87 crash is here!!

Well looks like the 87 crash has finally happened again.. look at the property index, its fallen by the exact same amount as back in 1987..

The question is will the XAO come down to its longer term support up trend as well?

 

"87 crash is here!!"


Do not panic as yet

All Ords drawdown on Nov 11/87 = 50%
All Ords drawdown now just under 25%

 

look at the XPJ index Tropo!

I'm worried the XAO will come down as well..

 

I assume that you decided to stay in the market (for whatever reason) and properly assessed risk you are taking on.
If my assumption is correct – why are you worry about it?

 

Why do you think I'm worried Tropo? Do you think a further 25% drop of XAO will be taken nicely on top of all the other falls we have already sustained?

I have assessed risk, and have reduced gearing down to 25%.

 

"Why do you think I'm worried Tropo?"

I got that impression based on:

“look at the XPJ index Tropo!
I'm worried the XAO will come down as well..”


"Do you think a further 25% drop of XAO will be taken nicely on top of all the other falls we have already sustained?"

I couldn’t care less. More market will drop, better for me.

 

Hi Tropo,

I think you'll get your wish. This is still very much early days in a prolonged bear market IMHO. Global credit spreads are not going to be resolved overnight. Here's just another little article that articulates the situation quite well for the ASX:

Expect more Allco, MFS, City Pacific and ABC Learning-type blow-ups to come, Michael West writes

I'm completely out of the markets at the moment and am in no rush to get back in. Maybe 2009, or 2010 perhaps? As a long only investor, that's my timeframe. I liked this quote from that article above:

Cheers,
Michael

 

Hi Michael,

Just a question, didn't you buy up big late last year? I think you got into china funds and small caps if I recall? Have you reversed this position?

Cheers,

Tom

 

Yep its reversed, and with a lot of pain in doing so. If you remember back some time ago, I was quite bearish the ASX when it first topped out but was branded an idiot for that opinion and bought into the groupthink at my own extreme expense. I was the only voice saying the first correction had the potential to be big and got bullied from pillar to post.

I had, at the time, intended to sell the rebound last time round but diversified instead and took a long buy-and-ride position. I rode it for a while under this second "correction" and got burnt out of the water. Margin called into non-existence on Black Tuesday, down $200K in realised losses. Now sitting on the sidelines having exited all my long only positions at huge personal expense. Equity burnt, confidence burnt, emotions burnt, lessons learnt...

Not coming back any time soon. If you're going to have a long only position you better be sure you're in a bull market. Anyone care to suggest today is still a bull market? And if not, why are you long?

Cheers,
Michael

 

I also increased my position late last year, got into ASIA and global resources.. but since then I to got burnt, cant say to the same tune as you.. I lost about $75,000. I since closed out all my funds except australian shares fund, so I have only 20% left to what I had back then.

Lucky I did get out, as all the funds I was in have since fallen more. I basically only have my toe in the water with a small holding in 1 managed fund and direct holding in LGL writing covered calls.

Lesson I learned is not to over extend gearing! It can bite right at the end!!

Whats your stratergie going foward? I have recently bought a IP which I plan to make a PPOR in a couple years time, and now have a smaller holding in australian shares via 1 managed fund and writing covered calls on LGL. I'm back to basics!

 

Hi Crc,

Simple strategy for now: Reduce debt and sit tight until things unfold a bit.

I'm holding my Mona Vale development site for now as the potential there is for some serious capital gains. But the risk still exists that the Aus property market will tank due to the cost of credit going through the roof. I'm hoping the demand/supply equation will mitigate against this so am just sitting tight.

I'm just in the process of fixing my interest rates at 7.95% for 12 months on my full $1M of borrowings. Refinancing away from WBC to Bankwest on a teaser rate. I've also put in a Section 221D form to get my monthly cashflow back in the black. With those two things in place I'm back in positive cashflow territory to the tune of about $1500 per month spare.

My longer term strategy is to develop Mona Vale and realise that $700K potential paper profit that the current valuations sugggests exists today. If upper quartile Sydney properties tank then that margin evaporates and I just keep holding it as it stands and ramping rents. I'm putting rent up from $550pw to $650pw end of March. I've already told the tennant.

Once I develop Mona Vale I will re-assess the Aus equities market. Should be 2010-ish by then and maybe the ASX will be thinking about turning bullish again. Maybe not. If the credit crisis has washed out by then I might take some of that $700K margin and leverage it at 50% LVR into Navra. I'm back in the Navra camp as this whole episode has taught me the importance of cashflow. I'll forgo some potential CG for guaranteed cash flow at 10% pa.

Then again, maybe I'll take that $700K margin and look to doing more Sydney developments or maybe buy some passive buy-and-hold IPs in strong growth potential areas outside of Sydney for some property diversification. It all depends on what is the best potential investment category at the time. Maybe it will be alternate energy stocks, who knows.

But for now, its sit tight, get control of my cash flow, minimise my debt and wait. In time, I hope the economy survives without going into recession so I can move to develop Mona Vale sooner rather than later. If not, I ride the recession and try and hold all my remaining assets. After the recession washes through I'll then develop Mona Vale. Its my main ticket now and holding it is my main game.

Cheers,
Michael.

 

Michael, 7.95% fixed ? I am at 8% variable with WBC and substantial debt.

How did you negotiate 7.95% ?

 

Mortgage Broker!

But its only fixed for one year as its a teaser rate, then it reverts to their variable currently at 8.55% after the recent rise. But still, 1 years fixed saving me 0.6% is worth $6K to me on $1M borrowings. I had to pay a $1750 rate lock fee and another $1500 early termination if I exit them within 4 years, but still its a positive outcome for me by taking this approach. Also, the MB threw $1K of his leading commission my way as a sweetener so upfront its only a $750 cost to secure $6K in savings.

And that $6K assumes no more increases in the next 12 months which is also a bit optimistic I think. But I've got certainty for 12 months now, which is what I was looking for.

Unfortunately, the 7.95% rate is off the table now for new loans.

Cheers,
Michael

 

Michael,

I am very sorry to hear that, but on the other hand I am glad that you decided to cut your losses short!
Do not worry about your loss.
In my early days I lost buckets of money, because I refused to take a loss, hoping (I hate this word) that inevitable never happen to me.
I got my lesson in the same way you got yours today.

It’s rather amazing, but majority of people learn the hard way.


“If you're going to have a long only position you better be sure you're in a bull market”.

SPOT ON !!!


Happy investing in the future!!
Until than.....stay

 

ummm Don't think you were the only voice saying such things... You were just publicly more vocal on your investing direction then most!
Unfortunately for us bears we only get proven right after all the pain, and even then we still get 'beaten up for rubbing it in'

Losing money really sux the big one... But its those that survive, regroup and attack again that make the big wins later on!. I don't think there is anyone on this forum that has not lost money over the last 6mths (assuming they are investing)...

Successful Investing requires survival...

 

Exactly - things you can read but only really learn from experience are often painful but a good lesson.

 

Looks like my prediction earlier this year has almost materialized. The all ords may undershoot 3900, but that would be short lived. We have a strong support that that point.

I'm now going to make the call that its NOW the time to be re-entering the market. Stick to ASX200 stocks with good dividends!

Happy Investing!

PS Buy when there is blood on the streets!

 

Hi CRC,

Can you redraw the support line below the 1992 low and the 2002 low?

Cheers,

Dan

 

Below 2002

That puts the support line at about 3400, which would be half the high we had at 6800. 50% just like 87. I see it hitting that in the next fortnight.

 

hmmm, you might be right!