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Australian stock market outlook & forecast for 2012

January 8th, 2012 · Greg Atkinson · 60 Comments

The ASX All Ordinaries Index and S&P/ASX 200 Index finished much lower than I expected in 2011, so this makes me somewhat reluctant to go on record and make an Australian stock market forecast for 2012. However the process of looking at the various economic data and trying to guess where the market will end is a useful one, so foolishly I will outline once again my Australian stock market forecast for the year ahead.

Firstly let’s cover what we know. The Eurozone is set for a tough year with many of the major economies there poised to enter a recession. The U.S. economy is still in bad shape, although there are a few bright spots in the housing and employment markets for example. In Asia the Chinese economy is slowing, the Japanese economy is struggling and in Australia the economy has been showing signs of weakness for more than a year.

A quick glance at some of the economic indicators I watch shows that the Baltic Dry Index is currently in a slump, commodities futures are still basically trending downwards as they have been since April/May 2011 and oil (WTI) is around $100 USD a barrel. (Brent Crude is trading around $113)

None of these economic indicators look particularly bullish to me. Even the gold price appears to be in somewhat of a holding pattern. It seems that the markets are waiting for something to happen and are poised to lurch upwards on downwards when something does. (as was the case for much of 2011)

The economic indicators for Australia suggest that the housing market is struggling, consumer spending is weak and export earnings might be on the decline. (as demand from China eases). On the positive side we may see the Reserve Bank cut interest rates again but I doubt that this alone will help the stock market much.

So as we start a new year I would say my short term outlook for Australian stocks is bearish. I see far more downside risks than upside potential, however I don’t expect the ASX All Ords or S&P/ASX 200 to spend much time below the 4000 level simply because I think many quality stocks are already over sold.

Yes the global economic outlook doesn’t look good at the moment, but consumers still consume, the banking system has not fallen into a heap and life goes on. Overheated economies will cool down, debt levels will gradually be brought under control and the seeds of the next market bubble will be planted…and probably already have.

Anyway for two years running now my Australian stock market forecast has been too high. Last year in my Australian stock market outlook for 2011 I anticipated that the All Ords/ASX 200 would end in a range between 4800-5200 and for a while, it looked like I had been too cautious.

But after a good start to the year the market slid back and was given a kick downwards in July because of the debt concerns in the Eurozone. The ASX All Ordinaries finished 2011 at 4111.00 and the S&P/ASX 200 at 4056.00. So quite clearly I was way off the mark and should be slapped around with a cold fish.

So this year it would make sense for me to be more cautious and although I am bearish in regards to the outlook for Australian stocks over the short term, I still believe (probably foolishly) that another bull market will take root and that this may happen this year.

Please remember that any attempt to predict where the markets will end in 12 months time is at best a semi-educated guesstimate. Quite clearly I have not been very accurate over the last few years but in my own defence I will say that at least I did spot some of the trends correctly.

So for 2012 I am expecting the Australian stock market to finish the year considerably higher with the All Ords/ASX 200 finishing between 4800-5200. Last year I was bearish when I suggested the stock market would end within that trading range, this year it’s a bullish call.

You might wonder, why am I making a bullish prediction for the Australian stock market in 2012 when I have outlined above so many reason for being bearish?

The simple answer is that most of the bad news is already factored into stock prices. A slowdown in China is priced into the mining stocks, the banks have been dragged down by the mess in Europe and stocks exposed to consumer spending are already trading at recession like levels.

In other words the Australian stock market is already in a recession and taking into account that it was once trading above 6500, one could argue that it has been in a slump now for four years. The Australian economy faces some challenges and times will be tough for a lot of companies, but the stock market is currently trading around 35% lower than the peak reached in 2007, so it seems to me an economic downturn is already priced into the market.

Many investors already have stock market fatigue. Vast sums of money have been moved away from Australian stocks and into other asset classes such as cash or precious metals. You don’t get many taxi drivers sharing their stock market tips these days, instead what you are more likely to hear are stories of people who have lost money with shares or gloomy stories about the economy.

So in my view we are close to the point of maximum pessimism in terms of stock market investor psychology.

My stock market investment strategy for 2012 therefore will be to focus on battered down blue chip stocks which have been oversold but pay good dividends. These are the type of stocks where you can earn income as you sit and wait for them to recover. It might take years before you see a decent capital gain with these shares, but the wait could be worth it.

At this point please remember that my ramblings should not be taken as any form of investment advice. I encourage all readers to visit other sites and do plenty of research as they develop their own stock market investing strategy. I simply hope my frequent blunders and occasional successes (if any) are of some use.

So I have stuck my neck out and make a call for 2012 so now I welcome as always, feedback from readers especially other outlooks or forecasts for the Australian stock market.

Greg Atkinson is the editor of Shareswatch Australia and the Managing Director of Ohori Capital He is originally from Australia but currently resides in Japan. He can be followed on twitter via @GregAtkinson_jp


60 responses so far ↓

  • 1 Stillgotshoeson // Jan 8, 2012 at 12:07 pm

    Greg Atkinson

    “The ASX All Ordinaries Index and S&P/ASX 200 Index finished much lower than I expected in 2011, so this makes me somewhat reluctant to go on record and make an Australian stock market forecast for 2012.”

    It’s alright for you Greg, it is your forum, no one is going to continually point out your errors or try to belittle you over “incorrect” predictions, the fear of being banned from the server is too great for them.. 😉

    I still am of the opinion that the ASX200/All Ords will touch new lows before this mess is sorted.
    I think we will see more QE from our Northern Hemisphere neighbours in 2012 which will, ,well should if they (share markets) react true to form get a boost. How long the “boost” lasts is the issue.
    I think we will be around 1000 points less than your figure at years end Greg.

    Yes, some shares seem to be at excellent buying levels, however I still think there is much money tied up in the big 6 to see falls of many 100’s of points when capitulation does come. Big falls in the Banks and RIO and BHP would also imapct those already beaten down stocks even more sending us below 3000.

    Accumulating “battered down” dividend paying stocks I agree could well pay off in to the long term strategy of an investor. However I think it too early too go “all in” on shares. Dollar average your purchases by spreadig the buying out, the market is too volatile to pick bottoms on paticular shares so accumulation on dips would be prudent.

    I feel confident Gold will break the $2000USD level this year and Silver will retest the $50USD dollar level in 2012.

    I am biased towards precious metal miners at this point, Holding energy (oil/gas/uranium) and a few others. Still more heavily weighted to cash than equities at the moment.

    RBA rate may very well be lower at years end than currently but I think mortgage rates will be the same if not a little higher this time next year.
    Any $900 cheques from the government will more likely be used to pay down debt or saved than spent this time around so I do not hold much faith in any government stimulus.

    Unemployment rate this time next year I expect to be higher than currently as well.

    So in summary 2012. Gold/Silver to reach new highs. (may not hold but will be reached)
    ASX/All Ords trading Between 3800/4200 this time next year.
    RBA rate lower but mortgage rates higher.
    Unemployment rate higher.

    This is how I think 2012 will pan out.

    Direct armed conflict between Iran and the USA would be a game changer for all.

  • 2 Greg Atkinson // Jan 8, 2012 at 12:37 pm

    Still, your outlook looks pretty reasonable to me. Between the two ranges we have set out one of us should be close at the end of 2012 🙂

    I agree that unemployment will probably higher and rates lower. Gold I reckon will be closer to $10000 USD an ounce than $2000 but I am a gold bear, so you can take that with a pinch of salt.

    Of course something will pop up this year that none of us have seen coming and that will shake everything up.

    Thanks for sharing your forecast!

  • 3 Stillgotshoeson // Jan 8, 2012 at 1:36 pm

    Greg Atkinson // Jan 8, 2012 at 12:37 pm

    Thanks for sharing your forecast!

    No problem Greg.

    Waiting for you know who to show up now and add nothing constructive to the thread.

    Still working on my “stock” picks for 2012 to post up.

    These will not be recommendations, merely for observational purposes. People should be making informed decisions before investing.
    Looking at making at a 100k portfolio ( plus brockerage) of assorted equities.
    Got a half dozen or so, but want to make it an even 10 at a limit of 10k per security.

  • 4 Leigh // Jan 8, 2012 at 4:37 pm

    All logical analysis says we must begin to climb out of this slump this year, however we have the distinct and unsettling oddity in financial markets that allows sentiment to over ride sense. Greg, I think you may be right that a lot of the bad news has already been factored in and there are good dividend paying blue chips available now. My rough analysis shows my portfolio at the end of 2011, 27% below the 07 highs and 43% up from the 09 lows so even though we have a long way to go to to get back to 2007 levels we are in a recovery trend, although I agree the last half of 2011 did not feel like it. I have this nagging feeling that if we don’t get on with snapping up a few of those “battered down stocks” before June 2012 we might be disappointed. If we had bought CBA, WES or even SUN in 2009 we would have already doubled our money by now.
    regards
    Leigh

  • 5 Stillgotshoeson // Jan 9, 2012 at 6:33 am

    The problem I have found with the market in general is that it has never been a logical place, fear and greed are the fundamental drivers of the share market not logic.

    I fail to see a recovery trend at the moment, I still see a downward trend inter mixed with the occasional spikes on anything resembling good news.

    Still own WES from back in the day when they were Coles/Myer Shares. Bought CBA circa $31 and sold above $50 a few dividends later. I am still inclined to steer clear of the banks, I am thinking 20% to 30% falls in them to be highly likely.

    Bad news has been factored in, capitulation has not and I think that is still to come, maybe not this year but we never know…

  • 6 Ficus // Jan 9, 2012 at 9:11 am

    What are peoples thoughts on the price of BHP, are they a good buying opportunity or could fall futher. Personally if there was a big correction I couldn’t see them falling by more than another 10%

  • 7 Leigh // Jan 9, 2012 at 9:45 am

    Shoes,I am not saying there will not be further slippery dips in the market this year, but I think there are a few good buys out there now, banks included, that are becoming hard to ignore especially if you are after income.

    Ficus, BHP is not exactly a speculative stock but the China slow down will effect it. Maybe this helps; in Oct 07 BHP was worth $47.55 in Aug 09, $31.33, early last year it went over $47 again and today its worth around $35.20, so on paper it looks a good, buy but as we all know, no one really knows. For me, BHP just doesn’t pay high enough dividends but we all buy for different reasons. Please don’t take this as any sort of financial advice.

  • 8 Plornt // Jan 9, 2012 at 10:36 am

    My predictions (take them with a grain of salt of course, as I am and will be wrong numerous times).

    XAO 5700 at some point over the next two years.
    XAO to rally heavily in the next 2 months, perhaps to 4800-5,000 then followed by another substantial 10 to 15% crash to higher highs (off the 2011 intraday lows). Then I am anticipating we should break out of this range to the upside.

    In regards to DJIA; provided Obama gets re-elected, DJIA returns may be significant especially in the second half:
    http://static.seekingalpha.com/uploads/2011/12/19/saupload_image001.png

    Have also increased silver position as my investment system has given a buy signal. Correction in silver was not as deep as I anticipated, but one can never predict these things with any degree of consistent accuracy.

    I am inclined to agree with this observation:
    “Too many people are convinced the market is in a permanent state of crisis,” George Greig, global strategist at William Blair & Co., notes in his 2012 investment outlook. “The prevailing conventional wisdom is ‘Pro-crisis and cynical equals smart.’ Once in that mind-set, it is difficult to move quickly or easily to a bullish position.”

    This drivel should not be taken as financial advice. Seek to obtain professional
    advice before proceeding with any financial decision.

  • 9 Plornt // Jan 9, 2012 at 10:43 am

    “Shoes,I am not saying there will not be further slippery dips in the market this year, but I think there are a few good buys out there now, banks included, that are becoming hard to ignore especially if you are after income.”

    I agree Leigh, like the way you think from a psychological standpoint :). So important to remain optimistic when the markets have crashed, but very hard to do in practice. My systems are giving very few short signals, and there are numerous buy signals. Last time this happened (in reverse) was in May 2011, when I was struggling to find many long opportunities, but there were plenty of shorts either triggered or about to trigger.

    This drivel should not be taken as financial advice. Seek to obtain professional
    advice before proceeding with any financial decision.

  • 10 Pat Cox // Jan 9, 2012 at 11:29 am

    I think we will end up slightly higher than where we started (say this time in 2013 around 4200-4300), but till then we are likely to go lower. I would say 3500 is the bottom. At this point, people will be exhausted and after almost 5 years of being unable to make a buck from ‘buy and hold’ most investors will give up and shy away from the market. This is the point to buy for the smart investors.

    I think from the low of 3500, in the next 3-4 years we will get back up to the 2007 highs with maybe a few corrections in between of 10-20%. And from there, we should enter a secular bull market phase where PE ratios expand. The secular bull could last anywhere from 10-15 years and we should see our index at 12,000-15,000 in that time!

    I think the best stocks to buy will be industrial stocks which are at low valuations and have been neglected as everyone has focused on mining (much like in the 1990’s where industrial stocks ruled and mining was loathed).

    These views are based on studying previous secular bull and bear markets in Australia. Since 2007, we have been in the same pattern as from 1987 to 1992 (big 50% market correction, a 50% rise and then a trading range for many years and a re-test of the ultimate lows from the big correction and then away we go into a secular bull which we had in the 1990’s to 2007 with only minor corrections and the odd bear market).

  • 11 Greg Atkinson // Jan 9, 2012 at 11:50 am

    Some great analysis coming through. Thanks.

    @Leigh I tend to agree with you that we must be due to rally out of this slump. It’s already been 4 years of mostly pain!

    @Plornt A target of 5700 over the next two years sounds reasonable to me. It does sound like many investors believe the crisis will go on forever and will probably miss much of the next bull market.

    @Pat Cox Sounds like you have a long term bullish view but see another major dip before then. You might be right. Your long term analysis looks pretty good to me and makes sense.

  • 12 Plornt // Jan 9, 2012 at 12:30 pm

    “I think the best stocks to buy will be industrial stocks which are at low valuations and have been neglected as everyone has focused on mining (much like in the 1990?s where industrial stocks ruled and mining was loathed).”

    Thanks for your opinion Pat. Yes industrials are quite low valuations and have been neglected. 80% of my investment portfolio is made up of industrials, and I expect them to rise substantially over the next few years and beyond.

    This drivel should not be taken as financial advice. Seek to obtain professional
    advice before proceeding with any financial decision.

  • 13 Stillgotshoeson // Jan 9, 2012 at 1:20 pm

    I hold a similiar view to Pat Cox, I think we will go lower in the short to medium term (2 years maybe) but I too am bullish for the longer term on Australian share market.

    As for industrials, I still think the precious miners will outperform in the short term, I have know idea how high gold and silver will go but I have target prices in mind and will sell out of the precious metal miners on targets then buy into what I hope will be still some undervalued equities in different sectors. Precious metals moves downwards can be severe and sudden, I will be happy to take a profit and move on rather than wait for the ultimate high point.

    My 100k portfolio is ready, will post up shortly. Comes in at $99477.95 for the 10 stocks I have chosen including brokerage.
    Again these are not buy recommendations, merely for observational purposes to see how they go over the course of 2012.

  • 14 Plornt // Jan 9, 2012 at 1:27 pm

    “As for industrials, I still think the precious miners will outperform in the short term,”

    Yes I agree, and I think in the longer term as well for some select stocks. I have 10% of my portfolio in small cap mining stocks (precious and commodities like oil and zinc). There are some severe mispricings there relative to the falls the corresponding commodity prices have suffered.

    This drivel should not be taken as financial advice. Seek to obtain professional
    advice before proceeding with any financial decision.

  • 15 Trading Coach // Jan 9, 2012 at 2:47 pm

    “So in my view we are close to the point of maximum pessimism in terms of stock market investor psychology.”

    Well, we all need better news this 2012. But there’s nothing wrong with sitting on the sidelines and learning and watching what will happen. It’s still action through inaction.

  • 16 Pat Cox // Jan 9, 2012 at 3:01 pm

    Yes, I also agree, silver and gold miners should do very well for another few years (in USD). Gold and Silver have been in a secular bull market since 1998-2000 while US equities have been in a secular bear market since 2000. All secular bull markets end with bubbles and an almost parabolic move towards the end, we are yet to see that, but we probably will in the coming few years.

    Also, gold and silver miners seem to have lagged gold and silver so perhaps there is an opportunity now to get some exposure. Last year George Soros sold his gold, calling gold the ultimate bubble. But what didn’t get as much air time was the fact that he bought gold stocks! Exciting times ahead in this space.

  • 17 Pat Cox // Jan 9, 2012 at 3:20 pm

    @Stillgotshoeson

    “I have know idea how high gold and silver will go but I have target prices in mind and will sell out of the precious metal miners on targets then buy into what I hope will be still some undervalued equities in different sectors.”

    The key thing to watch in my opinion is the Dow-To-Gold Ratio. Its about 1:8 (Dow 12,000, Gold $1500). When gold peaked last time with its parabolic move in 1980/81, the ratio was at 1:1. So I’d be looking out for that. For Silver, the historic gold to silver ratio has been 1:16. It is about 1:50 now, so silver looks ‘cheap’ in this sense. But wherever Gold will go, Silver will be sure to follow in a more volatile fashion.

  • 18 Stillgotshoeson // Jan 10, 2012 at 6:32 am

    100k Portfolio.

    IMF 7407 @ $1.35 $9999.45
    ABY 13000 @ $.765 $9945
    GRY* 8500 @ $1.165 $9902.50
    PRU* 3900 @ $2.54 $9906
    FML* 185000 @ $.054 $9990
    RAU* 2500000 @ $.004 $10000
    BPT* 7500 @ $1.30 $9750
    API 37700 @ $.265 $9990.50
    BKP 714000 @ $.014 $9996
    CTN 11000 @ $.89 $9790

    Total + $199.50 Brokerage $99278.45

    Shares with an * are shares I currently own.

    Sit and hold it for 12 months and see how it does or do you want me to update as if I was trading?

  • 19 Greg Atkinson // Jan 10, 2012 at 8:34 am

    @Stillgotshoeson – maybe you could post updates here? Australian Stock Market Outlook

  • 20 Lachlan // Jan 11, 2012 at 5:27 pm

    Well done Shoes.
    I am wanting to buy into NHC, the coal play I was talking about. Wondering if you or anyone can see anything negative in there?

    Greg I noticed more news about China again a couple days old now but analysts expect they will further easing reserve requirements.

  • 21 Frank Watkins // Jan 12, 2012 at 12:49 pm

    Maybe all this guesswork is why there are technical analysts. Methinks too much time is spent analysing “the market”. Who cares about “the market”.Unless you are an index trader you won’t make money from “the market”, you make money from individual stocks, you get a buy signal, you buy, a sell signal, you sell.
    And if you do not actively monitor your portfolio for buy and sell signals then you need help.

  • 22 Lachlan // Jan 13, 2012 at 4:02 am

    People like to actively invest and then there also is a pleasure component in the market for mine. Some people read history books which is great. The global markets in the present day are making what will become a fascinating history in the future and we get the thrill of watching it play out today like a great game of tennis or some such…internet has added greatly to the experience.

  • 23 Greg Atkinson // Jan 13, 2012 at 8:29 am

    The alternative is to be isolated in a room (so you don’t hear any news) and blindly work out some magical algorithms that will buy/sell/hold your stocks based on…signals?

    Even the technical traders I know pay attention to forecasts and also try to spot trends. I also use technical analysis and sometime trade on that basis but I also try to have a big picture view as well.

    As for the market…you don’t have to trade the index to make money. For example many fundamental investors study the market and then look for stocks trading below what they should be taking into account the longer term outlook for stocks and the economy in general.

  • 24 Leigh // Jan 13, 2012 at 1:14 pm

    It is so interesting to see how we believe what will make money.
    Time is the greatest generator of wealth and impatience is the greatest destroyer of wealth, unfortunately humans don’t really get enough time in a life-time to benefit from it and we seem to have an abundance of impatience.
    I believe the excitement generated from the risk drives a lot of our investment decision. It is rather heady stuff to click “buy” and instantly commit to ten,twenty or fifty grand. If we really wanted to make money we would buy some sensible investment property and a selection of blue chips and sit on them for thirty years, but that is not very exciting and by the time we cash in we will be too old to enjoy it.
    Analysis of the charts and forecasts and trends are all good fun and helpful as well. As Lachlan says, there is a pleasure component in the market. If you don’t get pleasure out of playing the market you probably should’t be doing it.

  • 25 Stillgotshoeson // Jan 13, 2012 at 8:48 pm

    Lachlan, had a quick look at NHC, potential to make a quick buck if change of control transaction comes to fruition with a takeover offer.

    No offer could mean NHC becomes a buy and hold option. They do not interest me (better value elsewhere for my coin). Other companies paying better yields if a dividend play is what your after.

    I would not consider them a “bad” stock, just that they are imho better value ones out there.

  • 26 Lachlan // Jan 14, 2012 at 6:09 pm

    Thanks very much Shoes.
    I have already purchased one lot @ 5.63 because I am interested in dividends now and also because I think they are going to bounce soon to new highs about 30-40% above here. Will look out for a better divi play of course. Its always easier in hindsight but I should have bought TLS at 3.15 or so while I had a chance. I will wait for them to pull back into an oversold state now and grab what I want. They are actually quickly getting that way anyhow and my entry price will likely have to be higher than stated previously.

  • 27 Lachlan // Jan 23, 2012 at 10:34 am

    TLS consolidation/pause may not include too much discounting before another spike up. Wait it out again.
    My father has a nice divi stock in DTL Shoes. Not that I am touting them.

  • 28 Ron // Jun 2, 2012 at 1:47 pm

    A projection for the ASX200 of around 5000 points at years end seems way too optimistic.

    I am not sure that many financial advisers realise that we are at the start of a fairly significant socio/economic change in the world and this may go for some years yet.

    Extended personal and government debt is just part of the problem. A lower tax grab due to a slowly reducing work force and lower gst from reduced retail spending on one side, and higher ageing costs, health care cost etc on the other side are a recipe for real social problems over the next few years.

    Solutions I have none. Other than to suggest that most of us have been living an excessive lifestyle fueled by easy credit. Perhaps it really is time that we pulled our collective heads in and lived within our means. And that goes for government as well.

  • 29 Ned S // Jun 3, 2012 at 7:30 am

    While I’m not a big fan of Nationalism, things are extremely bad when democratically elected national politicians start talking about giving up large chunks of their nation’s fiscal sovereignty:

    http://www.telegraph.co.uk/finance/financialcrisis/9307560/Spanish-premier-Mariano-Rajoy-calls-for-eurozone-centralised-control-authority.html

    That effectively means they are giving up their ability to buy votes. Which also spotlights the fundamental flaw in Democracy that we’ve spoken about here in the past.

    We are living in a period of monumental events. This sort of stuff actually has the potential to reshape the way large chunks of the world work. Who’d of ever thunk it?

    Not at all sure such a disparate and feisty bunch as the Europeans will be able to pull it off though? But it is fascinating to see such stuff being considered anyway.

  • 30 Lachlan // Jun 3, 2012 at 11:10 am

    Ned I know what you mean about nationalism, which bugs me too. Because when national sovereignty is at risk the rhetoric always resumes a pro-nationalist theme and the inherent degenerative nature of all statism is overlooked. But then I would conclude that these things are a product of human nature and therefore unavoidable over time regardless. All power centralisation however in my opinion produces increasing risks to sustainability at local levels although the central planner does not acknowledge that. They assume high notions of their ability to contain the human tide. I say as always it is unaffordable in terms of human capital. I am not saying that a super state is not possible for a time or that in many places it would not be very liveable.

    I have thought about Europe and cannot decide what can happen there. Push is coming to shove very soon I feel. If the powers there are determined to keep the EZ together then the people of more prudent core may become unruly as a large devaluation will become necessary. If the austerity is forced on the PIIGS then likewise for them. Things are bad there right now.
    If the powers give up for any period time there will be financial meltdown anyhow as nation state debts are defaulted on one way or another allowing them to proceed in to their futures. The whole thing seems unaffordable. The cost of controlling people.

  • 31 Ned S // Jun 3, 2012 at 12:19 pm

    I can’t see Nationalism going away anytime soon either Lachlan. So yes, it is a moot point.

    Re the PIIGS and austerity, they can vote against it all they like of course but the simple fact is that when one starts talking the likes of Spain, all the smarties reckon it’s Too Big to Bail. So there isn’t any party around who could get them off the hook even if they did want to? Which pretty much leads me to conclude they are going to get to do austerity regardless now.

  • 32 Lachlan // Jun 3, 2012 at 1:43 pm

    It seems impossible to pick even a vaguely likely outcome Ned. There has been so much political meddling at so many levels and now people are sick of it. Maybe the powers will pull a seemingly magic solution out of the hat. Who knows. It may all unwind.
    In any event there are always fundamentals. Access to food, water, energy etc etc. If the status quo ceases then some nations will have access to the things they need and some will find themselves more or less hung out to dry. Some will take advantage of others no doubt. Winners will emerge.

  • 33 Ned S // Jun 3, 2012 at 2:45 pm

    No magic solutions in the hat I’m afraid Lachlan.

    What might the ASX be cum end of year?

    I’m extraordinarily bad at this sort of stuff – But closer to 3K than 5K is my guess???

  • 34 Stillgotshoeson // Jun 3, 2012 at 4:28 pm

    Lachlan // Jun 3, 2012 at 1:43 pm

    It seems impossible to pick even a vaguely likely outcome.

    Ned S // Jun 3, 2012 at 2:45 pm

    No magic solutions in the hat I’m afraid Lachlan.

    What might the ASX be cum end of year?

    I’m extraordinarily bad at this sort of stuff — But closer to 3K than 5K is my guess???

    We can really only look at most likely outcomes and how they will impact on our own personal circumstances. Play the volatility to try and make money, or go the wealth preservation route are really the only options. ASX closer to 3k than 5k at years end, hard to say. I see it closer to 3k than 5k before this whole thing is over. Money printing is all but assured now, how much influence this has on markets and how long it lasts are going to be interesting. Read an article recently, think it was Alan Kohler.. says Spain will leave Euro first.
    Drop in AUD against the USD has been a good thing for the Aussie based Gold Miners and the AUD Gold price. SBM and FML both have higher than average per ounce costs so this has been beneficial to them. I feel BHP and RIO are still 10% to 20% overvalued and the big 4 banks circa 30% overvalued at current prices so expect them to correct down to these levels, maybe even over correct and go below even these estimates.

    Keens 40% fall over the decade (2008 to 2018) for property is looking very likely now.

  • 35 Lachlan // Jun 3, 2012 at 6:00 pm

    Ned I chose my words ie. “seemingly” magic. As in a solution that may not deliver what it appears to be promising.

    There are a number people in power who have are quoted with comments to the effect that crisis should be taken advantage of to catalyse political transformation. A change which would otherwise be unthinkable. So in the list of future possibilities I include the possible introduction of a new political/monetary solution. A magic fix. Possibly what Mariano is warming people up for in your link there. A union with fiscal control at a power centre. Such things could give markets a large surprise at some point if it looks like a contender in the race for the bottom is going to pull up for a period. There may even be a gold component in any new monetary mix which may be in part a way to front run some of the public sentiment.
    I do not know if any of this is remotely possible considering the anger flaming up on the streets in Europe… indicating what may be to come. However if Europe does do something and can stabilise then we may be back to a dollar focus.

  • 36 Lachlan // Jun 3, 2012 at 6:12 pm

    I hope we go lower Shoes…and that it takes a while to play out. I want to buy the cheapest assets I can get. A sizeable deleveraging here might send my over-indebted business opposition packing too… a silver lining 😉

  • 37 Lachlan // Jun 3, 2012 at 6:19 pm

    Oz Au holding well above the long term trend line too Shoes…so far. The AUDUSD may lose another point maybe two before a bounce I reckon and then we will see if it peters out and drops much lower again or the next run up starts. I think we will see 1.20/1.30 but not sure when of course. A logical gold view would be for the USD gold price to diverge upward with the flight to safety trade soon and for the AUDUSD to capitulate effecting a move to $2000plus for AUD gold.

  • 38 Greg Atkinson // Jun 4, 2012 at 9:44 am

    @Ron My view is that the Australian stock market has already had a major haircut as I mentioned again in my post today (see: Australian economic indicators & the housing market – June 2012) and that near the end of the year investors will start to see light at the end of the tunnel.

    Remember the stock market is normally a leading economic indicator and so I expect it to trend upwards before things like company profits do.

    At the moment fear is the prevailing emotion across the markets which means that some good stocks are probably being sold at bargain prices. These are the type of stocks I will be looking for but of course, catching a falling knife is always risky!

  • 39 Lachlan // Jun 6, 2012 at 7:59 am

    I think my market forecast is becoming poorer anyhow because the action is weak and the Europe emphasis likely won’t be overcome quick enough with some sort of decisive moment (large failure) appearing likely short/medium term. I think 3600 is the higher probability after we do whatever we are going to do off the 3990 support (I think we closed about five points lower than that a few trading days ago). I doubt we will go higher than 4150/4200 before we end up around 3600.

  • 40 Greg Atkinson // Jun 6, 2012 at 8:53 am

    Lachlan all our forecasts are at best, educated guesstimates. But if we don’t try and look ahead then it’s hard to plan anything. The truth is we just don’t know what will happen next. Will China launch another economic stimulus package? Will the U.S. start printing dollars again? Will the E.U. hold together?

    Normally this would be a good time to be in cash but with interest rates falling some blue-chip stocks that pay decent fully franked dividends start to look very attractive. That might tempt many investors back into stocks.

  • 41 BP // Jun 7, 2012 at 8:49 am

    On ‘educated guesses’:

    http://www.watoday.com.au/business/rba-and-swan-have-got-it-right-20120606-1zwmh.html

  • 42 Lachlan // Jun 7, 2012 at 11:48 am

    Greg if the action gains strength eg AUD/USD can go above and hold above about 1.00 for a little while I would start to think bullish again but for now it is still within a bearish trend. The problem is and why I wouldn’t trade anything short term (other than guesses here with you and the fellas) is that there have been so many false technical signals in the market in recent times. For example my New Hope Coal shares posted a classic long term consolidation and breakout and indicators looked in agreeable and yet they were crunched on the retest of support and now down about 35% on the year highs and about 25% from my entry.
    Anyhow I agree with buying individual shares here or anywhere for that matter… on their individual merits. I have bought shares at near XJO=5000 which are above water today. Of course there are far more opportunities at lower index prices and I know many things are correlated.

  • 43 Greg Atkinson // Jun 7, 2012 at 1:11 pm

    Lachlan it’s a hard market to read that’s for sure. There is a heap of data & news around that suggests the Chinese economy is slowing quite markedly but on the plus(?) side there are signs that the authorities there might be about to stimulate the construction sector to give the economy a lift. So it seems we will just have to watch how events unfold.

  • 44 Lachlan // Jun 8, 2012 at 6:32 am

    I posted this on DRA but anyhow Greg a summary I made from a Bloomberg article…something to throw in the mix….

    China has approved an estimated $23 billion of steel projects that will use material produced by companies such as Rio Tinto Group (RIO) and BHP Billiton (BHP) Ltd.
    Steel production in China will possibly amount to more than 700 million tons this year. The 2011 output was 683 million tons.

  • 45 Lachlan // Jun 8, 2012 at 6:41 am

    For what it is worth Greg the local economy here away from the mines is VERY slow and people are aware of it. In the mines (I talk to miners through my involvement in revegetation) there is unending optimism, which is infecting me. Of course that is no proof of anything, true.
    I have said all along that China contrasts the west because they have created their own slow down through banking policy and regulations against fixed asset investment. So my belief is that demand there can’t be exhausted. They should be able to grow when they choose to allow people the freedoms to invest. The west has encouraged people at every point to loan and invest and in many places demand is somewhat exhausted for the time being.

    Anyhow that is how I see it for the time being. “Stay grey”, I say.

  • 46 BP // Jun 8, 2012 at 9:02 am

    Tend to agree, Lachlan. It’s difficult to ignore that unending optimism. I see China has moved towards stimulus as predicted.
    WA Today (8/06/2012): “Australian shares are expected to open higher after China announced its first rate cut since 2008…”

  • 47 Greg Atkinson // Jun 8, 2012 at 10:03 am

    Lachlan the Chinese have not engineered their own slowdown although that’s probably what it looks like from the reporting in the Australian media. There is a very wide gulf now between what seems to be reported in the Oz media and what the finance media outside Australian is focused on.

    Many of the biggest China bulls in Australia for example have spent very little time working in Asia and some have not even been to China recently!

    Europe is China’s biggest trading partner. It’s also the source of a large amount of inward investment (perhaps the most) and a slowdown in Europe is putting the brakes on the Chinese economy.

    The Chinese authorities may unleash another building program again but I don’t think many people quite understand that just building a lot won’t deliver GDP growth. China needs to build the same amount as it did last year plus more to keep growing. For anyone that has been to a Tier II city in China they will appreciate this probably means more empty apartments, barely used office buildings and shopping malls with few customers.

    Even the BHP CEO is talking about the slowdown now.

    Demand won’t be exhausted but it’s going to get very hard to keep growing the economy year after year at 7% plus. (if we can trust the figures that is)

    It also seems that the massive loans local governments in China are sitting on doesn’t get reported much in Australia?

  • 48 BP // Jun 8, 2012 at 10:47 am

    Greg, I must admit that some of your calls amaze me, given your bearish global views.

    I figure some of your recent estimates must be typos, or misprints… (?)

  • 49 Greg Atkinson // Jun 8, 2012 at 11:43 am

    BP – the stock market is generally a leading indicator. It will go down before the gloom hits company profits and will tend to rally before company profits pick up again.

    Where are we now? Well the Australian stock market as I have mentioned a few times, appears to have already priced in the slowdown in China. A quick look at BHP or RIO share price charts over the last year appears to support that view.

    So if the slowdown is already priced into the market then the eventual upturn (hopefully) isn’t.

    It’s the classic short term bearish – long term bullish play. Maybe it’s the right call, maybe it isn’t.

    However there is a global market out there besides China. The sky is not falling in but the government, investors & companies need to wean themselves off the obsession they have with China.

    If they don’t they will find they have missed out tapping into other big emerging markets like Indonesia, India & Brazil.

  • 50 BP // Jun 8, 2012 at 11:50 am

    Nevertheless, you may wish to review your comment No. 2, on 8th Jan 2012… or should I dash over to the Perth Mint and rack up another quick mil?

  • 51 Greg Atkinson // Jun 8, 2012 at 1:44 pm

    No need for a review. Gold is around USD $1500 an ounce so you can dash away to the mint if you wish. The gold bulls had it crashing through $2000 USD last year but that didn’t happen so they will have another attempt to pump up the price this year.

  • 52 BP // Jun 8, 2012 at 4:56 pm

    C’mon, even our resident goldbug didn’t spruik $10K/oz, Greg!
    Think he topped out at $6K, or thereabouts… .

  • 53 Lachlan // Jun 9, 2012 at 10:20 am

    I’ve got me compressor all ready 😉

  • 54 BP // Jun 9, 2012 at 5:53 pm

    Ready to dive in, Lachlan?!

    (MUST be a misprint….!) 😉

  • 55 Lachlan // Jun 9, 2012 at 8:20 pm

    Hedging maybe BP?

    Re Asia: Just read that there are 188,000 millionaire households in Singapore or 17.1% of the households in total.

    http://www.thechinamoneyreport.com/2012/06/09/singapore-rising/

  • 56 BP // Jun 9, 2012 at 11:35 pm

    Lachlan: “Hedging maybe BP?”

    Think I’ll stay with the one-too-many zeroes theory, Lachlan.

    “…there are 188,000 millionaire households in Singapore…”

    I can believe it. Mind you an ordinary Honda Civic is well over $100K, so they need to be well-heeled:
    http://www.sgcarmart.com/new_cars/pricelist/13/2012-06-07.pdf

    Downside? Singapore wages are very low. Upside? Taxes are really low. Our young bloke pays 3% and that includes his base salary, bank interest, his shares income and his property rents.

    Real estate and rent are relatively expensive. Most young people live at home, even into their mid-thirties, until they’re married. Our kid has servant quarters* in his high-rise apartment, but, being single, isn’t permitted to have a woman occupy them.

    * We’re about to spend a few weeks in what has become his guest quarters… .

  • 57 Lachlan // Jun 10, 2012 at 9:05 am

    Crumbs BP. 24K for the same cars here unless I am mistaken. The way you describe it sounds a little financially repressive actually.

  • 58 BP // Jun 10, 2012 at 10:58 am

    “The way you describe it sounds a little financially repressive actually.”

    Yes, many of the X and Y generation might agree, Lachlan. Whether it’s a real problem is questionable. Remember that 17% of their population are millionaires.

    From another point-of-view, this tiny ‘island-state-nation’ does need to restrict the number of cars on its roads, which are already very heavily congested. Parking can be a _major_ issue. However their public transport systems are unsurpassed anywhere in the world we’ve travelled. You can set your watch by their underground rail system… .

    We’ve visited Singapore countless times in the last three decades. Repression has eased. The second time, riding south from the far-northern Thailand/Burma border, I was the subject of a full body search. Long-haired and bearded… and given our wanderings, I suppose I should have expected it…
    but my young missus was given the most cursory inspection!

    It would be fanciful to imagine future China as an immense version of Singapore, but at times that possibility actually crosses my mind…. .

  • 59 Graeme // Jun 11, 2012 at 9:11 am

    Greg

    What is your view of Bluescope Steel shares? I understand steel demand is low, due to the GFC etc, but at 25 cents, when in 2008 they were $12+ do they represent good value in the short (3-5 years), medium (5-10) & long term (10-15 years). How do you see the business & their share price over these periods? Will they ever climb back to $12 in the next decade? Cheers.

  • 60 Greg Atkinson // Jun 12, 2012 at 7:10 am

    Graeme I have Bluescope (BSL) on my list of very risky but potentially high gain stocks. I don’t have a price in mind anywhere near $12 and am I not brave enough to set a price target.

    It’s an Australian steel maker, losing money with a Return on Equity (ROE) that is not very attractive so it’s hard to find much to like about the stock expect it seems on the cheap side. (maybe)

    Blue Scope’s business is pretty complicated as it involves dealing with imports the prices of which are affected by such things as shipping costs & the value of the AUD.

    Sorry I couldn’t be any more helpful.

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