Bear.asx

[Daytr]

+1 for cash. I don't think we're out of the woods yet by any stretch of the imagination. Airlines now being priced like Ebola is suddenly completely beaten as a threat is one example of how irrational the current market seems to have become.

I agree, I think we are likely to see large swings back & forth in equity indices for some time. Its a reflection of US markets in particular getting ahead of themselves in regards valuation vs the economy & the huge amounts of cash on the sidelines that will act as a cushion. DOW for instance looks very toppy above 17k & I'm wondering if it will actually make it back above on this attempt as its been a great short & I think some of the market is waiting to short again. As such I have gone early & shorted the DOW this morning.

I have read a bit of chat of the US economy vs Europe & basically US hedge funds talking of a general short against Europe vs the US. You just have to know this is how they are positioned already & wanting the retail market to carry the load for them. I don't buy it, if anything with the rising USD we may see a bounce in Europe vs the US shortly. Where does that leave the ASX? You certainly can't get too bullish on it that's for sure.

http://www.bloomberg.com/news/2014-1...priced-in.html


Interestin

[Beagle]

Thanks for the link Daytr. We certainly live in interesting times. If we look at the average projected earnings for 2015 the S&P500 at about 17 times doesn't look expensive compared to historical average and most certainly not in the context of record low interest rates and super low bond yields forcing investors into equities. DOW does look a bit toppy but maybe you've gone a bit early with your short, only time will tell.

Anyone's guess where too from here. Europe looks vulnerable to further geopolitical influences with the DAX down about 10% from its recent high I'd say there could be more to come as Russia continues to paint itself into what appears to be an increasingly intransigent position that's affecting other European economies. How the economic effects of Ebola play out is another wild card with no forward clarity whatsoever.

[Daytr]

No but it looks expensive in comparison to the economic back drop & what is a pretty anemic recovery in the US.
The participation rate in employment is a good indicator of that as is actual wages.
Zero interest rates should actually lower rate of return expectations, hence valuation expectations shouldn't be what they have been historically & I think that is something the market is going to have get used to.
Yep stopped myself out pretty sharply yesterday on my short the DOW, but will see what comes tonight with the FED I suppose.
I suspect we will see another reasonable pull back in US equities at least in the coming days / week.

[noodles]

Wow, did you see the volume that has been going through this thing this week? Looks as though the last run was indeed a practice run, this could be the real thing

You don't think the Chinese rate cut will send the BEAR into hibernation for a couple of days at least?

[Daytr]

KW, rate cut signals that China is in a bigger mess than people thought. Really? Not saying that China is by any means perfect & the lack of transparency means its difficult to know what is going on, including if its in a bigger mess than people thought. One thing, China is buying, everything and they have a massive government surplus, something most 1st world economies only dream about. China is making massive changes in the way it does things, particularly in the area of electricity generation, that will make them far more efficient and pollute less. One program of work installing high voltage power cable will save the consuming 150M tons of coal a year! So yes Australia is going to suffer, however its due to stupid over investment in gas, coal & iron ore & massive increases in production than weakness in China. I was involved in some of the deals to finance the massive gas projects as a commodity specialist. I highlighted four years ago that Australia hasn't the only one expanding its gas production dramatically & that there would be a gas glut with all these projects coming on stream at once. Everyone said its ok there are supply contracts in place, the only issue is they may have a contract, but its benchmarked to the Brent price & last I looked that was down over 30%!

[BlackPeter]

OPEC are doing to the gas industry what RIO/BHP are doing to iron ore. Flooding the market, pushing the price lower, in order to drive out competitors. It would be good for the Australian manufacturing industy, if only they had one left LOL

interesting ... the question is, how long are the currently low oil prices going to continue? Most shale oil production is uneconomical below US$80 per barrel, but to flush these competitors out, they need to keep the oil price down for years. Lots of things can happen during that time: world economy improving due to low oil price and increase the oil consumption, ISIL managing to set some oil fields on fire, embargo of Russian oil and gas (getting the price up for the reminder, ...). So I think we should enjoy the low oil prices as long as they are around, but I wouldn't bank on them staying that low.

[Daytr]

Its not OPEC, its the US & Canada they are the ones that have increased production of oil & they burn off an estimated billion bucks of gas a day or week or something as its not worth capturing. OPEC can easily out produce the US in a low price environment, so yes in that regard you are correct. And then there is Russian gas & you can damn well betchya Russia is selling oil directly to China.

[BFG]

I can hear a grinning cheshire cat in the background today...

ASX looking very sick today. Lower high confirmed and we are almost back to the bottom of the last leg down. Looks like correction time is confirmed and it's time to start viewing Oz as a sick man!

[Toulouse - Luzern]

[QUOTE=KW;520208] "Well its better late to the party than to never arrive at all. Hope you have been acting on sell signals in the last few weeks. And continue to do so over the next few weeks. "


Thanks KW for your posts over the years and the views you have shared.

You have been right on this call, as with many others.

Even with last weeks oil price fall and the heavy hits to Santos (STO) on Friday I was not expecting quite so much more of the same today.

The ASX200 is currently down 1.6%, and the Energy sector is down the most at -6.3% and Materials -4.4%.

STO is down another 8.9%, and others are down as well: AWE 10.9%, DLS 8.8%, LNG 23.5%, SXY 9.7%, PDN 12%, WOR 11.3% and WPL 4.8%.

All of the Indices are down except A-REIT that is plus .3%.

With such an across the board markdown it does not look great in the short term

I was lucky, I didn't like what I was seeing and exited the ASX the first week in August.

At some point in the future the contrarians may come into play again and the big question is when.

Thanks and regards

[Beagle]

interesting ... the question is, how long are the currently low oil prices going to continue? Most shale oil production is uneconomical below US$80 per barrel, but to flush these competitors out, they need to keep the oil price down for years. Lots of things can happen during that time: world economy improving due to low oil price and increase the oil consumption, ISIL managing to set some oil fields on fire, embargo of Russian oil and gas (getting the price up for the reminder, ...). So I think we should enjoy the low oil prices as long as they are around, but I wouldn't bank on them staying that low.

Fair bit of debate and conjecture over the weekend on CNBC on the point you've mentioned and nobody seems to know exact numbers.
From what I could gather watching a number of commentators outlining their views on the subject there seemed to be some very loose consensus around
1. If WTI stays consistently below $80 there will be a definite impact upon new investment
2. Cash cost is somewhere around $60 per barrel as a broad average for the sector.

What's motivating the Saudi's ? I'd suggest they're just defending their market position. Russia and other producers took an obstinate position when it came to the pre-market meeting they had with selected Opec members. The Saudi's are reported to be in a superb cash position to ride out a protracted period of weakness and they probably thought if others are going to be obstinate and unhelpful, we don't have to do the heavy lifting on reducing output so why should we ? A lot of market commentators seem to be talking about oil in the $60 range for quite some time, perhaps years. Pretty sad that this is sticking it right up the Russians isn't it