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Old 01.06.2012, 18:22
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Next wave of market corrections?

Things in last 3 weeks have taken an a very sharp nose dive.

In last month DAX and FTSE are both down 10% each.

Major commodities are down between 15% and 25% (oil 20%, Cotton 15% and Copper 12%). News from Asia is not good either. Indian, Chinese and Russians are faltering on their performances like never before in last decade. Most of these developing countries are reporting their worst growth rates in 5-10 years. The currencies are devaluing and the business are slackening.

More recently, like yesterday even US which off late was showing some signs of resilience has reported poor housing and job numbers.

Where are we headed? Are we looking at the worst year ahead, much worst than 2008-2010 in US but this time for the whole global market or this is just a small downward trend? Are there still any Gold and Silver bull around?

I feel we are up for IInd wave of market corrections and poor economic developments. EU still doesn't have a clue on how it is going to solve any of its problems related to crises. The problem is just getting bigger day by day.

I don't mean to scare anyone here. Just want to have an open discussion on the current market situations.

Han
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Old 01.06.2012, 18:55
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Re: Next wave of market corrections?

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Things in last 3 weeks have taken an a very sharp nose dive.

In last month DAX and FTSE are both down 10% each.

Major commodities are down between 15% and 25% (oil 20%, Cotton 15% and Copper 12%). News from Asia is not good either. Indian, Chinese and Russians are faltering on their performances like never before in last decade. Most of these developing countries are reporting their worst growth rates in 5-10 years. The currencies are devaluing and the business are slackening.

More recently, like yesterday even US which off late was showing some signs of resilience has reported poor housing and job numbers.

Where are we headed? Are we looking at the worst year ahead, much worst than 2008-2010 in US but this time for the whole global market or this is just a small downward trend? Are there still any Gold and Silver bull around?

I feel we are up for IInd wave of market corrections and poor economic developments. EU still doesn't have a clue on how it is going to solve any of its problems related to crises. The problem is just getting bigger day by day.

I don't mean to scare anyone here. Just want to have an open discussion on the current market situations.

Han
So the price of things gets cheaper, sounds like good news to me. In any case regular price movements of +/- 10% makes investing easy.
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Old 01.06.2012, 18:59
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Re: Next wave of market corrections?

Best to be cash rich and asset poor in this environment.
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Old 01.06.2012, 19:02
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Re: Next wave of market corrections?

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Best to be cash rich and asset poor in this environment.
Not with printy , printy going on, USD equities will do very nicely again like the last year.
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Old 01.06.2012, 19:18
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Re: Next wave of market corrections?

Maybe, maybe not.
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Old 01.06.2012, 19:34
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Re: Next wave of market corrections?

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Maybe, maybe not.

This just in from our Economics Specialist
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Old 01.06.2012, 19:36
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Re: Next wave of market corrections?

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This just in from our Economics Specialist
Well, it's one of the better predictions.
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Old 01.06.2012, 19:48
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Re: Next wave of market corrections?

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This just in from our Economics Specialist
Ha ha, was expecting a barbed response from FMF, but youve stolen his thunder now.

The longer version goes along the lines of: printing if USD = ccy devaluation of the dollar, so equity gains if any could be outweighed by ccy falls relative to the Swissy if that is your home ccy.

Oh plus the other thousand possible scenarios that we cant imagine.

History doesnt repeat but it rhymes...
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Old 01.06.2012, 20:00
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Re: Next wave of market corrections?

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Ha ha, was expecting a barbed response from FMF, but youve stolen his thunder now.

The longer version goes along the lines of: printing if USD = ccy devaluation of the dollar, so equity gains if any could be outweighed by ccy falls relative to the Swissy if that is your home ccy.

Oh plus the other thousand possible scenarios that we cant imagine.

History doesnt repeat but it rhymes...
Thats why you should hold only equities, with printy printy companies can put up their profits in line or faster than inflation. Shareholder will win as shares go up & so do dividends.
Markets like certanty, so will always go up & down, thats just noise.
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Old 01.06.2012, 21:03
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Re: Next wave of market corrections?

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Thats why you should hold only equities, with printy printy companies can put up their profits in line or faster than inflation. Shareholder will win as shares go up & so do dividends.
Markets like certanty, so will always go up & down, thats just noise.
Not so. You are describing the pass through rate of inflation which tends to be less than one as the consumer will switch to lower cost providers at some point, Lidl Aldi etc.

I believe the cause of the 09 equity rally was due to two related reasons: global coordinated response following the G20 summit as beforehand there was individual policy response. The printed money had to go somewhere. It was free money to hedge funds and traders and it went into assets. So for me it was a relief rally and it might not occur again this time round, cos yes, cliche time, this time it could be different.

I also refer you to Japan circa 1989 to the present day as a case where printing money hasnt exactly worked out.
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Old 01.06.2012, 21:11
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Re: Next wave of market corrections?

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Not so. You are describing the pass through rate of inflation which tends to be less than one as the consumer will switch to lower cost providers at some point, Lidl Aldi etc.

I believe the cause of the 09 equity rally was due to two related reasons: global coordinated response following the G20 summit as beforehand there was individual policy response. The printed money had to go somewhere. It was free money to hedge funds and traders and it went into assets. So for me it was a relief rally and it might not occur again this time round, cos yes, cliche time, this time it could be different.

I also refer you to Japan circa 1989 to the present day as a case where printing money hasnt exactly worked out.
Japan Equities were in a huge bubble with very high PE's, it's not surprising it has not worked out. Rather like FB IPO, the public is attracted to high prices.

09 rally due to oversold possitions, buy low sell high.....
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Old 01.06.2012, 21:13
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Re: Next wave of market corrections?

Partly agree there, though while I think about it the rise was not due to more E, just P.

The money did not go to consumers nor into the bottom line. I wouldnt put a lot of money on it again. Tell me what constitutes value for you.
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Old 01.06.2012, 21:43
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Re: Next wave of market corrections?

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Tell me what constitutes value for you.
The price I am paying for the future earnings, there will always be shocks & unexpected events, choose great companies that don't have to invest all there earnings to stay competitive like Airlines or car manufactures.
The ideal business can raise it's prices by at least the rate of inflation & the employees should not be unionised, which rules out Airlines & car manufactures yet again! I don't want any exposure to such companies, they can never be a good investment.

The best value stock I ever bought was in the late 1990's
http://uk.finance.yahoo.com/echarts?...rce=undefined;

Balance sheet had cash & stocks of 65p other assets 80p , generally traded between 50-60p daily volume 5000 shares, until Warbourg one of 3 market makers decided to stop being a market maker & dumped 4,000,000 shares. They dropped to 28p with a dividend of 4p.
Todays average volume only 11,000 shares however the price is over 1,000p

You really only need to find a few shares like that in your lifetime, my uncle died in 2001 owning 400,000 shares, his wifes advisors said she should sell as it was not a safe balanced portfolio, a very big mistake!

Last edited by fatmanfilms; 01.06.2012 at 21:58.
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Old 01.06.2012, 21:47
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Re: Next wave of market corrections?

Funnily enough, I concur on all of these points.

Quickest way to make a million dollars? Buy an airline for a billion.
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Old 01.06.2012, 21:51
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Re: Next wave of market corrections?

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Not so. You are describing the pass through rate of inflation which tends to be less than one as the consumer will switch to lower cost providers at some point, Lidl Aldi etc.

I believe the cause of the 09 equity rally was due to two related reasons: global coordinated response following the G20 summit as beforehand there was individual policy response. The printed money had to go somewhere. It was free money to hedge funds and traders and it went into assets. So for me it was a relief rally and it might not occur again this time round, cos yes, cliche time, this time it could be different.

I also refer you to Japan circa 1989 to the present day as a case where printing money hasnt exactly worked out.
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Japan Equities were in a huge bubble with very high PE's, it's not surprising it has not worked out. Rather like FB IPO, the public is attracted to high prices.

09 rally due to oversold possitions, buy low sell high.....
I don't work in Finance or Banking, I just buy stuff and the predictability about when I buy stuff is very important to me.

What I have learned in my time is that people who professionally sell or give advice in this kind of sphere are rubbish at it, and one can understand how bad they are at predicting the future when you witness that they often can't even agree on the analysis and causes of the past!

I went to a conference on oil pricing several years ago and sat through a day of macro and micro analysis and just before the end of the day - the big reveal was "We can now predict that the price of oil next year will be *drum roll* between $45 and $115 next year". WTF kind of use is that to anybody?

Similarly, one of the analysts covering my company predicts that our stock price will be between $45 and $80 by the end of the year. That's a variance around the mean of plus or minus 30%! If I get my buying wrong by 5%, I'd get fired. 10% and Wall Street would register it. 30% range plus or minus??? Do me a favour.

My point being......the market will do what the market will do and unless you have some utility to change it eg Merkel, the Greeks or Berkshire Hathaway, you're just guessing. Too many computers make too many automated decisions based upon technical and algorithms to guess what's going to happen next.
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Old 01.06.2012, 22:02
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Re: Next wave of market corrections?

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I don't work in Finance or Banking, I just buy stuff and the predictability about when I buy stuff is very important to me.
.
It's really that simple, get worried when all the analysts agree on something (FB for example) for sure they are all wrong!
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Old 01.06.2012, 22:30
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Re: Next wave of market corrections?

oh Lord... the talking heads on CNBC are all whining ... the Fed. the FED! the Fed has to do something!!

are we down to where the solution to every problem in the world now is for the Fed to print more money????
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Old 01.06.2012, 22:42
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Re: Next wave of market corrections?

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What I have learned in my time is that people who professionally sell or give advice in this kind of sphere are rubbish at it, and one can understand how bad they are at predicting the future when you witness that they often can't even agree on the analysis and causes of the past!

My point being......the market will do what the market will do and unless you have some utility to change it eg Merkel, the Greeks or Berkshire Hathaway, you're just guessing. Too many computers make too many automated decisions based upon technical and algorithms to guess what's going to happen next.
Lots to agree about with there. Those forecasts are typically given by the sell side. They dont actually put money on it themselves. Same with economist predictions. Some people however do quite well with calculating the odds though. Some hedge fund managers have been known to make a bit of money, but I dont know many that give their forecasts out.

Also agree with information advantage.

The good news is that you can still pretty much rely on the past in your favour as an individual, in as much it can help you avoid mistakes and take calculated risks.
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Old 01.06.2012, 22:44
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Re: Next wave of market corrections?

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oh Lord... the talking heads on CNBC are all whining ... the Fed. the FED! the Fed has to do something!!

are we down to where the solution to every problem in the world now is for the Fed to print more money????
They need the consumer to spend, which is what they would be willing to do quite happily. The problem is the transmission mechanism. The banks wont pass it on.

If the Fed gave me all the new dosh, I would happily spend it all for them. QED
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