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Calm Before The Storm?

Discussion in 'The Economy' started by Chris C, 7th Dec, 2011.

  1. Chris C

    Chris C Well-Known Member

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    Hmm... I don't know about you guys, but I getting the sense that everything seems to me to be pointing towards a calm before a rather large storm...

    So what's everyone reckon?

    How long until this whole EU debt crisis enters the final climax? Can EU leaders really buy another 6 - 12 months? Or will this all have gone pear shaped in the first couple of months of 2012?

    And once the EU governments go into meltdown, will Japan go with it this time, or will investors still see the Yen as a safe haven?

    No doubt the EU and Japanese problems will help buy the US government some time. Whilst I don't have a lot of faith in politicians in the best of times, you'd think the US politicians will finally sort out their disagreements, to finally agree on the fact if they can't come to an agreement on radical fiscal adjustments the US bond market will also suffer the same fate.

    Maybe 2012 will also be the end of pork barrel politics?

    :rolleyes:

    Me thinks it's going to be a hum dinger of a 2012. What do you guys reckon?
     
  2. Johny_come_lately

    Johny_come_lately Well-Known Member

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    Methinks it will all end in tears!




    Johny.
     
  3. Johny_come_lately

    Johny_come_lately Well-Known Member

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    If the ratings agencies downgrade the entire 17 EU members countries it will be the end of the Santa Claus rally. :eek:




    Johny.
     
  4. Johny_come_lately

    Johny_come_lately Well-Known Member

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    Found an interesting article on http://www.marketoracle.co.uk

    Say, we are now in Dec 16th 2011, and the time is 17:45 and ECB (European Central Bank) has decided to devalue the euro by 30% and is now trading below parity of the US dollar. What do you expect to happen next? The following chronological of events may best describe will be in store for you.

    18:00 You are packing up your office and ready to hit home. Promised to be early home for dinner.

    18:30 You get into the car and start driving home. On the way you notice there is a huge traffic jam ahead. So you decided to take a longer route through one of the suburbs.

    19:00 Gas running low on car so decided to lookout for a gas station nearby. Found one but the queue is too long probably about 100 cars in front. Maybe another station down the road has stock out. Anyway decided to go Wall-mart to get some groceries.

    19:30 Reach Wall-Mart but cars are jammed up till the front gate, no way to get in so might just head home for dinner.

    19:45 Pass by a few banks but seems strange because the queue is very long. Up to 30 people on the queue. What is happening?

    20:00 Reached home and straight head for the shower. Came out from shower and have dinner. Still haven’t got a clue of what is happening.

    20:15 After dinner decided to switch on the television to check out today’s headlines. Headlines are just unbelievable,

    EUROPEAN MARKETS TUMBLE

    EURO DEVALUED 25%, BELOW US DOLLAR PARITY, EUR/USD = 0.78
    FTSE -450pts, CAC 40 -278pts, DAX – 435, ATX -207pts, BEL-20 – 197pts
    BANK RUN ACROSS EUROPE
    MASS LOOTING AND PUBLIC DISORDER
    GOLD UP BY $300 TO $3980

    20:30 You feel panic and decided to switch on the PC to check on the internet. But the speed is just excruciatingly slow and it took ages to load a page.

    21:00 Nation being address by Obama on TV live while Geithner calling for calm and assured investor that everything is alright and should be back to normal in a next few days.

    21:30 Janet Napolitano, Secretary of Homeland Security declared all major US cities will observe curfew from 7 pm to 6 am starting from NOW. All citizens are advised to stay at home if possible and try not to get out of the house.

    22:00 Breaking News, US Secretary of Treasury, Timothy Geithner declare Bank Holidays for 5 days starting from tomorrow. DOW JONES and NASDAQ lost 10% and circuit breaker activated.

    When you turn on to CNBC, Jim Rogers seen to be reporting, ‘This is what the financial crisis looks like when the dollar collapse, and if you are not prepared, you will be wiped out’. About the same time, another news anchor reporting about empty shelves in supermarkets and ATM machines. This is total PANIC.

    22:15 CNN is seen busy reporting fund managers and bankers jumping out of high rise and the Chairman of a large broking firm committed suicide due to the massive losses incurred to the company.

    While on Bloomberg, news anchor reporting on empty supermarket shelves and gas stations, ATMs out of cash and looters and mobs are everywhere.

    At the same time, someone twittered saying that police are putting up road blocks all over the place.

    In the next morning, Asian Markets open and you will see the same headlines Tokyo -900pts, Hang Seng – 2000pts, Singapore – 210pts, Shanghai – 300pts. Meanwhile the US dollar is plunging by more than 20% in Asia, USD/SIN = 1.20, USD/AUD = 0.67, USD/MYR = 2.50, USD/HKD = 5.12, USD/YEN = 52.35.

    Total panic is gripping Asia and financial markets are in total chaos, buyers nowhere to be found. Stocks limit down 30% and everyone is rushing out. Similar to America, total chaos is the order of the day, leaders are out to calm markets.

    This is the type of scenario you will be seeing should there be a Global Systemic Meltdown. What happens this time round is we are not talking about a single country going down but simultaneously the whole world is going down due to the interconnectivity of the Global Financial Markets.



    So stock up on baked beans. You never know what will happen. :D

    Johny.
     
  5. wdongli

    wdongli Well-Known Member

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    The possible answer is no one really know.

    If anyone is sure 2012 is bad, he should short all and borrow to short now. If anyone is sure 2012 is good he should long and borrow to long. Our sense in the darkness is a very primary instinct.

    Could we trust our instinct?

    Uncertainty is the root for our fear. But is it any helpful to be fearful?

    The best way is thinking about how we could be safe and do what make us be safe without cutting off all of chances in future.

    Running in the ruins tearfully would kill us! Is it common sense? Get some cash in for the worse possibilities and be happy if things are bad enough.

    Let our fragile and tired guts have some nerves!
     
    Last edited by a moderator: 10th Dec, 2011
  6. wdongli

    wdongli Well-Known Member

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    If you are a day trader, market-timer or algorithmic genius, you could short the market to make profit but you could not get anything good enough by longing the market. Most of retail traders could not short the market and then they didn't have chances to be better than tearing.

    The volatility since seismic 2008 meltdown is pushing many retail traders into poor, knee-jerk, market-timing decisions. You expected it better but it just became worse! What could you do?

    Extreme down, extreme up are just brutal for retail traders. They sell in the downturn, and then miss the rally. Then they effectively sold low and bought high to realize the self-destructive process. That is why clever or not clever traders could not stop to cry for the darkness. Actually the market is not worse than the beginning of the August 2011.

    ***
    No one complains when volatility propels stocks higher. However, if you cry or feel very painful, you are definitely at some very bad position. You don't need anyone to beat you but you will beat your day and night.

    The key for us to avoid crying for ourselves and others is to find a position you feel safe. If you’re cushioned against the blow and either don’t lose money or lose less than the average, then you’re less inclined to panic and have a better chance of landing on solid ground sooner. No worries and then you would stop crying.

    ***
    Generally saying, retail traders and investors tend to get out when they could not see the light and take the heat. Typically they exit near a market bottom and then jump back in, if ever, only when it’s clear that stocks have resumed their climb. It happened in each market bust time. Most of retail traders and investors sold on Nov or Dec 2008 and then missed the V-Shape recovery.

    No any retail-traders or investors could decide how quickly the roller-coaster to roll. Sometimes no one could make money. To stay on track or defend yourselves, you have to stop to join the roller-coaster. It is a matter no system could make decision for you. You must make your mind. It is just as to buy and sell anything. You should not buy or sell but you do which would cost you!

    ***
    It is boring if we don't trade! Most of retail traders lose their shirts just because they need the exciting time in the market. Exciting is a matter which cost resources. You pay for what you want, which is fair.

    Now it is not a matter of boring but depressing problems. So many experienced and clever market players have lost their shirts. More and more have lost their interests in stock market. Could we say most of retail traders and investors have sold their chips on fire? It is a very critical question to decide when you should provide service for these losers! You have to start when most of them have been in deep water like the hopeless dogs!

    ***
    Most of retail traders and investors are very clever. But they tend to be too clever to make any good decision in darkness. Don't forget the environment would keep to change and the underlying principles of sound market service business should not alter from decade to decade, even the application of these principles must be adapted to significant changes in the financial mechanisms and climate.

    Crying for the bad environment is wasteful efforts. Losing the memory about underlying logic and common senses would send anyone into the hell. Future is unpredictable and when we try our best to predict the future without putting the efforts on the necessary matters, we are stupid!

    Market is happy and never stop wipe out the stupid out of the market. It is the duty of the market and make it very fair, we like or hate! When he tries his best to beat anyone in the market down, you need your corner and make it stronger and stronger! So you could run under the rising Sun sooner or later rather than would be consumed completely by it!

    Could you make yourself calm?
     
    Last edited by a moderator: 10th Dec, 2011
  7. wdongli

    wdongli Well-Known Member

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    It is a matter of desposition!

    If you win when all of genius and bums win, you could not say you are wiser even we could boast and feel extremely super! If you lose when all of genius fall down, you could not be said you are completely wrong even you are really wrong!

    Whatever the reasons you lose your shirt or how clever you lose your shirts in the market is not important since the fact is that you are the losers. Experiences and expertise are great but if you just lose your shirts, all are penniless.

    Beating others, gamblers or EU or China, is always the best way to let us feel better in ruins! But at last you have to count your own money. It is not a war to beat others down but how to win yourself. About ourselves is about the behavior and disposition.

    There are always some simple but effective and wise solution around. Does your behavior and disposition allow you to find these solution.

    My new boss is a very ambitious but nothing-in-order Engineer. He wants to be in order when everything is messy he wants to get into short-cut for quick solution. He doesn't know he does need a plan and guideline when he feel desperate or cheerful until too late and have to use too much resources to clean up.

    If it happened before I would try to correct him since I thought every Engineer should be professional and in order. Now I know I could not change anyone if he doesn't want to change but I could. I follow him for quick but clean up my things a few days. When he has very dirty as*hol* and struggle to figure out how to clean up the mess, I just move forward a few meters ahead and wait for him. Why? We are mates and we have to move forward together. Don't show your helpful hands too early. Someone are extremely self-over-respective. Leave them alone until they are desperate for help.

    1. don't follow him for short cut? He would try to make troubles. Why making your mate upset?

    2. follow him completely? I would be in mess and disorder, which I hate.

    3. go into the middle: cheerfully get enough self-reliance and put some enough efforts for the people's primary instinct(no harm to anyone except the feeling). Most of us are good guys but we just don't know how to balance between right and left or up and down generally.

    The retail traders are in messy and ruins. They are in serious troubles. Could we be self-reliant and service them when they could not get help from anyone else? It needs good behavior and disposition! Do you have them?

    All are to prepare I could service the warriors in next GFC or something similar. Now I just fine tune myself when I make my last defensive line! Life is really a matter how you want to live. Is it important to know this? Yep! It is and would decide you are happy or painful!

    Too many work too hard to be happy! Why? It is because of China, US, EU, and ASIC, they said! Who is insane? Cleverness and insane are the ticket to the hell!
     
    Last edited by a moderator: 10th Dec, 2011
  8. wdongli

    wdongli Well-Known Member

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    The havoc wrought by GFC and EU!

    The havoc wrought by the last market breaks, the GFC and EU, were catastrophic to retail traders and investors who dared to jump into the market due to the IT and internet. It was the time anyone, who could google, has some great ideas, work or not! Everyone seems the expert in something but loses the money.

    This was nothing new in itself—it had happened to a similar degree in 1973 and 74—but there was now a novel element in the fact that retail experts were hit the most heavily. They have great chances to jump down the roller-coaster when it stalled at lowest points. History never repeat itself exactly but it is always true as though it is their destination!

    They had large commitments in highly speculative and obviously overvalued issues of blue or not blue chips. Evidently it is not only the tyro who needs to be warned that while enthusiasm may be necessary for great accomplishments elsewhere, on market it almost invariably leads to disaster.

    Market needs the cool head but unfortunately nearly all of retail traders and investors started their exploration passionately or greedily. It is a journey for rumors and facts in the past but no efforts to put for better future.

    All of winners and losers deserve what they have got, happily or not!
     
  9. Insight

    Insight Brisbane Buyers Agent

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    Re: Prediction meeting the cold hard streets of reality, the generating cash from investments and business reality.

    1) If prediction is so
    2) then what?

    For example. EU is a mess, reasonably clear that this has elements of truth. Markets are discounting mechanisms.

    Two possible scenarios from a universe of scenarios

    1) Markets have aggressively discounted bad things. Bad things discounted in market pricing aren't quite as bad as what happens, markets rebound strongly or muddle along.
    2) Bad things are worse than markets have priced. Money printed till there are no more plastic trees and digital 1's and 0's, high inflation and government stimulus common in economies.

    Could make out cases for property as one asset class being a: good or b: bad from either of these scenarios and you can also generate scenarios to reinforce any position. I like a prediction as much as the next person. I also have a strong respect for how difficult it is to profit from market gyrations.

    I predict people who focus on increasing their skills and income, budget and invest soundly (such as well placed and priced residential property) will continue to do well :) Of course I also have a barrow to push, let's just hope it's not a barrow full of devalued dollars eh? :)
     
  10. fundies

    fundies Member

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    Well, looking in the 2 monthly rear view mirror on this topic, all seems well, and stock markets are steaming along ( The All Ords having a stellar January, up over 5% ). The disconnect from reality is almost unbelievable. Although I went into cash over 12 months ago, one feels sorely tempted to jump aboard the Bullcrap express, but something keeps telling me, not just yet. Lets see where it ends up in the next couple of months, but if it keeps going the way it has recently, the skys the limit.
     
  11. Andrew Newman

    Andrew Newman Well-Known Member

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    Reading this thread about predicting markets made me recall comments from Warren Buffett where he said you should be a business analyst not a market analyst. A market analyst would concern themselves with the direction of interest rates, the direction of the Australian versus the US dollar, the price of oil and all those external factors. Whereas a business analyst would look at a stock as a business and value that stock as if they were to buy the whole thing. He suggests doing that first and the last thing you should look at is the price of a particular stock – these are unchanging principals.
     
  12. wdongli

    wdongli Well-Known Member

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    and based on the business analysis to buy when the market is selling desperately.

    He does do market analysis but not to run over the wind for quick money. He tends to buy solid business when everyone believes the sky would crash down. It sounds logic. You bought the gold at $250(even Buffett believe he could do much better than buying the gold) and then it would become part of your profit business.

    The problem is most of market players could not get balanced. If they do business analysis they would forget the price. Too many lost the shirts with Blue baby, RIO. They paid too much!

    There are storms always and we all need to avoid them. Summer usually is hotter than in winter. Should we know the seasons for our profit based on our long term view?
     
  13. Chris C

    Chris C Well-Known Member

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    Yeah I don't think it's the time to be getting into the market in a massive way - that said I have been selectively nibbling at a couple of stocks over the last 2 - 3 months, but I've mostly be looking for investments that have a promising long term horizon (ie companies that are very likely to be around well after this crisis has passed) as well as taking advantage of the high AUD.

    Whilst I also have a large chunk of my portfolio in cash I tend to think that keeping your money in AUD isn't as great of a defensive strategy as "being in cash" is often made out to be given that if **** does hit the fan again you can be quietly confident that the AUD will plunge relative to other developed currencies which will mean that it will only offer you a better buying opportunity for Australian-based assets and potentially some emerging market assets.

    I also think "being in cash" in the sense of holding international sovereign bonds, UST, JGB, Gilts, etc carries a LOT more risk these days than it once did with all the quantitative easing going on around the world - whilst everyone remains fearful of potential economic collapse the future yields on bonds will obviously stay low, but at some point alternative investments will present themselves and the reality will sink in that many developed governments will not be paying back their debts back in full and bond yields will aggressively rise, at which time a tipping point maybe realised and once that process is started it is hard to envision a scenario where it would be "orderly" as opposed to "a race for the exit".

    So yeah - whilst I feel "safer" in cash - I don't think it is "safe".

    I think that strategy is easier when you are living in the US using USD In an economy that produces pretty much everything it needs.

    Australia on the other hand is very import/export dependent and the AUD isn't the reserve currency of the world and is liable to fluctuate rapidly (which can be both a good and bad thing).

    So in Australia you can buy a "great business" that has been able to outcompete all its local rivals for the last couple of decades while the AUD/USD was below $1.00, but if the currency appreciates by 30% that business can quickly find itself out of business from foreign competition.
     
  14. wdongli

    wdongli Well-Known Member

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    Will the sun rise and sink as everyday we had in the past? There are always problems. Sometimes the problem is big and sometimes it is small but so far no any problems could stop the rise and sinking, isn't it?

    Australia is not too bad. In the last 100 years, there were wars around the world and its population was much less. Why did the economies and market still not too bad?

    What was about GFC and US? What was about cultural revolution and China? What was about the debt crisis and EU? Yes what was about resource and Australia?

    Have problems? Try what you can do to get the solution. When the sun rises again where would you be? Life is good and it is not problem free. Don't be panic and sun rise while all in the sleep!

    Only few could not sleep but worry the sun would never rise again. What happen if you could not wake up again when the sun rises? That is a real problem!
     
    Last edited by a moderator: 18th Feb, 2012
  15. Chris C

    Chris C Well-Known Member

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    Things seems a little too calm again... isn't it a sad reflection of the times that I get nervous when their isn't enough volatility.

    : P

    Anyway despite the flat Dow overnight I think there is quite a bit going on...

    The AUD has been continuing to slip against the USD. The Yen is continuing its 6 week fall against the USD, 10Y JGB's have slipped back over 1%, 10Y UST have also fallen to levels not seen since Oct last year.

    Large falls in UST's and JGB's at first glance could be written off as the market being back out their looking for risk now that Greece has defaulted, but the falls in the AUD and deflated stock markets makes me think that story might be a superficial one.

    Part of me wonders if the market is temporarily confused as to which neck should be placed on the copping block now the Greece has been dealt with for the time being.

    The shortest odds would have to be Portugal, but Ireland and Spain also have good cause to believe they might be the next cab off the rank.

    Then there's Japan just sitting there hoping no one looks at them (unfortunately looking at the USD/Yen and JGB's it appears it's not being ignored).

    The UK just had Fitch put them on downgrade notice suggesting they have a 50% chance of being downgraded to AA in the next two years (and I'm sure in 2 years time the UK will be dreaming about the good old times when they had a AA rating, let alone a AAA).

    Then there's Italy, which it seems the market has grown bored of for the time being, so it might be out of the woods for the next couple of months at least.

    So the question on my mind is how much has the market factored in the next sovereign debt crisis, or does it seriously believe it all ended with Greece? Surely not.

    The markets might be able to tolerate issues in Portugal and Ireland, but what will happen when the market starts looking more deeply at Spain and the UK again - or worse Japan...?

    How will Australia hold up with a Japanese sovereign crisis given that Japan is by far the second biggest export market for Australia?

    So 3 months after I first posted this thread Greece has now defaulted, and the next question is how long can they remain on the Euro. Will we make it out of 2012 without defaults on Portuguese, Irish or Spanish debt?

    It's calm, but me thinks there be a storm brewing.