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ASX 200 underperformance

Discussion in 'General Investing Discussion' started by lorrimer, 1st Oct, 2010.

  1. lorrimer

    lorrimer Well-Known Member

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    Since the March 2009 lows, the Aussie market has underperformed the Dow by a whopping 18% and the FTSE by 14%. Since the start of 2010 it has underperformed the Dow by 8%.
    Given that our economy is supposedly in such good condition relative to the US and the UK, does anyone have a good theory as to why our market should be performing so poorly?
    I'm astounded that more hasn't been said about this in the financial press!
     
  2. Johny_come_lately

    Johny_come_lately Well-Known Member

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    Do you have any graphs of these events?





    Johny.
     
  3. lorrimer

    lorrimer Well-Known Member

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    Hi Johny,
    I did my research using the graphs at Yahoo here : Yahoo!7 Finance
    and a calculator!
    Cheers,
    Lorrimer
     
  4. Johny_come_lately

    Johny_come_lately Well-Known Member

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    You used to be able to compare indices on yahoo, but they've changed the software. Its not very helpful. :(





    Johny.
     
  5. Johny_come_lately

    Johny_come_lately Well-Known Member

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  6. Billv

    Billv Getting there

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    Does the strong AUD have much do with it?
    Perhaps overseas investors don't see Oz stocks as cheap.
    On the other hand, the US$ has dropped significantly so US shares look attractive
     
  7. Chris C

    Chris C Well-Known Member

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    Bingo! So many people forget to price in "real" change. So forget nominal values. Focus on PPP.

    Just remember you can double the money supply, which will double prices, but no one is wealthier as a result.

    ;)
     
  8. lorrimer

    lorrimer Well-Known Member

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    Today's action on the ASX would tend to dispel that theory.
    Aussie dollar weakens agaist the US$ and we get a huge sell off in Aussie Equities.
    In fact it seems to me that when the "risk trade" is on, the Aussie$, equities and commodities all rise in tandom. If the Aussie dollar starts weakening, like today, everybody bails out of Australia, and the ASX underperformance is even more pronounced. It doesn't make any sense to me, but then there is a lot going on ATM that doesn't add up!
     
  9. Tropo

    Tropo Well-Known Member

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    Banks brace for another crisis as fuse burns under a pile of missing papers

    News Headlines

    'Catastrophic' foreclosure freeze meets Wall Street opposition


    Potential profit taking from offshore investors is a concern as the AUD/USD turns down from post-float high of 0.9918.
    Traders are increasingly coming to the conclusion that the market has factored in potential US$500 billion quantitative easing announcement by the U.S. Fed on Nov. 3.
    "I think the market will pre-empt a sell on fact reaction by selling off before the event," says a trader who declines to be named.
    Others feel the Fed might try to impress the market with US$1 trillion worth of QE, although there's plenty of skepticism about the longer-term merits of QE2.
    "Certainly QE2 won't have the same magnitude of effect as QE1 and I suspect QE2 will have to be much bigger than US$500 billion to 'impress' the market," says Wesley Legrand, broker at Grand Private Equities.
    "Short-sighted central bankers and vested-interest politicians have no choice but to defer the inevitable pain as long as possible as they try to cling to power, so there is now a 'race to the bottom' as most countries of the world are committed to printing as much money as they can to try and devalue their respective currencies but each 'sugar hit' is having less and less effect...faith in the global fiat currency system is eroding such that even though the U.S. feels like it's in deflation because there is a shortage of money, they are actually very close to hyperinflation, which is a confidence event, unlike inflation.
    Unfortunately Australia is just a cork in the financial ocean, so fingers crossed for China."
     
  10. Chris C

    Chris C Well-Known Member

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    Why is it that when the Australian dollar weakens against the US dollar that it weakens in general? Who is to say it's not just that the US dollar strengthen more than the AUD dollar which also strengthen?

    To compare everything against the US dollar is to say that the US dollar is the control variable in terms of currency fluctuations.

    Sometimes it's better to use a basket of currencies rather than just the US dollar to determine the relative value of the AUD or alternatively you can compare it to an alternative currency like the price of gold. This will give a different perspective.