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Moving back down the ASX 5000 levels

Discussion in 'Shares' started by Tim, 16th Jan, 2008.

  1. Tim

    Tim Well-Known Member

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    Hmm should be interesting, SPI futures down 99 points so ASX should trade well back below 6000 today.

    Surely this is creating a good base for the next run or are we going to drift for 6-12 months while sub prime unravels its systemic toxic.....

    Timbo
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I think it's difficult to tell ... on one hand we have a market that's already been hit by too much bad news about credit problems, but on the other, we still have an overheating economy.

    I think anyone acting on a prediction at this point is a bit foolish - when there's both good news and bad news around, the market can be guaranteed to do one thing: go up AND down :rolleyes:
     
  3. Tim

    Tim Well-Known Member

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    HI Sim,

    yeh it is very hard to predict - yesterday SPI futures were up 47 but market went down anyway!

    I am sorting off sitting on the sidelines with a small amoutn of cash, but 80% of what I have to invest is sitting in there getting hammered, not much fun really but very good for the overall long journey of learning, taking action, modifying strategy and going again, the continous improvement cycle.

    I am wondering about the banks, although their bad debt levels are supposedly OK, think their future bad debts could get a lot worse, but the dividend is starting to look appealing.

    I pity those who are heavily margin loaned..........

    Tim
     
  4. Tropo

    Tropo Well-Known Member

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    I would forget about good base for the next run for a while.
    Market may ‘drift’ much longer than 12 months...
    It’s too early to say if we go down to 5000 again (XJO) - but 5730/34 & 5360 is quite a possibility.
    ;)
     
  5. Glebe

    Glebe Well-Known Member

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    put your hand up if you've been margin called.. :eek: Luckily I'm still a 10% drop off that phone call...

    I'm actually predicting the ASX to get back to 6500 by the end of 2008. :D
     
  6. Smartypants

    Smartypants Well-Known Member

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    For those that have been investing in mgd funds for some time (lets say +5 yrs), do you generally just ride these turbulent times out or do you have any strategies you implement, such as sell out then buy back in when you think market is in upward swing again?
     
  7. Alan

    Alan Well-Known Member

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    I'm on holidays at the moment.

    Checked the ASX about 10.15am and it was down about 150. Just got back from the beach and it's still around that mark, BUT the Australian Securities Exchange - Stock Market Information, Stock Quotes - ASX chart shows it shot back up to opening prices of about +150 before dropping again to -150. :eek:

    It didn't, did it? Must be a graph error. That would be some VERY extreme volatility!
     
  8. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Yup, bad data I think - Yahoo chart of XJO attached
     

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  9. crc_error

    crc_error The Rule of 72

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    me :mad:



    ......................
     
  10. Glebe

    Glebe Well-Known Member

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    That's me too. But after a few good years, things like this happen. You take the crunchy with the smooth...
     
  11. Tim

    Tim Well-Known Member

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    I have no choice except to ride it out, there is no point crystallising losses which will cost more than holding for another year.....

    Tim
     
  12. MichaelWhyte

    MichaelWhyte Well-Known Member

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    Me three!

    But the crunchy with the smooth is my theory too. I'm a strategic timeframe investor and the current drop is less than my locked in profits over the last couple of years. I originally invested at 4800 levels so 5800 still sounds pretty good to me! ;)

    Still, 7000 would sound a whole lot better... :D

    Cheers,
    Michael.
     
  13. Alan

    Alan Well-Known Member

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    Possibly a question for a few of the older heads that can clearly remember the late 1980's.

    My gut feeling at the moment is that the market is certainly dropping into an area where Margin Calls are happening but most of these are probably being addressed with backup funds etc in a large proportion of cases at the moment.

    How much further do you think the market would have to drop for a falls to be almost self-generating by Margin Calls dropping the market, causing margin calls to drop the market etc? 500 points? 1000 points?

    I'm certainly not saying this will occur but the futures today are pointing to another -120 or so. Therefore I was wondering if based on previous historical reactions you get almost an 'off the cliff' type reaction caused by margin calls or are Margin Loans only a relatively small percentage of the market and play a more minor role in market falls?

    In summary, historically, how big a driver have Margin Calls been to significant share market falls in the past?
     
  14. crc_error

    crc_error The Rule of 72

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    I doubt margin calls would have been a issue in the 80's as they really didn't become main stream till the last few years.
     
  15. Alan

    Alan Well-Known Member

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    Yes I guess that's true. Margin Loans do seem to have grown a great deal.

    I still don't know how big a share of the market they cover but the increased size may well play a new role in how the market reacts.We'll see......
     
  16. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    The tech wreck was certainly made worse by margin calls driving the market.

    Around that time I was working on a large project were there were about 80 IT people in a room - close to half were daytrading tech stocks in the background while working ... and many of them were margined to the eyeballs.

    A lot of people lost a lot of money very quickly when the music stopped.
     
  17. crc_error

    crc_error The Rule of 72

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    I think the music has stoped again.
     
  18. Tim

    Tim Well-Known Member

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    I would call it a freefall - this is going to be VERY interesting....

    This presumably will make it the 10th day consecutive drop in what - 12-15 years?

    Tim
     
    Last edited by a moderator: 18th Jan, 2008
  19. Tropo

    Tropo Well-Known Member

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    It happened when DOW moved back down under 14 000.
    :cool:
     
  20. MichaelWhyte

    MichaelWhyte Well-Known Member

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    Its actually quite funny now isn't it. I just sit here and shake my head at the absolute stupidity of it all. It just makes absolutely no sense for the ASX to track backwards when another US financial institution has a profit downgrade. Does nobody care that the Australian economy is actually in great shape and that the PEs for ASX stocks are ludicrously cheap right now.

    There must be some mighty scared short-term focussed punters out there running for the doors. It must find a bottom soon, because current levels at sub-6000 just do not compute. If ever you wanted proof that the market is "imperfect" and irrational, then this is it. Blood in the streets people, bargains galore when this thing hits bottom...

    Cheers,
    Michael.