realistically how far can the ASX drop?

[rosewaterwrx]

Ok so a naive question from a young investor still with the training wheels on.

Ive got a couple of properties (50% in my name) and thought id consider using some of the equity to purchase about $30-40,000 in shares.

So forgive me but isnt the old adage buy low sell high? buy when theres blood in the streets?? in theory isnt now a brilliant time to get into the share market for the first time, albeit via a loan?? I can pay the loan repayments and am happy to have low returns for a few yrs on the assumption that the payoff over 7-10 yrs will be good? Or am I missing a few potential major stumbling blocks?

So truthfully what could happen from here on in? I cant see the whole financial system collapsing as were a global economy and all the nations in the world are dependant upon the current system surviving intact....or is this my lack of understanding.....am i gonna have to live on canned beans and steal potatoes from my neighbours veggie patch?

Is it my youth or inexperience that makes it hard for me to believe that the ASX could drop much further??

 

[Aaron Sice]

mate - seriously search the coffee lounge. all your Qs will be answered.

 

[oldjonesy]

It would have to be at the bottom mate. It bounced off 3500 pretty hard today.

 

[Max Carnage]

Chuckle.

Yes, it sure didn't, did it.

 

[Kingbrown]

We will retest the lows of 03, meaning another 30% drop or so, or about 2400 - 2600.

Lock it in!

 

[WASP]

hey, that looks like a falling thingy, you know, one of those downtrendies

 

[Aaron Sice]

realistically - it could drop to 500.

1500 could be possible considering we've seen a high of 6850 and are now at 3500.

seriously, anything is possible lately.

 

[rosewaterwrx]

Another naive question.

When you look back at past history of major downturns are there any group of people eg the Buffets or even Rockefellers etc of the world who had enough insight/inside knowledge/ability to manipulate, that pulled out of the market at the right time and then reinvested in large amounts??

Is it a good idea to say...hey keep an eye on this group/person etc to have as a yardstick for a reasonably well informed return into the markets?

Buffett seemed to invest heavily recently quite comfortable that the market will be higher than it currently is in 10 yrs time. I know he can afford to take a bath but the mans not stupid.....or has he made a huge blunder?

I guess the difference in deciding wether now is a ballsy/smart time to invest or incredibly stupid will purely be hindsight in 5-10 yrs.

 

[Kingbrown]

I agree with Blue Card.

Corporate earnings will fall further, dividends will fall.

As the earnings will be dropping for some time yet, the yields just won't be enticing enough for buyers.

Only thing that can happen - prices drop further.

Hold on to your hats, and my commiserations in advance if you are nearing retirement and have you money in stocks.

There are many perfectly logical and believable short term scenarios that have the dow at less than 3000.

Our market would mirror this.

 

[rosewaterwrx]

General consensus here is quite gloomy regarding purchasing shares. Luckily im 25 yrs from retirement ( all things going badly of course)

Short term doesnt phase me im thinking longer term.....within reason.

 

[quoll]

worst case scenario?

What if you purchase shares in a company that goes bust? You loose the lot but the market as a whole might not drop much.

It wasn't that long ago when fund managers where putting cash into ABC Learning.

It's all risk and reward but you need to work out just what the risk really is, which might not be what you think the risk is. You need to find out what you don't have any idea about.

Fundamentals, do your research.

cheers
Graeme

 

[Gentle_Chief]

Wish I knew what the bottom is going to be.

Everyone I know has been calling it the bottom since the ASX touched 5000 levels and we are on 3500 today. The peak was at 6800 levels in Nov 2007...hardly 12 months ago.

IMHO, I would say, do yourself a favour & put the money in an offset a/c. And wait for another 6-12 months before investing anything on shares. The markets are not going to take off in a hurry anyway.

 

[Sunfish]

Why not just ask the Meaning Of Life? If you can't answer that simple question you sure ain't gonna pick this market.

 

[kum yin lau]

Hi Rosewater, I don't think you're at all naive.

I'm about to do the exact thing that you're suggesting i.e. leverage my property to invest in shares except that I'm buying in the name of my superfund.

If the most gloomy predictions are correct, what can be done is buy on the way down. Many investors buy on the up but how we tell what's up? We only make educated guesses.

I was highlighting Aus shares at a time when there was no less a recession for years and years. In 1992. The AllOrds? Around 1100 - 1300

This was a strategy I was taught when I 1st started buying shares. Divide your money into 3. Use one part 1st.

This is what I'd do now. Buy @ around 3500 [looks like I'll have my wish]

If it drops 500 points, buy again. And so on until I come to the end of my funds.

Time will tell whether I have the discipline to stick to my plan!

KY

 

[steveadl]

I'll be buying in over the next few months, but then I'm looking to the long term. Short term, there could well be more pain to come. But that's all just my opinion, so take it for what it is.

 

[Sunfish]

Everyone I know has been calling it the bottom since the ASX touched 5000 levels

Not Me.

The markets are not going to take off in a hurry anyway.

Seriously, there seems to be an expectation that this will be a "V" shaped recovery like '87, or "9/11", that there will be "one big day" and if you miss it, you've missed the opportunity of a lifetime.

Let's think about "that day": The only two stocks which spring to my mind (I have a narrow watch list!) that haven't lost 50% or more from their highs are WOW and AGK. To recover their loss the rest of the market needs to gain 100% from current price. Now that's not going to happen overnight.

The real market is stairs and elevator shafts. That is, you climb the wall of worry (the steps) and come back down the elevator shaft..... Strait down. But of course nothing goes up, or down in a strait line. Bear rallies or bear traps are infamous. The dead cat bounces after it hits something and then continues down.

Anyone got any cliches to add? LOL

Someday things will be different but there is no rush to to pick how or when. Be patient.

 

[Ebbie]

Up until recently I thought we were nearing the bottom but after hearing rumours of a Derivatives Meltdown and doing a Google search to read up on it I've realised we could be in for much much worse before it gets any better.

I sold the rest of my shares yesterday and will be keeping the cash in my offset account for the next 3 months while I wait to see what happens!

 

[GreatPig]

General consensus here is quite gloomy regarding purchasing shares

Large losses tend to do that to people.

GP

 

[craigb]

Hey max is that chart is upside down , , ???? not!

 

[Mr. Fabulous]

Lots of

in this thread.

Mark