here come the drums of a global slowdown #2

[trendsta]

well, well here we are.. about a year since this thread was started.... http://www.somersoft.com/forums/showthread.php?t=37403

finally there is acknowledgement of a slowdown, and appreciation of the size of this whole problem... it took a while but its happened.. and as suggested post olympics period has been cruicial .. IMF, OECD, various govts all worthless forecasts .. it was clearly evident a global slowdown was coming, but very few wanted to accept it...

US - recession
UK - recession
NZ- recession
Uero - close to recession
Japan - close to recession
Aus - close to recession

China, India - slowed down

where to from here?

hard to tell .. economically still of the view, as have been for many months that we head into a recession next year..

looks like equity markets have finally taken the various risks and slowdown into account and are reflecting fundamentals. Not saying they wont go lower, 3400 - 3500 seems like the absolute low from TA perspective.. But they are reflecting close to reality. Picked some for the long term last week.

resi property .. still holding out.. has been a long but worthwhile wait .. reason being unemployment and lower migration hasnt hit yet, companies havent really started slashing costs, which they will soon do... i expect mid-late next year to start looking at some props... will analyse the situation then.

happy investing

 

[MichaelW]

where to from here?

hard to tell .. economically still of the view, as have been for many months that we head into a recession next year..

Hi Trendsta,

Maybe you'll need to start a new thread titled: "Here come the drums of a Global Stimulation package..."

They've already started reflating bubbles. Rudd pulling demand side levers on resi property and splurging $10Bn of his surplus. He's also committing to pulling forward major infrastructure work to stimulate the economy.

Stimulate will be the new catchword for a while.

Cheers,
Michael

 

[Pete_d]

If you sold all your shares the day trendsta posted this thread and then bought in again last Friday you would have saved around 36% of 43% drop in ASX200 index since their peak in early Nov 2007....not bad, did you heed your own warnings trendsta? If so, very savvy investing

 

[Aaron Sice]

new catchphrase for Rudd? now he can replace the word "challenges".

very interesting reading the first few posts.

i certainly thought the stock market was a lot stronger than what is currently valuing.

 

[tubs]

I think you've been listening to the media too much.

A recession is 2 consecutive quarters of negative growth. Take a look at some real recession stats:

US - [recession] - Not one quarter of negative growth recorded. Not in recession.
UK - [recession] - Not one quarter of negative growth recorded. Not in recession.
NZ- recession - Correct.
Uero - [close to recession] - I have not heard of any quarters of negative growth across this region.
Japan - close to recession - Correct. One quarter of negative growth (2Q08) so will be in recession if Q308 is also negative.
Aus - [close to recession] - Not yet recorded one quarter of negative growth. 2.x% growth rate still predicted for 12 months.

 

[Kennethkohsg]

Dear All

1. Singapore was recently reported to be in a technical recession after 2 successive contraction in its GDP growth.

2. However, who cares about this technical Recession when at the same time, Singapore Economy/GDP is further officially projected to grow at 3% pa. for 2008 and 2009 with full employment status ie with less than 5% un-employment rate.

3. Likewise, we need to clearly differentitate between a full-blown Recession taking place in a particular country within the OECD countries bloc/Western World and the various sensational news headlines, frequently screaming aloud everywhere, "Recession about to hit soon, Recession there soon etc" but no real Recession actually occurring at all, to date, as well as its subsequent full impact on a particular country economy where with word, Recession is first mentioned.

4. One is a fact which we should calmly and further logically exmaine its full impact on our own investing strategies/outcomes, the other is simply playing on our own fears and greatly distorting /exaggerating our own existing real life perception regarding the actual level of " risks" for an imaginary Recession to occur soon.

5. For your further comments and discussion,please.

6. Thank you.

regards,
Kenneth KOH

 

[Aaron Sice]

one shouls also note that 2 consecutive quarters of CONTRACTED growth does not equal a recession, either.

so, if YTD values are -5%, actual values may have gone from 10% to 5% - which is still growth.

this MAY be how trendsta is forming the above statements.

 

[Aaron Sice]

neat little piece of info for you all.

 

[trendsta]

MW, yup, hence I finally took some positions… Not sure how successful govts will be in ramping up the bubbles, but for now its good enough… im not going to argue with the markets… simply play them as they are. If they succeed, then commodities will win the next round in the battle between commodities and bonds/treasuries (i.e. inflation vs deflation). I expected a fiscal policy response and bought stocks late last week benefiting from excess global liquidity and aussie fiscal stimulation. Fingers crossed..

Pete, yup I took my advise, and invested based on my views.. some stocks I sold off last year have dropped 50-70% .. e.g. KZL, OZL (ZFX), WPL etc..

Tubs, I don’t pay attention to general media. Take US as an example. Until recently bernanke, Paulson, bush were all singing that US economy was fine, then a few weeks ago they started painting “world depression” scenarios when requesting for the 700 billion bailout. Bernanke/Paulson last year said ‘this is a 100 billion problem’… Why on earth would I listen to those clowns and media regurgitating their words.

Also at start of this year (Jan 08) I mentioned US was in recession. They posted 1.3% GDP growth for Q4 07… Then just a few months ago sept 08, they adjusted Q4 07 gdp to -0.2%... Recessions are always announced in hindsight, again why would I wait for the media to announce a recession etc.

Kenneth, yes agreed.. lets not focus on simply two qtrs of negative growth. Lets look at real numbers like unemployment.. e.g. in US up from 4.3 to 6.1 (reality is probably north of 7%).. definite recession.

By the time recession is announced and publicly admitted it will be all over.. IMHO we’re not there yet in land of OZ.

 

[trendsta]

neat little piece of info for you all.

thanks BC.. always good to maintain perspective..

 

[GreatPig]

A recession is 2 consecutive quarters of negative growth.

Not officially, it's not. Take a look at this Wikipedia article.

GP

 

[Sunfish]

Gigo

Basically, growth for a quarter is the "nominal" increase in $ terms less inflation. So if you use a garbage inflation figure you get a garbage result.

But I'm more up-beat about Oz than I was. I've been a bear for years, but while I was aware our banking system was better than the Yanks, I misread how this would play out. I was also aware that our CHESS share clearing was much tighter than theirs but I underestimated it's effect. And our budget surplus and high interest rates give the Gov and Res a full quiver of arrows to fire.

What I got completely wrong was that the Brit and European banking was even worse than the Yanks'. The world wide mess has prompted drastic action and Rudd has followed suit. The French maintain they are showing the Yanks how it should be done. We can blow the surplus and a few bill more and drop IRs to 2% without doing long term harm, and I'm still a resource bull. (I still think we are in for high inflation as the pay-off for the rescue).

About time I re-committed to the market, methinks.

 

[GreatPig]

drop IRs to 2% without doing long term harm

Wouldn't do wonders for bank deposits though.

GP

 

[nonrecourse]

Critical thought;The lights are on but nobody is home?

3500 - while there is great support there - i think is a little pessimistic.

i think it will have to be a hot day in hell for the ASX to break below 4000 - that's a B-I-G psychological barrier.

Just jogging your memories a bit chaps Besides suggesting a low point of 3500 when it was around 5000 I also mentioned 2% as the reserves rate in a couple of years.

I note that in todays financial review on pages 16 and 17 there are two excellent articles entitled; "If anything, the Europeans were most gullible" and Ability to guarantee not universal.

The first article talks about the tidal wave of short term debt that European banks have to roll over early next year. The second article compares various countries proportion of national debt (%) in proportion to national GDP. The average bank leveraged ratio (bank assets divided by net worth.

In the US the ratio is 12 to 1, and Switzerland 29 to 1
Talking about some eggheads definition of a recession is off with the faries. A tidal wave of red ink will wash over the world in the next ten years. The soft depression rolls on

 

[Sheryn]

are the signs there for a global slowdown ??

copper and other industrial metals, although volatile, are a good indicator..
they were the first to rally from 03 boom ..
and recently as USD has been falling they should be rising.. however, the bigger picture says there is a slowdown coming and the metals are falling..

what does this all mean .. lets see, Australia is heavily into resources, but the coming earning season should be packed with fireworks.. e.g.

2006/07: copper was 3.50/USD 1usd = 0.75 AUD (average)
2007/08: copper now 3.10 (actually 3.00 and falling) and 1usd = 0.88 AUD

for a producer this means: in 06/07 price in AUD was 4.67 , and now is 3.52
hence a drop in profits of 25% (assuming equal production)...

add to that increasing costs etc, and it looks even worse ..

they were the first to rally, and the text book says they should be, a perfect leading indicator to global upturn.. they are starting to fall , is this a leading
indicator to a global slowdown !!

Trendsta

I have enjoyed this thread enormously and read/followed each page.

Absolutely brilliant I have one question at this stage 'Which text book?'

Always looking to improve my knowledge. I am pleased that I am witnessing and 'understanding' history (well reading online newspapers and this forum daily) as the global economy changes.


Kind Regards
Sheryn

 

[Sunfish]

Wouldn't do wonders for bank deposits though.

GP

Yea. Tough. But that's what savers are for: To be the patsy and fund the spendthrifts who can't keep themselves out of trouble. I agree that engineered inflation is a crime, but there are so few "responsible" voters neither party will take them seriously.

Can you imagine how many self funded retirees will be traipsing off to Centrelink now with their variations?

 

[Sunfish]

A tiddle wave of red ink will wash over the world in the next ten years

Gotta be better than a tidal wave.

 

[Aaron Sice]

Just jogging your memories a bit chaps Besides suggesting a low point of 3500 when it was around 5000 I also mentioned 2% as the reserves rate in a couple of years.

thanks for that - and as soon as the all ords broke below 4000 it speared back up again - market correction back in line.

however - it HAS been broken. may hover at 4000, or 3500 may be a good call now.

current prices are trading outside the trend now so all bets are off.

 

[trendsta]

non-recourse.. i def remember you mentioning 3500 level, when it was far-far away, amongst other things.. kudos to you.

thanks sheryn, dont really have one particular book.. have read quite a few.
the most thought provoking is probably 'think and grow rich'..
mostly i read finance and business news on the net and afr when i can.. the main thing i will say is always manitain a balanced view..

you will read many articles, most will be noise, many will make predictions solely based on history etc.. the real analysis is being able to pick what matters, from the many pieces of junk information. Media such as internet make this especially difficult... but thats they key.. being able to see the bulldust when most are harping about the roses, and being able to see the roses from the bulldust ..

i dont know the exact bottom .. but there is a lot of fear out there. once in a hundred year events taking place. The govts and central banks have two choices, let the system collapse and go into a depression, or manipulate/control the system to avoid this.. they have shown their commitment to the system. the market is now factoring in a global recession, which was expected.. but im now starting to look beyond that... currently the key is LIBOR.. if it moves down from its insane levels there will be a flood of money coming down.. im placing myself in areas that will benefit from this.

The alternative is money doesnt flow down due to preception of risk, i.e. sits in treasuries and is hoarded by banks. However as central banks continue reducing rates, the difference between cash rate and yields will make it too tempting... so either way the money will flow.. its a matter of time.

cheers .. another day to dip in... may not be the exact bottom.. but close enough is good enough.. in 5 years 10% here or there wont matter much..

(PLEASE DO NOT TAKE THIS AS INVESTMENT ADVISE. I HAVE NO QUALIFICATION ETC, MAKE YOUR OWN JUDGEMENT)

 

[GreatPig]

current prices are trading outside the trend now

Depends which trend you're talking about. My base trend from late 1987 till now is currently around 3860. XAO still over 4000 right now.

GP