches belong to the wealthy shareholders and the Corporations and does NOT relate to the ever increasing working poor.

Nor does it take into account the fear and insecurity of Australian citizens and increases in suicides and all forms of crime which result from that desperation.

NE OUBLIE.