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Has the stock market correction gone too far?

May 24th, 2010 · Greg Atkinson · 51 Comments

For more than a week investors have been watching stock markets across the globe drop sharply as concerns over debt in Europe have raised doubts in people’s minds that a global economy recovery is really taking shape. But is the current correction really that bad, and is there a chance that stocks have fallen too far, too quickly?

Back on April 13th when the ASX All Ordinaries was around 5000 I wrote:

“….why do I think the recent market rally means a correction is on the way? Well simply because that is normally what happens. In my opinion, if you expect stock market corrections to come along then they become less of a shock when they finally do arrive.”

So here we are and the market has indeed corrected and fallen past the 4500 level, which to be honest, I thought it would bounce off.

But on reflection it seems reasonable that the ASX All Ordinaries Index has fallen as far as it has. Not only is the European Union a bit of an economic mess at the moment, but we also have tensions between South and North Korea to deal with, the mining sector in Australia in open revolt against the Government’s new mining tax and still plenty to worry about in regards to the U.S economy.

With so much bad news around it is no surprise that stocks have slumped so much. But is the correction really that bad? Well let’s have a look at a few charts and see what they might be telling us.

ASX All Ordinaries Index 6 Month Candlestick Chart

all-ords-6-months-chart-may-10

It is pretty clear from this chart that around the 4500 level is an area of strong support, and yet this time instead of the All Ords bouncing off this level it fell through it. Why?

In my opinion we can thank Ken Henry, Wayne Swan and Kevin Rudd for this because the reason the market did not hold at around 4500, was due the mining stocks being heavily sold off.  A major factor behind this sell off  was the infamous  Resources Super Profits Tax. (RSPT)

The RSPT is a shocker of a tax and will be watered down because Rudd doesn’t have the backbone to stand firm with an election coming up.  If he can back-flip on the ETS then he easily back-flip on an increasingly unpopular tax, unless of course this is an even greater moral challenge than global warming!

Therefore I see no reason why stocks won’t get back up to 4500 and if we don’t get any other market shocks, I reckon this will happen in a matter of days rather than weeks.

But I would imagine many people would say that blaming the RSPT for stocks falling below 4500 is nonsense.  So in my defence I offer the chart below to support my view.

ASX All Ords (XAO) versus Dow Jones  (DJIA) 1 Month Chart

xao-vs-djia-1-month-chart-may-10

Here we can see how the Australian stock market has moved compared to the U.S market (Dow Jones Industrial Average) during the current correction and guess what? Our market has fallen further than the U.S stock market.

How can that be when our economy is so well managed and according to Rudd and Co., the proposed new mining tax has had no impact on the Australian stock market or mining stocks?

Quite obviously Rudd, Swan & Henry have no idea how money moves around the markets and have blundered their way into mess that has shaken international investor’s confidence in Australia as a stable investment destination.

Unless the tax is dropped or heavily modified soon, Australia’s  investment reputation will be damaged permanently.

At this stage I believe that the stock market will recover over the next few months and once again move towards 5000. (unless that North Korean nut-case does something again) Yes the stock market has had a nasty week or so, but if you take away the impact of the RSPT then it is a pretty normal looking correction as the chart below illustrates

ASX All Ordinaries Closing Levels Charts (over 2 years)

all-ords-2-years-chart-may-10

So the current stock market slump is nasty that is for sure, but when we look at the big picture over the last two years it is hardly something to panic about…. for now anyway.

But please remember, I am not suggesting that anyone act on my view of how the markets are moving or will move. I have no ability to see into the future just like everyone else. Please as always, do your own research, seek other opinions and obtain professional advice as needed before making any investment decisions!


51 responses so far ↓

  • 1 Biker Pete // May 24, 2010 at 6:14 pm

    Was laughing WITH you, not at you, Greg. I hadn’t seen the irony of the European situation until you mentioned it. Reread my comment… . I meant no offence.

  • 2 Ned S // May 24, 2010 at 6:41 pm

    I’d love to see “the” comment? 🙂

  • 3 Ned S // May 24, 2010 at 7:22 pm

    What is “too far” Greg? That implies a fundamental faith in “the honesty” of stock markets – Which I don’t share. It is actually possible that the mongrels who are manipulating it all could just choose to rip 10 or 15 or 20% out one dark night – It’s happened before and presumably will again. (They do seem to be hungry little porkers.)

  • 4 Biker Pete // May 24, 2010 at 7:57 pm

    “That implies a fundamental faith in “the honesty” of stock markets – Which I don’t share.”

    Agreed, Ned. But my issue is in regard to corrupt boards.
    Despite all my diligence and hard work, that’s how I lost $55K in a single hit.

  • 5 Ned S // May 24, 2010 at 8:16 pm

    I just don’t trust “the system” anymore Biker – With the Bernie Madoffs and corrupt boards being an extra hassle outside said system … Although I’m sure I’ll adjust! 🙂

    Once I REALLY learn to watch what they do; And ignore what they say.

  • 6 Greg Atkinson // May 24, 2010 at 10:01 pm

    I am not sure there is a system, just a lot of money sloshing around. But despite all the chaos companies or stocks do have value and this is not always the same (and actually rarely is) the same as what their stock price suggests they are worth.

    When corrections take hold a lot of the pushing downwards is done by automatic trading systems and I reckon these tend to push the markets down too far. They also probably cause stocks to rally too far on the upside as well.

    As for Europe, well last year big Government spending was all the fashion. You might recall the G-20 Leaders were all happily patting themselves on the back for spending big and kicking their economies on.

    Now many of the same people are worried about sovereign debt!

    In the UK they have basically found out the outgoing Labor Government was spending madly to try and hold onto power and have left the economy in a mess.

    I wonder how many times we will keep making the same mistakes?

  • 7 Biker // May 24, 2010 at 10:18 pm

    Best I can do is set some very, very broad parameters, Ned; using the same indexed funds strategy within Super that my son uses out of it. Losing money gambling on specific shares just doesn’t appeal to me! I trust no-one in the stockmarket these days.

    Having said that, I’m almost equally doubtful about developers and realtors!

    And FAs leave me cold…. .

    But because we’re about to start accessing $uper, we may test three advisors, soon: A local private company; the ANZ; and our Super Fund people. In the past, we’ve used this strategy: a.) create a few critical, highly-relevant questions whose answers we _know_ with certainty; b.) include a few we _know_ will benefit the advisor, more than our own specific situation; c.) negotiate an _hourly_ rate, rather than a percentage. Using a rubric, total the score. Highest scorer overall may get our business… but we’ll run everything past our accountant first. 🙂

  • 8 Vince L // May 25, 2010 at 12:25 pm

    The problems in the EU seem to still be holding the markets down and dragged down the Dow last night. Maybe this correction has a little further to run?

  • 9 Greg Atkinson // May 25, 2010 at 1:40 pm

    Vince the situation on the Korean Peninsula isn’t helping either. The South Korea Won is diving today and the North Korean’s are making all sorts of threats.

    So we have the RSPT, a massive oil leak off the coast of Florida, tensions in Korea and EU sovereign debt concerns…what’s next?

    Surprisingly gold is not soaring at the moment. Maybe the buyers are exhausted?

  • 10 Ned S // May 25, 2010 at 3:13 pm

    At least humour is still not dead:

    ‘ Adam Posen, a member of the Bank of England’s Monetary Policy Committee, said: “Let us just say that the prospects for strong growth in most of the euro area are rather dim for the next several years.” ‘

    http://www.theaustralian.com.au/business/industry-sectors/spains-challenges-are-severe-imf/story-e6frg96f-1225870850138

  • 11 Biker Pete // May 25, 2010 at 3:52 pm

    Yes, there’s even talk of massive Irish emigration, Ned.

    (Possibly to buy cheap Australian houses!!~ 🙂 )

  • 12 Biker Pete // May 25, 2010 at 6:03 pm

    And what clever use of a caption, right under the photograph. 😉

  • 13 Firebug // May 25, 2010 at 7:47 pm

    Seems like the down hill slide will keep going for a while

    A fellow blogger who is good at TA told me that if the US stock market didn’t stage a turn around by Wednesday, we’d be in for major shockers.

    Let’s hope it doesn’t happen…

  • 14 Ned S // May 25, 2010 at 8:22 pm

    “stocks do have value” – Unquestionably true. So I guess a pretty big issue for me is that when I look at major markets like the Djia and the Nikkei over the last 5 and 10 years, the thought that goes through my mind is that any regular long term investors have been making donations to big trading houses taking regular profits.

    People will say it’s been a horror decade maybe; And that the markets effectively going nowhere just reflect that. But has it really? There were huge amounts of cheap money slopping around for most of the decade. If markets can’t turn all that into something real and lasting, I’ve got to question just what the heck they have been doing with it?

    “what clever use of a caption” – Yes, one wouldn’t think she had a care in the world hey?

    “what’s next” – Tell the Israelis that if they invade Iran they’ll be conscripted into the EU and not allowed out until they put out all the oil well fires and get the price back under EUR 500 per barrel maybe? 🙂

  • 15 Anon // May 25, 2010 at 8:55 pm

    “Seems like the down hill slide will keep going for a while

    A fellow blogger who is good at TA told me that if the US stock market didn’t stage a turn around by Wednesday, we’d be in for major shockers.

    Let’s hope it doesn’t happen…”

    Theres lots of these “another 20% down” predictions going around atm. Supposedly another crash is comming even tho we’ve just had one! Rear view mirror bias in full force 😉
    This is the final capitulation I was unsure about a few days ago. I’ve continued buying more stocks for the longterm portfolio at firesale prices…i feel like a kid in a candy store! Some of the stocks I am buying are at the same levels they were at the depths of the credit crisis!
    Its so weird how alot of people were willing to buy at ~5,000 and 11,000, but when things drop ~15% its suddenly dangerous to buy…doesn’t make sense to me!

    None of my posts constitute financial advice – so do not act on it in that manner. Its just chit chat. Always see a financial advisor for decision making / advice / info.

  • 16 Greg Atkinson // May 25, 2010 at 10:07 pm

    Well lads I am remaining upbeat, which is hard to do since I live not far from South Korea and within missile range of the nut-case in North Korea!

    But my gut feeling is the markets are just too gloomy now.

    Can the Dow pull a rally out of this air soon and save my credibility? 🙂

  • 17 Biker Pete // May 25, 2010 at 10:11 pm

    “Its so weird how alot of people were willing to buy at ~5,000 and 11,000, but when things drop ~15% its suddenly dangerous to buy…doesn’t make sense to me!”

    Exactly how we felt buying beach blocks at $134K and $145K!
    The icing-on-the-gingerbread was scoring that $169K house deal, three days after the time limit had expired… and now just letting the deal ‘ride’, at no cost, until this present one is complete. Costs are rising, but we’re locked-in… .

    It’s highly unlikely, I know, but imagine how much more fun it might be if the ASX fell to its last low. I guess the equivalent for property bears is true, if Keen’s Krash ever came to pass.

    Feel a little for my kid, who has probably done 100K, but perhaps he’s learning more than he did getting his PhD… .

  • 18 Anon // May 25, 2010 at 10:15 pm

    “Well lads I am remaining upbeat, which is hard to do since I live not far from South Korea and within missile range of the nut-case in North Korea!”

    LOL!

  • 19 Anon // May 25, 2010 at 10:25 pm

    “It’s highly unlikely, I know, but imagine how much more fun it might be if the ASX fell to its last low. I guess the equivalent for property bears is true, if Keen’s Krash ever came to pass.

    Feel a little for my kid, who has probably done 100K, but perhaps he’s learning more than he did getting his PhD… .”

    They say money is the biggest teacher of life. Hopefully he will recoup those losses Biker.
    I’m getting smacked on buying all these falling knives, but I cant pick bottoms exactly, so i’ll have to grit my teeth and pray to Allah.

    —–

    “Can the Dow pull a rally out of this air soon and save my credibility?”

    Well i’m with ya…its weird how we are so alone when we starting making the turn calls. Feels abit like the time when we were bearish about commodities.
    Lots of smart people coming out of the woodwork, with lots of fancy calculations, showing how equities will keep tanking.

    None of my posts constitute financial advice – so do not act on it in that manner. Its just chit chat. Always see a financial advisor for decision making / advice / info.

  • 20 Greg Atkinson // May 26, 2010 at 11:10 am

    Anon I am sticking with my optimistic outlook 🙂 Repeat after me “no new low, now new low” 🙂

    Biker unless your son has suddenly sold he hasn’t lost anything. If investors sit around calculating losses that don’t exist then they will never get any sleep. It is the same as saying I made money when stocks rally…actually I don’t make a cent unless I sell. It’s a market 😉

  • 21 Anon // May 26, 2010 at 12:11 pm

    “Anon I am sticking with my optimistic outlook 🙂 Repeat after me “no new low, now new low” ”
    lol 😉 I’m not concerned…the fact we are loners on our optimistic outlook is bullish!

    I’m seeing alot of hedgies “sitting on the sidelines” here. So could be abit of a manic buying spree comming?
    Given how bad May has been, the seasonal Sept-Oct period may be less severe than people are currently preaching.

    I wouldn’t be surprised if recent XAO lows held for the entire year.

    None of my posts constitute financial advice – so do not act on it in that manner. Its just chit chat. Always see a financial advisor for decision making / advice / info.

  • 22 Ned S // May 26, 2010 at 1:45 pm

    I’m actually quite content if my conservative little SMSF fund (in a mortgage free pretty basic residential RE property and some cash) returns about 6% pa after expenses and tax. Despite the fact that 6% probably isn’t even really enough to keep up with what I think of as the “true” rate of inflation.

    So I surely do admit, that investments where one gains and loses more than that in a week (and potentially in a day), make my head spin and my blood chill! 🙂 It’s all just very much out of my league.

    Having said that, I continue to watch with interest. And could fully understand it, if there are lots of up and coming retirees, who are even a bit more financially challenged than me, who are even a bit more tempted than me, to take a punt.

  • 23 Firebug // May 26, 2010 at 1:46 pm

    A disclaimer here: I am not bearish. Really, I have no idea what the markets will do.

    What I posted was someone’s opinion, notice the “if” in the sentence

    Here is a link to his blog, please check it out if you have a moment.

    http://dreddmarketreport.blogspot.com/

  • 24 Ned S // May 26, 2010 at 2:25 pm

    Are the markets saying “double dipper ahead”? – Or have “god’s servants” just been taking their profit – With a view to setting themselves up to take some more? 🙂

  • 25 Anon // May 26, 2010 at 2:45 pm

    “Are the markets saying “double dipper ahead”?”

    Well the retail investors seem to think so…they are going to cash en mass (from retail based websites I quickly scan for sentiment)…they are putting money into USD bank a/cs and trying to short the market. As usual they are late to the party and the barbeque is fired up ready for cooking!

    None of my posts constitute financial advice – so do not act on it in that manner. Its just chit chat. Always see a financial advisor for decision making / advice / info.

  • 26 Ned S // May 26, 2010 at 2:55 pm

    What exactly is a “retail investor” Anon? – In my mind, I’d equate them to big pension funds (and suchlike) maybe? Assume your “wog” is less worse?

  • 27 Anon // May 26, 2010 at 3:02 pm

    Big pension funds do tend to be sheep at times – so that is a correct assessment Ned. I do use them as contrarian signals every now and then.

    Generally if I’m looking for a retail investor i’ll look for people who trade on emotion rather than logic…and tend to use what just happened as a forecasting method going forwards.

    None of my posts constitute financial advice – so do not act on it in that manner. Its just chit chat. Always see a financial advisor for decision making / advice / info.

  • 28 Anon // May 26, 2010 at 3:35 pm

    Retail Investors Seek Shelter in Cash, Shunning Buffett Advice

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aBAIZZvVBqT4&pos=6

    None of my posts constitute financial advice – so do not act on it in that manner. Its just chit chat. Always see a financial advisor for decision making / advice / info.

  • 29 Ned S // May 26, 2010 at 3:48 pm

    Must admit I see the West as being in a long term secular bear market. And that I’m not sure to what extent QE and other financial tricks might soften the impact – Over the long term timeframe they seem to be angling for; Or (from my perspective worse), significantly damage the purchasing power of cash holders. Or more likely I do and just don’t like the answer! 🙂

    And the way markets seem to work, even makes it difficult to place that much faith in the likely potential growth regions – In the absence of the West being able to earn an honest buck themselves, their big pool of hot money just flows in and flows out, snaffling some speculative returns in the process. But potentially destabilising the potential growth regions in the interim – Which may or may not be “good” depending if one is in those potential growth regions I guess.

    No idea if this is accurate, but it is my vague recollection that I read recently that the average time a stock is held nowadays is 11 seconds.

  • 30 Biker Pete // May 26, 2010 at 4:01 pm

    Point taken, Greg. His brother (also buying IFs) made the same comment, from Montreal, a couple of hours back. There’s nothing wrong with taking profits, however; as I advised them both to, at 5000+. Buying back in, right now, they’d have done well.

    While I recognise the old Greed-is-Good policy can be fruitful, I’ve never been able to fully subscribe to it. Like you, the boys thought my buying back in at 3200 was reasonably astute… and chaffed me relentlessly for bailing at 3800. My missus was _just_ a little kinder, I regret to say… .

    My dad’s “Set-a-sell when you set-a-buy’ advice” remains one of the best of many principles he taught me. It has never made me _fabulously_ rich, but we’re certainly pretty comfortable, after applying that rule… . Took _me_ a while to recognise how right he was… . 🙂

  • 31 Biker Pete // May 26, 2010 at 4:23 pm

    Just talked The Montreal Kid out of buying up eight ‘slum apartments’ in a complex in Montreal, on a 20% deposit. He thought that putting a fifth down made the investment safe… !!~ 🙂

  • 32 Ned S // May 26, 2010 at 4:56 pm

    “eight ’slum apartments’ in a complex in Montreal” – Ouch! Know bugger all about Montreal – But I do have a strong suspicion it AIN’T a suburb of Vancouver? 😉 Maybe your lad could check out how New York’s Harlem has performed over the last century or so? 🙂

    Don’t mind me – I’ve been busy breaching that 250 ml rule again! 🙂 🙂 🙂

  • 33 Ned S // May 26, 2010 at 5:06 pm

    Must admit, the more I look into this Marxism stuff, the more I see the attractions – Workers of the world unite; Throw off your shackles; Death to those who never have been nor ever will be productive (unless their IQ is under 80) – Yeh, I could warm to the theory! Although it does seem a pity to have to cut our pollies that much slack? 🙂 🙂 🙂

  • 34 Ned S // May 26, 2010 at 5:39 pm

    Read maybe 6 years ago that when Russia went under (in the 90s), all the average Igor was really interested in doing was speculating – With whatever he might have left to speculate with I guess. But that cast Russia in a somewhat limitted light I suspect – The Borises were busy making a buck nicking stuff; And the Vladamirs were honing their corruption skills.

    It all seems to have worked out well! 🙂

  • 35 Ned S // May 26, 2010 at 6:46 pm

    What we need now is a nice 6 or 7% rally like we got after the dot com thingy (to say haha fooled yah sucker) or a nice 20% drop like we got after the 1987 thingy (to say haha fooled ya sucker) – But maybe markets have become more subtle? 🙂 🙂 🙂

    “They seek him here; They seek him there; They seek him everywhere” – Such was it said about The Scarlet PimperValue … 🙂

    Arhggg … I do love grog – How can they keep the tax on it SO cheap?

  • 36 Anon // May 26, 2010 at 6:48 pm

    “Richard Russell, author of the famous Dow Theory Letters, is “insisting, demanding, begging” his subscribers to “get out of stocks”.

    In his latest letter, published last night, he says the stockmarket has lost its mind. “Finally it’s happening. The poor thing is falling apart.” Russell is referring to the fact that the market is falling in the face of persistent optimism about the US economy. He says you should believe the market, not the economists.

    “It’s been hard, and it’s hard to tell my subscribers that this market is topping out and that you should be out of stocks. So, if you are still in the market, sell your common stocks (not the golds) and get out. I don’t care how good or how blue-chip your stocks are, when the bear takes over, he sinks his claws into the throats of all the boys and girls. Declining price/earnings in the bear market alone will cost you, and P/E ratios are now dangerously over 20.” ”

    http://www.businessspectator.com.au/bs.nsf/Article/stockmarket-bear-Dow-pd20100526-5SSE8?OpenDocument

    Another Richard Russell Call:

    April 2007:

    “We saw something that is extremely rare, in fact I can’t remember ever having seen this before. What I’m referring to is that on those two dates all three Dow Jones Averages Industrials, Transports and Utilities — closed at simultaneous historic highs. To me, a fellow steeped in Dow Theory for over half a century, this was like a clap of thunder… My take on the situation is that the stock market (and the Dow Theory) told us that an unprecedented world boom lies ahead.

    None of my posts constitute financial advice – so do not act on it in that manner. Its just chit chat. Always see a financial advisor for decision making / advice / info.

  • 37 Ned S // May 26, 2010 at 7:30 pm

    So even really smart market watchers struggle with figuring out what’s happening – Which means muggins isn’t likely to outsmart them. Or any parties who can actively “move” markets maybe? But I still reckon the West is in a long term secular bear market during which the West’s markets will rip profits out of the non-West’s markets. With bugger all long term return for anyone over and above what inflation their government might happen to cook up maybe – Whilst still retaining some credence in their currency.

    Arhggg … I do love grog – How can they keep the tax on it SO cheap? 🙂

  • 38 Biker Pete // May 26, 2010 at 8:01 pm

    “I’ve been busy breaching that 250 ml rule again! 🙂 🙂 :)”

    Moi aussi… (which I’ve overused to excess overseas.) Nice half-bottle of Shiraz.

    I was quite amused to discover I have much in common with both Twiggy Forrest* and Warren Buffett. Neither traded in their old cars or their wives when they became wealthy… not that I’m in their league, mine dew!!!!!~ 🙂

    The Montreal Kid sent me a mathematical breakdown which was superior to anything I might have produced at 24… but which excluded a long list of short-and-long-term costs. In Canada, you can bet that if the strata costs are low, the future repair bills will be immense! Not uncommon to be hit with a $25K bill for one apartment, let alone eight. Hope I’ve scared him spitless.

    What I like about property is that I’m in control of most of the variables, _IF_ I’ve done my homework. Did my homework diligently in the share market and _still_ got busted. This has _never_ happened in property, since I bought my first block back in ’68. I read a really interesting little piece in The West today. Ripped it out. Must find it… .

    * Twiggy’s (FMG) great great uncle Alexander sold my granddad and great uncles their five farming properties around 1912 – 1915; after they had sold their Kalgoorlie wine bar. My granddad Charlie’s role was bouncer, in the very late 1800s. He carried a nickel-plated revolver, but apparently never had to produce it after a knockout in a bar fight. Writing the family history now, before _everyone_ has passed on… .

  • 39 Ned S // May 26, 2010 at 8:25 pm

    “What I like about property is that I’m in control of most of the variables” – Yes and no … 🙂 I guess what I like about property is that if one has bought sought’a close in, in a nation that loves urban spread, even should the “average” price get whacked, my actual holdings mightn’t … Well not much anyway.

    “He carried a nickel-plated revolver” – Remember getting my lesson at about 18 from my mum’s dad in his backyard about how I should use his snub nose 22 if I should ever be in Sydney’s Cross and feel so inclined … It wasn’t nickel plated though – Ah, the drawbacks of being working class! 🙂

    Arhggg … I do love grog – How can they keep the tax on it SO cheap?

  • 40 Ned S // May 26, 2010 at 9:05 pm

    Should send my recollection of time spent together in me Grandad’s backyard to me Aunt Biker maybe – She does my mob’s family history – And loves anecdotes. Although, by and large, I just take the attitude of that’s how it was and why would anyone care?

    I DID love Frank Hardy’s “Power Without Glory” though – Fully expect I have a copy here somewhere? And if so, will drag it out for a reread. It WAS a great yarn! (Well, I reckoned it was anyway – All that throwback background on where the old buggers REALLY came from! 🙂 )

    Arhggg … I do love grog – How can they keep the tax on it SO cheap?

  • 41 Biker Pete // May 26, 2010 at 11:19 pm

    All that throwback background on where the old buggers REALLY came from! 🙂 )

    In the previous family history (on my mother’s side) the author relates how grandma had a roll in the hay with one of Victoria and Albert’s sons. I buy every copy of the book I can find, because the family was so outraged by skeletons in the closet that John changed each successive edition… names and all…! Picked up a fourth edition in London last year (Antiq Books).
    My ma (89) is the last living person who can relate who each character actually is… My grandmother was the subject of an infamous Austraia-wide scandal circa 1915, reported in the Melbourne Truth. Her ’15 minutes of fame’ apparently lasted more than the usual quarter hour; kept the scandal-rag busy for months… !!~

    I must get back on topic. You have my permission to erase this within 24 hours, Greg!~ 🙂

  • 42 Ned S // May 27, 2010 at 5:57 am

    Well the Yanks know how to put on a decent brekkie show. We’re looking for a successful retest of the February low I gather?

    Yes, when one digs around in old closets, some skeletons can certainly fall out. Talking about brekkie, I think I’ll have my panadol sunny side up! 🙂

  • 43 Biker Pete // May 27, 2010 at 11:43 am

    Reckon(!) a new thread is worthwhile: “How long before the median housing value for Australian capitals is a Million Plus?
    Is it inevitable?!~”

    What might make this predictable, now that a million is perceived as the old $100K?

  • 44 Ned S // Jun 12, 2010 at 2:23 am

    I enjoyed the following read:

    http://www.abc.net.au/unleashed/stories/s2923818.htm

    It’s just general stuff on where the world is at and where it could go.

  • 45 Senator13 // Jun 13, 2010 at 1:15 pm

    The share market is still looking pretty sick.

    I was reading somewhere that they reckon bailing out Greece has only bought them 3 years…

  • 46 Anon // Jun 13, 2010 at 1:46 pm

    “The share market is still looking pretty sick.”

    Is it?
    The XAO has bounced almost 8% from the intraday lows a few weeks back. Thats not a bad performance? Granted this could be a dead cat and we may have some turbulence on this rise, but valuations still look compelling to me on certain selected stocks.

    Heres some commentary I found useful:
    “DORFMAN: I think people need a sense of what market history contains. Normally you have three sell-offs a year on average of 5 percent or more and one of 10 percent or more. In fact a sell-off of 10 percent or more happens on average once every 11 months. So I see these really as fitting the normal historical pattern. ”

    “DORFMAN: I think the stock will advance because I think it will exceed investors` expectations. That`s the name of the game and expectations right now are very low. ”

    John Dorfman of Thunderstorm Capital

    None of my posts constitute financial advice – so do not act on it in that manner. Its just chit chat. Always see a financial advisor for decision making / advice / info.

  • 47 Senator13 // Jun 13, 2010 at 2:42 pm

    8% is good. But the XAO is no better off than at the start of the year. XAO @ 4500 would not lead me to believe that we are in the sling shot recovery that some would say we are.

    Might be good conditions if you’re nimble enough. Not necessarily so good for Super. It is that turbulence I am not liking at the moment.

  • 48 Anon // Jun 13, 2010 at 4:00 pm

    “Might be good conditions if you’re nimble enough…It is that turbulence I am not liking at the moment.”

    Good point…you do have to be nimble in the stock market atm.

    The VIX looks like its in a downtrend, so it appears volatility may decrease going forwards.

    None of my posts constitute financial advice – so do not act on it in that manner. Its just chit chat. Always see a financial advisor for decision making / advice / info.

  • 49 Ned S // Jun 16, 2010 at 7:37 am

    Djia up another 2% – I agree with that article you posted a link to Anon where the author reckoned poor old Mr Market has finally gone crazy. 🙂

    Don’t get me wrong though – I think it’s great! And can only hope it’s true. As indicated previously, I’ll probably start to feel considerably more comfortable with the state of the world when the Djia is bouncing around between 12,000 and 12,500. And if it’s only because central banks have managed to get a bit of inflation happening, that could be OK as well – At least it will have gotten a bit more debt out of the system as I understand things?

    It’s the main reason I stay out of highly liquid stuff like stocks I guess? I’ve noticed that I have an uncanny ability to be WRONG! So it’s best that I’m not exposed to the temptation act on that recurring wrongness easily.

    Quite seriously, I was betting black at a casino one night – The run went red. I started to throw everything I had at it on the old double up theory – Ran out of ammo on about the 4th red maybe is my recollection? (But certainly before the table limit nailed me which seemed like some consolation at the tme.) So wandered off. But came back later to see how I might have made out if my pockets had been a bit deeper and the table unlimitted. The run of reds was SO long and the shock at seeing such a highly improbable statistical event SO deep, that I never since have been able to genuinely recollect if it was 11 or 13 of them that I counted?

    Lesson: Ned and high liquidity do not happy bedfellows make! 🙂

  • 50 Anon // Jun 16, 2010 at 12:10 pm

    “I’ll probably start to feel considerably more comfortable with the state of the world when the Djia is bouncing around between 12,000 and 12,500”

    I rkn we could get there…altho i’m pretty bad at picking tops, so knowing me i’ll sell out too early again!
    I’m not sure why i sold out at too early last time…i wasn’t willing to short, yet I was willing to sell out…didn’t make sense…my technical models said we were going higher too.

    Rule to self: dont sell, unless you are willing to short the stocks you are dumping 😉

    None of my posts constitute financial advice – so do not act on it in that manner. Its just chit chat. Always see a financial advisor for decision making / advice / info.

  • 51 Ned S // Jun 16, 2010 at 3:48 pm

    If one is short when a guv moves to ban shorting Anon, do you get to play your hand, or are you forced to fold it? (Pardon my total ignorance. 🙂 ) And are you very likely to get hammered regardless?

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