here come the drums of a global slowdown #2

[trendsta]

Hi Ethann, that initial fall of copper was only a hint to the slowdown – it wasn’t the cause of the slowdown. Also, it alone didn’t signal a slowdown.
It was a combination of things that was the basis for the ‘drums of a global slowdown’ - historically low credit spreads even for junk rated companies, general euphoria in various asset classes, high debt levels and leveraging at various levels (just look at the number of geared funds released in 06 and 07), China index p/e at 48, aussie banks p/e above 15, iron ore increasing 70% year on year, etc all pointed to a top.

 

[trendsta]

A flicker of hope amongst the despair...

Things have greatly shifted and so have my views. Its not easy being doomy and gloomy especially for such a long time, but that what reality was and I accepted it. Time to move on.

Moving on my views are:
- Credit markets are slowly easing up. Interbank lending rates are finally coming down, but would like to see the money flowing down the chain.
- Equity markets are close to the bottom (give or take ten percent and few months, the absolute bottom will be in by march 09). Once credit eases due to historic low rates and liquidity injections equity markets will lead the economy into the recovery, just as they led the economy into a bust.
- Various economies are now ‘officially’ in recession - first step to fix a problem is to accept that there is a problem. Its likely the economic slump will last till late 09. Unemployment rates etc will be going up, companies will be cost cutting, earnings coming down etc.. It’s the real economies turn to feel the pain.
- Commodities have been thrashed, some to a point where spot price is below cost of production, hence many miners are shutting down, cutting production and staff, cutting exploration and new projects etc. A great squeeze is on…
- In general, housing will lag by another year or two after the economic recovery, so 10/11 depending on area, type of prop etc…

 

[topcropper]

This has been a truely amazing bit of forecasting Trendsta. Hope your right again. Hope you make a fortune too.

Well done. Wish I'd took even more notice.

Cheers.

 

[boomtown]

Hmm

First time I have ever seen it - a customer refused to pick up their boatload of thermal coal sitting at an Aussie port.

I wouldn't be so excited about it but thermal coal is used for electricity generation - not something you would expect to drop much.

 

[Sunfish]

I've just got home, so have you got a link BT?

 

[willair]

, that initial fall of copper was only a hint to the slowdown – it wasn’t the cause of the slowdown. Also, it alone didn’t signal a slowdown.

Trendsta,i know a few people that deal in scrap-metal bought from government and various other auction outlets all around Australia,up too about 3 months ago,scrap -bright copper was in high demand and would on-sell overnight for a 250 % markup from the auction markdown price,easy money,but not now one i know is sittng on over 1000 ton of bright scrap copper in his holding yards,the high end metal dealer /NO-NAMES/the 3 very high end dealers in southside -northside Brisbane dealers that he onsold to have stopped buying,and they have a lot more than 1000 tons sitting in their holding yards,so it is a flow on effect from what i'm told they can hold everything in place till just after christmas then they willlbe
laying off up too half their staff,intresting times,and it's only the start..
imho..willair..

 

[Sunfish]

Ya know mate: All my instincts tell me current prices are illogical. (Trust me, I'm in the top group on logic )

But I'm fully aware that the market can stay illogical longer than I can stay solvent (OK I've said it before)

Supply and demand must rule someday though so I'm doing what the guys with the copper are doing: Hoping it happens sooner than later.

 

[GreatPig]

the market can stay illogical longer than I can stay solvent (OK I've said it before)

I think just about everyone has said it before... more than once!

Must be one of the most over-worked sayings on financial forums.

GP

 

[trendsta]

thanks TC.. and thanks for the info willair and BT.

BDI showing fluttering signs after a total collapse in the past 6 months
(a fall of about 92% from the top - now thats scary)..

At current rates shipping companies worldwide are losing money. Lets see if the index can slowly claw back gains and cross above its downtrending 200dMA over the next few weeks.

 

[trendsta]

Big moves in BDI over the last week, with strength gaining.
It has moved up strongly to near 1500 since the low of mid 600s and base of 800-900. The point to note here is downtrend is weakening and may possibly have broken.

There are various areas of strength appearing, or areas of downtrends weakning. IMHO there are areas I think are going to do really well from here, and have started investing in them. Unfortunately, resi housing isn’t one of them, I think any “general” pick up in house prices will be delayed for few years at least. Houses may not go down much due to help from the govt, but conversely I don’t think they will go up much in the coming years either.. whereas there are areas that will go up a lot from the recent low bases… basic mathematics and laws of economy …

Also, unlike many I never believed in decoupling mumbo jumbo since 07… To me it was evident china would fall hard and commodities would follow especially after Olympics.. But I have changed my views. I think now is the time decoupling will start taking place …

 

[boomtown]

I didn't believe you before but I want to believe you now.

Please keep posting your thoughts.

 

[chilliaa]

Just a word of warning with the BDI,
i used to trade this index indirectly by buying and selling shares in Thai shipping companies (whose quarterly profit announcements would reflect the movement in the BDI, but the share price of which would only move based on the quarterly profit result rather than the BDI). It was a good and nearly risk free trading strategy until the recent popularity with resource stocks.

Anway im i bit rusty on this cause i havent done this type of trade for more than 4yrs, but from memory the BDI moves significantly in seasonal patterns. Hence dont look at just the movement of the BDI, you have to get 5yrs+ worth of data, and remove the seasonality effect first.

Just a heads up.

 

[trendsta]

Hi chilliaa,

cheers for the heads up..
im not investing in BDI.. im using that and various other leading gauges to determine changes in trends and pick future investments.

im slightly optimistic now (looking year in advance).. and have been for couple of months now ... theres an avalanche of money waiting in govt bonds, yielding historic low rates, and any positive movement in economy and thus inflation will cause the the tide to shift. I think the tide is already shifting, but isnt apparent in general media because the money flow is still small ...

 

[boz]

Hi chilliaa,

cheers for the heads up..
im not investing in BDI.. im using that and various other leading gauges to determine changes in trends and pick future investments.

im slightly optimistic now (looking year in advance).. and have been for couple of months now ... theres an avalanche of money waiting in govt bonds, yielding historic low rates, and any positive movement in economy and thus inflation will cause the the tide to shift. I think the tide is already shifting, but isnt apparent in general media because the money flow is still small ...

interesting read,
you should be more specific about your view and where you think money is going, after all it is not a secret and you make more money if others are following your investments.
I also thin the BDI might have bottomed and even many share market might have bottomed (like the chinese one). I can see the worldwide bond market yield have risen quite a bit last month, starting from Japan to Australia, Germany, US and UK, a bit more money have moved into more risky country reducing spreads. Also some money have moved into gold and many commodity even if prices not rising that much.
Personally I don't agree with your decoupling view and I am not optimistic:
there is far less money (and wealth) in the world then last year and the year before, so this avalanche money can't be relatively that much. Also I don't think the world can take more debt and the bubble has burst, we just see a shift from private debt to public, I don't see any chance the overall debt increasing in real term and the sheet is still too small, when you see the money moving out from bonds (if that would happen and it is not given) then you see the bond yieald rising at a point higher then the equivalent amount of money moving out would do a year ago. As I said, the sheet is too small! probably the recent yield increase in AUS bond is because of more debt that would be taken from government spending and grants, this will eventually push cost of money up despite what CB rate is

This week I sold 2/3 of my gold mining shares and I am looking for good corporate bond of around 1 year residual life in Euro. I keep monitoring the share market but I still see it overvalued, the sector I like is the Utlility, energy, oil and new technology

 

[trendsta]

Big moves in BDI over the last week, with strength gaining.
It has moved up strongly to near 1500 since the low of mid 600s and base of 800-900. The point to note here is downtrend is weakening and may possibly have broken.

There are various areas of strength appearing, or areas of downtrends weakning. IMHO there are areas I think are going to do really well from here, and have started investing in them. Unfortunately, resi housing isn’t one of them, I think any “general” pick up in house prices will be delayed for few years at least. Houses may not go down much due to help from the govt, but conversely I don’t think they will go up much in the coming years either.. whereas there are areas that will go up a lot from the recent low bases… basic mathematics and laws of economy …

Also, unlike many I never believed in decoupling mumbo jumbo since 07… To me it was evident china would fall hard and commodities would follow especially after Olympics.. But I have changed my views. I think now is the time decoupling will start taking place …

the flickers of hope, and small signs of strengths have been picked up by the markets and now the general media... and the decoupling has started (actually better word is divergance) ..

 

[topcropper]

- Equity markets are close to the bottom (give or take ten percent and few months, the absolute bottom will be in by march 09). Once credit eases due to historic low rates and liquidity injections equity markets will lead the economy into the recovery, just as they led the economy into a bust.
- …

Not a bad forecast either, back in November. Well done mate. [post 42, page 3, this thread].
Your main problem is that you don't post enough.

See ya's.

 

[chilliaa]

fantastic thread mate. Just went through it again, thanks again.

 

[boz]

Not a bad forecast either, back in November. Well done mate. [post 42, page 3, this thread].
Your main problem is that you don't post enough.

See ya's.

But still what makes a good trader is not this long term forecast that would need to be revised several times specially during the GFC.
Anyhow 1 week after trendsta forecast to be close to bottom the S&P500 dropped from around 900 to 725 (well over the 10%) and got down to 660 in march, now is back at 908, exactly when the forecast of near the bottom was made. The difference is the exchange rate that the AU$ was 64 cent then and 77 cent now, that would still make you 20%+ underwater.
But all this doesn't mean anything, trendsta still had great posts and I hope he would be a bit more specific, specially on what data he is basing his forecasts on.
My opinion at the moment is that we are at a important point, the TA on the S&P500 is a sell as long as the index is below 930, my view is that the minimum target is 825. I might be wrong and index goes up to 1000 or more but I would still be of the idea it would go back down to see if it can test the march minimum again.

 

[trendsta]

But still what makes a good trader is not this long term forecast that would need to be revised several times specially during the GFC.
Anyhow 1 week after trendsta forecast to be close to bottom the S&P500 dropped from around 900 to 725 (well over the 10%) and got down to 660 in march, now is back at 908, exactly when the forecast of near the bottom was made. The difference is the exchange rate that the AU$ was 64 cent then and 77 cent now, that would still make you 20%+ underwater.
But all this doesn't mean anything, trendsta still had great posts and I hope he would be a bit more specific, specially on what data he is basing his forecasts on.
My opinion at the moment is that we are at a important point, the TA on the S&P500 is a sell as long as the index is below 930, my view is that the minimum target is 825. I might be wrong and index goes up to 1000 or more but I would still be of the idea it would go back down to see if it can test the march minimum again.

Cheers guys.. just doing what I love doing.. investing.. I don’t post too often, esp about property (even though it is a property forum) because just get tagged as D&G, even though my views aren’t that dramatic.

Hi boz, im not into short term trading (weeks, months).. I look for trends (long term trends) and try to buy low and sell high … I didn’t buy at the exact bottom, no one can, but was close enough… and that has been my main aim. In the long term timeframe of 5 years that’s good enough for me. E.g. if I bought oil companies when oil was around 45, I don’t really care that I didn’t get the bottom at oil 35. When oil does rally back past over 100 in several years time, I will make over 100% in few years … at that time it wont matter much if I bought when oil was 35 or 45… good enough for me.

Also, I think it’s the ability to be able to change the forecasts and views with the times that makes a person a better investor. For example many people were saying about china decoupling and diverging from US and other markets back in 07.. I didn’t believe it and had the view china would slow down post Olympics (as you can read in my 2007 and early 2008 posts).. and it did ..

Then back in nov 08, I changed my view.. I saw that china could indeed diverge from US, and bought china shares… result since nov 08 US markets are up about 10% from nov, china up about 60% … in this case if I was head strong and stuck to my 2007 views, I wouldn’t have made any money.. all in AUD so no currency impact …

In terms of data, theres no silver bullet. Its analysis of many different events, news, indicators, govt responses etc, some intuition and logic.
Again, im not really into short term trading, but yes in short term the market looks close to fully priced.. Im not selling, but not buying either.. A decent pullback is due.. the higher it goes the more probable it becomes..

 

[Francesco]

...
Hi boz, im not into short term trading (weeks, months).. I look for trends (long term trends) and try to buy low and sell high … I didn’t buy at the exact bottom, no one can, but was close enough… and that has been my main aim. In the long term timeframe of 5 years that’s good enough for me. E.g. if I bought oil companies when oil was around 45, I don’t really care that I didn’t get the bottom at oil 35. When oil does rally back past over 100 in several years time, I will make over 100% in few years … at that time it wont matter much if I bought when oil was 35 or 45… good enough for me.

...

In terms of data, theres no silver bullet. Its analysis of many different events, news, indicators, govt responses etc, some intuition and logic.
Again, im not really into short term trading, but yes in short term the market looks close to fully priced.. Im not selling, but not buying either.. A decent pullback is due.. the higher it goes the more probable it becomes..

Hi Trendsta

I appreciate your candour and perspective on investment trends. It mirrors my own, perhaps not in assets allocation. Come and share your thoughts. With the recent quick run up already, I am waiting for a decent pull-back. Cheers.