Is the worst over or is it still to come

[Aaron]

I started buying shares based on broker recommendations around the market peak (Was it November 2008). After the crash and with share purchase plans and buying some more shares at the bottom I have a few gains but a whole lot of losses. My idea was to invest for the long term.
Reading some articles from the market oracle and the daily reckoning etc I can't help thinking that there is worse to come.
I have trouble selling my losses as I will crystalise them when I sell the shares but then again if there is worse to come I could always buy them back cheaper in a years time.
From reading i understand market timing is difficult at best but it could also be profitable if you get it right.

The question may have already been asked somewhere else in this forum but should I cut my losses and wait for the next bottom on the share market or is this really the beginning of a long slow recovery.

[RazorX]

If you are investing long term, no use selling every time the market goes down - you'll only lose money. If you are trading on the other hand you'd probably want a good stop loss strategy. My shares if the go wrong they suddenly become investments :). As long as the company is strong enough to stay afloat I'd keep them until the share market recovers.

(Disc - I'm not highly experienced in shares so don't take my word for it)

[peat]

$64 million question !!!!

personally I dont see how it can be over.... but in saying that look at the opportunities that have presented themselves over the last year , i think it pays to be flexible and to operate using sound asset allocation and money management techniques .
A clever investor like Phaedrus fully admits he has no idea what the future will bring he merely defines precisely how he will react to it when the signals are given.

[JBmurc]

personal I believe keeping up with the latest from the likes of -Marc Faber-Jim rogers-peter schiff-max keiser---on U-tube or their personal sites -these guys have called many positive an negative market moves over the last 30yrs an unlike 90% of the analyst on CNBC,BBC,ABS etc they get it right 90% of the time so IMHO worth listen to..

-the latest I watched from Marc Faber is very bearish long term USD ,DOW world SM's ,credit, bonds- neutral- sharemarket short term he is picking the DOW could go as high as 1150 before going down hard---he's Bullish-Gold,silver bullion -

-http://www.youtube.com/watch?v=lTj18PaTyiI

[skeet]

One way I try to look at my stocks if they are heading south

When a SP slump occurs I remind myself of the reasons why I bought a
stock in the first place. If the fundamentals haven't changed, I hold or continue to accumulate

Guess this applies more to a single sp slump than rather a market crash

[Brian]

I believe that economists and brokers are wrapped up in their own little worlds[ which are mainly dreamtime] they have advised me to buy and i have lost, they have advised me not to buy and i have lost. the capital gains are nice to have; but with the market at the moment dividends better than fixed interest are the way to go.
ANYBODY OUT THERE KNOW MORE THAN THAT???

[Dr_Who]

I believe that economists and brokers are wrapped up in their own little worlds[ which are mainly dreamtime] they have advised me to buy and i have lost, they have advised me not to buy and i have lost. the capital gains are nice to have; but with the market at the moment dividends better than fixed interest are the way to go.
ANYBODY OUT THERE KNOW MORE THAN THAT???

The numbers coming out of the US is looking good with a recovery. The numbers coming out of China and Aust is too good, so they have to put on the brakes. All this is a sign that the global economy is recovering. You will have to be very selective to make money as the market have already factored into some form of a recovery by putting on 60% in the last year.

[JBmurc]

The numbers coming out of the US is looking good with a recovery. The numbers coming out of China and Aust is too good, so they have to put on the brakes. All this is a sign that the global economy is recovering. You will have to be very selective to make money as the market have already factored into some form of a recovery by putting on 60% in the last year.

yeah going off CNBC an other major media sources your'd think world credit problems were all sorted an not going cause any problems sadly the fact is volumes in the markets aren't large either on the sellers or the buyers still DOW reaches a new high overnight so in the mean time things are all right.

The fact is the US,UK etc should be cutting back spending an paying off their debts instead they are ticking up trillion's to keep failed economic systems alive ..for a couple more months yrs who know's
but the fact is without the free money + low rates the world would be working through a major depression with bad businesses failing an good ones taking over with new future of better lower debt nation's

It's like a person having a business they doesn't make a profit year after year but has a major investor in the company that is also the bank loaning the money also the bank has a deal with the government for free money till the bank also start's making money this is happening all through the US an is the reason why the US has 13trillion in debt it can't pay back.
the current new US health care overhaul is going cost near on a trillion so TAX will increase on a nation that can't stop the debts increasing......

[JBmurc]

"Michael Pettis from Beijing University argues that China's reserves of $2.4 trillion - arguably $3 trillion - are a sign of weakness, not strength. Only twice before in modern history has a country amassed such a stash equal to 5pc-6pc of global GDP: the US in the 1920s, and Japan in the 1980s. Each time preceeded depression.

The reserves cannot be used internally to support China's economy. They are dead weight, beyond any level needed for macro-credibility. Indeed, they are the ultimate indictment of China's dysfunctional strategy, which is to buy $30bn to $40bn of foreign bonds every month to hold down the yuan, refusing to let the economy adjust to trade realities. The result is over-investment in plant, flooding the world with goods at wafer-thin export margins. China's over-capacity in steel is now greater than Europe's output."

[beacon]

"Michael Pettis from Beijing University argues that China's reserves of $2.4 trillion - arguably $3 trillion - are a sign of weakness, not strength. Only twice before in modern history has a country amassed such a stash equal to 5pc-6pc of global GDP: the US in the 1920s, and Japan in the 1980s. Each time preceeded depression.

The reserves cannot be used internally to support China's economy. They are dead weight, beyond any level needed for macro-credibility. "

I think they are wrong, China is making inroads into expanding its export markets. That will see their trade surplus as well as reserves plummet this year and next, followed by their exponential rise unless they can keep investing in third world countries. While the Gurus you follow keep blowing their "The end of world is nigh" horns, global political leaders seem to be working jointly to reflate assets and economy. While their solution may not be ideal, it is working. The US economy and world trade are recovering, and it is those who fail to see that these green shoots are strengthening that have got their "heads in sand" ...

[Dr_Who]

I do agree with you JB Murc in regards to the high debt level and the fact that most govt have a tendency to print too much money. This will be detrimental in the longer term for hyperinflation follow by a possible bigger crash. But in the meantime, we can enjoy the ride of the recovery thanks to the printing press. Just remember to hold some cash and get out before the party stops. The next crash will be the big one if global debt are not reduced significantly.

I have a different view in regards to China. I think the Chinese are maneuvering their economy perfectly. They have learnt from the trouble economies of Japan and Russia, not to let foreign powers intervene and not give in to pressure. The biggest concern with China right now is too much liquidity creating an internal asset bubble. They are in the process of queezing liquidity out of the system and slowing the engine down a notch. The main concern is that they slow it down too fast. I personally think that is not a concern. Unlike democratic society, the Chinese govt have the powers to make things move or not move very quickly.

[JBmurc]

I think they are wrong, China is making inroads into expanding its export markets. That will see their trade surplus as well as reserves plummet this year and next, followed by their exponential rise unless they can keep investing in third world countries. While the Gurus you follow keep blowing their "The end of world is nigh" horns, global political leaders seem to be working jointly to reflate assets and economy. While their solution may not be ideal, it is working. The US economy and world trade are recovering, and it is those who fail to see that these green shoots are strengthening that have got their "heads in sand" ...

The US economy has recovered because of the biggest increase in free money supply ever by the FED to the failed business models of the west.
An the Gurus I follow have got 90% of the predictions correct over the last 30yrs ---- sounds like your from the camp" it's different this time are world leaders are so much smarter"
I don't think the world is going end neither do any of the gurus I follow, they like myself are worried with the mass of easy money an huge debts that very few western countries seem to at all worry about(only recently had the US paid of all it's debt from Vietnam)
-the Total US Debt per Family is-$690,909 average pa income per US family-$61,968

Now if you take all household, corporate and government Debt to GDP Spain's debt ratio is 336.5% of GDP, a legacy of the credit binge that created the real-estate bubble and bust that is the root cause of the slump.

By comparison, the EU's total debt-to-GDP ratio is 258.2%, while it's 242.2% for the U.S. and 243.8% for Greece, according to ISI. (Greek consumers are relatively frugal, with household debt equal to just 61% of GDP, compared the American household debt of 95.7% of GDP.)

Please beacon explain to me how reflating assets and economy with even more debt is going help credit woes worldwide

worth to watch has the most important chart this century

http://click.icptrack.com/icp/relay.php?r=27242804&msgid=364022&act=8ZF0&c=258666&destination=http%3A%2F%2Flebed.biz%2Feconomicnewsu pdate03232010.html

[Phaedrus]

Is the worst over or is it still to come? Is this really the beginning of a long slow recovery?Everyone has their own theory, but the reality is that no-one knows. No-one


I started buying shares based on broker recommendations around the market peak.You are learning the hard way - just as most of us here did. Forget brokers - you are on your own in this and the sooner you realise that the better.


I have trouble selling my losses as I will crystalise them when I sell the sharesA loss is a loss - whether it is crystalised or not. We all make mistakes. The trick is to recognise them as soon as possible and quit them. If you don't take small losses, you WILL take big ones. Let your winners run and cut your losers.


I can't help thinking that there is worse to come.You would not be alone in this, but look at what is happening right now. Markets are rising. This is a time to be in, not sitting on the sidelines waiting for a bottom that may not eventuate. There are people right here on ST that have missed out on this magnificent rally because they (not unreasonably) think there may be worse to come.


Should I cut my losses and wait for the next bottom on the share market?Are any of the stocks you are holding not rising with the general market? Sell them and buy something that is.


I understand market timing is difficult at best but it could also be profitable if you get it right.Aaron, you can't get it "right". Fortunately, you don't have to. All you have to do is be on the right side of major moves. Make sure you are in on the big moves up, and out of the big moves down. This is not complex or difficult to achieve and there are many ST threads devoted to this subject.

[beacon]

The US economy has recovered because of the biggest increase in free money supply ever by the FED to the failed business models of the west.


So you agree that things are getting better. I had the impression these "experts" kept harping about how we need to get into underground bunkers NOW. We were told to expect a W shaped recovery, and that only buying Bullion would be saviour. Maybe I misinterpreted these noble well-meaning 90% success track record Gurus as messengers of doom and gloom.


sounds like your from the camp" it's different this time are world leaders are so much smarter"


I am from the camp "Good to see the movers and shakers working together to tackle a crisis made global as well as worse by media". I hope we have learnt something from our past mistakes


the Total US Debt per Family is-$690,909 average pa income per US family-$61,968 ....


That seems inconsistent with your later statistics "debt-to-GDP ratio is 242.2% for the U.S." and "American household debt is 95.7% of GDP" but I generally agree that the western world is staring at the aftermath of its credit binge. So, what solution would you propose to rectify this situation?


Please beacon explain to me how reflating assets and economy with even more debt is going help credit woes worldwide


Rather than providing explanations, which are easily dismissed as speculation and theories, I'll point you to a factual observation. The sharemarkets across the globe rallied in the last 12 months. What do you think a rallying capital market does to ease credit flows? If you must still have an explanation, here's one you offered in the same post you posed this question "US economy has recovered because of the biggest increase in free money supply ever by the FED"

[Aaron]

Which are the threads that discuss whether the next major moves are up or down.
I guess I am tending to believe the next swing is down due to private sector debt problems in the US & UK (western world) causing the last big drop and the solution to this problem being governments taking over this debt and creating more debt and running deficits and printing money to prop things up. It doesn't sound like a long term solution to over consumption based on an increasing spiral of asset price inflation pushed up by increasing debt resulting in increasing asset prices etc.
I would have thought asset deflation and debt reduction would be the answer but I guess the US needs inflation to make their debts relatively smaller over time.
I have to admit I have no clue as to how the global economy and money supply work but I will stick to reading a lot of different opinions and try and make up my own mind.

[Phaedrus]

Which are the threads that discuss whether the next major moves are up or down?Wrong question. Any such threads must of course be no more than pure speculation. What you need is threads that discuss what the market is doing right now. Apart from the fact that it is impossible to predict the future, there is no need to even attempt it. All you have to do is make sure that you are positioned appropriately within the current market.

[Aaron]

How can you position yourself within the current market if you aren't looking to the future. No-one can see the future but you can form an opinion based on what you read and hear. Wouldn't I be appropriately placed sitting on the fence waiting for the next possible/likely fall within the next 12 months. I am guessing you trade and follow shares regularly so would be in or out quickly if there are any big swings up or down. I don't follow the markets daily and am hoping to be a long term investor buying good companies at the right price. Although the stockbrokers providing me that advice would appear to have been a little too optimistic two years ago. If I thought some sort of crisis might trigger an overall market fall like we have seen i could be buying in 10-50% cheaper in twelve months than now. I could be wrong and the recovery is well under way. probably in twelve months time I will lose patience or panick and buy at the next peak but I can't help thinking if the GFC was the worst financial event since the great depression it won't play out in the exact same way due to governments actions but those actions as I understand it were radical and large its quite possible no one really knows what ongoing changes it will create but theres a good chance it will spook everyone and send prices down in the near future.

[Phaedrus]

How can you position yourself within the current market if you aren't looking to the future? By making sure that you are in the market when it is rising and out when it is falling. You don't know what the future holds, and you don't need to. Your actions simply need to be in synch with the market. The only certainty is that uptrends (and downtrends) do not last for ever.


No-one can see the future but you can form an opinion based on what you read and hear. Sure you can - but it is not necessary to have such an opinion in order to invest profitably. What I am describing here is a reactive approach rather than a predictive one.


Wouldn't I be appropriately placed sitting on the fence waiting for the next possible/likely fall within the next 12 months? There are times when sitting on the fence really is the best place to be - when the market is falling, for example. There are also advantages in fence-sitting if the market has no clear trend..


I am guessing you trade and follow shares regularly so would be in or out quickly if there are any big swings up or down. In NZ, my activities would be best described as those of an "active investor". I buy NZ stocks for their high dividend yields and hold them for periods ranging from months to many years. I trade other markets more actively.


I don't follow the markets daily and am hoping to be a long term investor buying good companies at the right price. Buying at the "right price" is not enough. You want to be buying at the right time too. That would be when the stock has fallen and then started to rise again.You don't have to follow the market daily to identify the best time to buy. A quick look once every week or so should be quite sufficient.


The stockbrokers providing me that advice would appear to have been a little too optimistic two years ago. This is an example of badly mistimed entries. There may well have been nothing fundamentally wrong with the recommendations you were getting - what was wrong was the abysmal timing. Two years ago the NZSX50 was in a very clear well defined downtrend - no time to be buying anything.

The attached NZSX50 chart shows how simply a market can be monitored. It features 3 indicators - trendlines, a moving average and an oscillator. You can see that these all kept you in the market for 5 years when it was rising and got you out as soon as the uptrend weakened and before the market had fallen very far. Similarly, they signalled when to re-enter the market. These are by way of illustration only and are only a very small selection from many indicators that did esssentially the same thing. There are entire threads are devoted to this topic, such as this (http://www.sharetrader.co.nz/showthread.php?5149) one.

http://i602.photobucket.com/albums/tt102/PhaedrusPB/NZSX324.gif

[Aaron]

Thanks for the information. About the chart. The NZSX50 Index chart is the value of the 50 largest companies on the NZ exchange. I guess this is number of shares times market price of shares somehow weighted to form the NZSX50. The top graph I am not sure about what is this. Is it the volume of shares being traded with 100 being the average daily transactions.

I would have thought volume would increase as the decline increases as everyone tries to sell out but I guess if its the value of the trades rather than the quantity of shares it would decline as prices plummet.

Where would you get charts like this from. Do you rely solely on technical analysis for your trading or do you also use fundamental analysis when choosing a company to invest in.

[Phaedrus]

The top graph - I am not sure about what is this. Is it the volume of shares being traded with 100 being the average daily transactions?It is the Momentum Oscillator. The momentum of a security is the ratio of today's price compared to the price x-time periods ago.


Where would you get charts like this from?Mine are prepared using MetaStock software, but most any charting package can produce charts like these.


Do you rely solely on technical analysis for your trading or do you also use fundamental analysis when choosing a company to invest in?In NZ I generally use fundamental analysis to select companies to invest in, using TA to time all entries and exits.

[Aaron]

Today could be the beginning of the next leg down. The news reports say Greece could be in a prolonged recession/depression reducing its debt. If the US, UK and other EU countries are in the same boat wouldn't that mean this fall has some way to go and company earnings expectations will need to be revised down. Reading the papers China may be due for a slow down as well. Can India and Brazil etc keep the world moving?
For the future will we have inflation or deflation. High interest rates or low interest rates.
Phaedrus the momentum oscillator in your graph above. I am guessing it says sell. Can you tell me when it says buy again. I need someone to ring a bell at the bottom so i can buy companies again.

[Stranger_Danger]

A bell at the bottom? You realise the sharemarket isn't WINZ, right?

[Aaron]

You mean Work & Income? They are the safety net at the bottom if you get wiped out with bad timing. (I don't fully believe its "time in the market") they are not the bell indicating when the sharemarket has reached the bottom.

See the graph Phaedrus provided further up this thread. Its not the exact bottom or top but its pretty impressive if he bailed out and bought back in at those trigger points.
I would be described as a "Mum & Dad" investor by the media. Pretty unsophiscated and relying on stockbrokers and other experts.

My gut feeling is there is still a long way down to go. In the last crash I bought in on the way down and it was only all the discounted rights issues that I bought into that reduced the size of my losses. I am now waiting on the sidelines until I think we are somewhere near the bottom then my plan is to be a long term investor again.
The problem is that no one knows where the bottom is. Phaedrus doesn't either but he does have an idea when he would buy back in. Although his prediction in another thread re the NZX50 was pretty bold. Have to wait and see how that turns out.

[Aaron]

I would be interested in peoples opinions for the next 12-24 months.

1/ NZX, ASX and S&P 500. Will there be a big crash to test the March 2009 bottom. (From what I read I think markets will drop close the March lows sometime before the end of the year. This is based on governments taxing more and spending less to finally address the debt problem. This will affect economic growth and company profits)

2/ Interest rates are going up (Fast for Greek bonds and SCF debentures). If banks aren't lending then companies will need to issue bonds/debentures and will need to compete for investors improving future yields. (This will also negatively affect shares as bond yields get more attractive and less risk as they take priority over shares if the company craps out)
If I understand things correctly the US will want interest rates low to encourage inflation to inflate some of their debt away.)

3/ Inflation/deflation what is going to happen here (I am obviously picking asset deflation for shares and maybe NZ & Aussie houses short term) but if there is tonnes more money in the system won't this automatically cause inflation.

What does the next two years hold and what should I invest in. I think I'm too late for precious metals (gold) and don't know where to go to invest in gold anyway.

[shasta]

I would be interested in peoples opinions for the next 12-24 months.

1/ NZX, ASX and S&P 500. Will there be a big crash to test the March 2009 bottom. (From what I read I think markets will drop close the March lows sometime before the end of the year. This is based on governments taxing more and spending less to finally address the debt problem. This will affect economic growth and company profits)

2/ Interest rates are going up (Fast for Greek bonds and SCF debentures). If banks aren't lending then companies will need to issue bonds/debentures and will need to compete for investors improving future yields. (This will also negatively affect shares as bond yields get more attractive and less risk as they take priority over shares if the company craps out)
If I understand things correctly the US will want interest rates low to encourage inflation to inflate some of their debt away.)

3/ Inflation/deflation what is going to happen here (I am obviously picking asset deflation for shares and maybe NZ & Aussie houses short term) but if there is tonnes more money in the system won't this automatically cause inflation.

What does the next two years hold and what should I invest in. I think I'm too late for precious metals (gold) and don't know where to go to invest in gold anyway.

1. Probably a correction coming, especially if the European debt issues keep getting worse (& if the US keeps printing money), over next 2 years i'm guessing things may go sideways for a while, mini rallies, followed by drop offs, sorry to sit on the fence, but who really knows?

2. NZ is at the bottom of the interest rate/inflation cycle at the moment, as the economy improves the interest rates will rise, which will affect property & lastly wages before inflation rears its ugly head again, those leveraged may get caught at the top of the market, whereas those freehold will gain yet again.

3. Deflation is more likely in the present environment, long term inflation will return, with increased interest rates etc

4. As for investing in precious metals, Gold has had a good run, but all the debt fears in the USA & Europe is only helping surge the move into Gold, with India & China buying Gold, it does seem to be heading higher in the short term, over the next 2 years i do think we will see new highs, but with periods of stability & moving sideways. I still favour Silver & over the next 2 years, other precious metals like Platinum.

Buying Gold, u can do it a few ways

1. Buy the physical stuff, bullion, coins etc from the likes of Perth Mint
2. Buy GOLD:ASX which is equivalent to 1/10th of an oz
3. Buy into Gold ETF's, like Perth Mint ASX:ZAUWBA
4. Buy Gold stocks, producers, near term producers, or explorers (personally i like GDO, TRY, CXC, SLR & ARD for Gold/Silver)

[Aaron]

Everything seems much more optimistic these last couple of days. Maybe the next big leg down won't happen and I should stop reading pessimistic views.
What does anyone else think. Big Crash in China to come. US money creation causing hyperinflation? A long slow recovery with some ups and downs.
I don't know if Phaedrus is still around to advise but based on the chart he provided in this thread I think that Based on my chart in incredible charts (which I don't know how to show here) The 120 day moving average has broken the share price line and the 150 days "momentum daily" has broken through 0 so I should be buying at this stage and then working out an exit strategy if things turn down.

Phaedrus the momentum daily doesn't show the same scale as yours and I have assumed 150days what does the other number next to the 150 represent in your chart.
Sorry still haven't applied myself to study. I bought and read the book you recommended but need to go back over it and really try to understand what I am looking at.

[Phaedrus]

Everything seems much more optimistic these last couple of days.Of course it does - the market is rising!


Maybe the next big leg down won't happen... It will happen. We just don't know when, that's all. That's why it is important to monitor the overall situation.


What does anyone else think?Who cares what anyone else thinks? There will always be pessimists and optimists. What the overall market thinks is all that matters.


I should be buying at this stage and then working out an exit strategy if things turn down.You should have an exit strategy in place before you buy. It needs to be set before you become emotionally involved with the stock.


What does the other momentum daily number next to the 150 represent in your chart?It is the value of a moving average applied to the base indicator in order to smooth out minor fluctuations.

Aaron, don't base major decisions on any single indicator - you are looking for a broad consensus here. The following chart should demonstrate that choice of indicator and indicator parameters is not crucial - they are all telling the same story, more or less.

http://i602.photobucket.com/albums/tt102/PhaedrusPB/NZSX97.gif

[belgarion]

The squigley line goes green! Buy people buy. ...

[JBmurc]

The squigley line goes green! Buy people buy. ...

yep till next week-- sell sell the line looks grey ---yes IRD I am a trader I will pay tax

[Aaron]

Nearly two years and still waiting for the worst to come.
My question is I use ASB Securities and have money in my cash management account earning .5% waiting for the big crash that may never come.
I want to be able to quickly buy shares if there is a major fall or if I think markets have overreacted to some news on a company.
Is there any savings account or otherwise where I could park my money at a better rate but have it available at the drop of a hat. Term Deposits aren't much good as I want to have access to the funds quickly. Any ideas.

[peat]

i wouldnt think that its worth sacrificing 3 % just for instant liquidity. Rabo will give you 3.4% for cash and you can access it within a day by transferring it out to your nominated trading bank account. Crashes do happen fast but imo not so fast that you need to have the money in the brokers account losing all the yield.

[777]

Nearly two years and still waiting for the worst to come.
My question is I use ASB Securities and have money in my cash management account earning .5% waiting for the big crash that may never come.
I want to be able to quickly buy shares if there is a major fall or if I think markets have overreacted to some news on a company.
Is there any savings account or otherwise where I could park my money at a better rate but have it available at the drop of a hat. Term Deposits aren't much good as I want to have access to the funds quickly. Any ideas.

Direct Broking pay 2.8% on broking account and it is a PIE account.

[POSSUM THE CAT]

Aaron Change your broker have a look at Direct Broking's accounts

[Aaron]

Thanks for the advice. I think I'll try the Rabobank Call Account. Hopefully they are not one of the European banks about to get into trouble. They do have the highest credit rating of any bank in NZ last time I looked. I think the Direct Broking fees are similar so will stick with ASB for now.