Black Monday

[Beagle]

No question about it mate, we live in very interesting times. I think one of the big wild cards is Putin. What happens when Russia's reserves run out ? Does he get more reasonable or does he start some more conflict or dramatically escalate the Ukraine situation ?

[skid]

No question about it mate, we live in very interesting times. I think one of the big wild cards is Putin. What happens when Russia's reserves run out ? Does he get more reasonable or does he start some more conflict or dramatically escalate the Ukraine situation ?

Or more action in Syria or Turkey--Some reckon if they manage to upset the oil producers enough it could help create more of a shortage.

[stoploss]

Or more action in Syria or Turkey--Some reckon if they manage to upset the oil producers enough it could help create more of a shortage.
"more of a shortage " arguably there has never been so much oil on the market , what is the shortage you are talking about ?

[Baa_Baa]

It seems pretty obvious at the moment, firstly China and the Asia's get the collywobbles then the globals decide how to react. Today China got some sideways and the US futures are currently dropping off the cliff. However it ends up tomorrow, up or down, NZX tends to follow. Looks like a DCB at the moment, but looks can be deceiving.

[skid]

"more of a shortage " arguably there has never been so much oil on the market , what is the shortage you are talking about ?

Didnt mean to imply there was a shortage--poor use of words, should have said slow the glut,or stop the blood--they are in trouble economically ,but do have a mighty military--Now China is involved in the politics of oil---Russia-US-China...the big three (according to a documentary on the ''seven sisters''---It was very interesting how at one stage the US convinced its ally (saudies) to flood the market,which brought down the economy of the USSR (totally oil dependant),and the country--Now there is only 1 real superpower (scary)

[skid]

It seems pretty obvious at the moment, firstly China and the Asia's get the collywobbles then the globals decide how to react. Today China got some sideways and the US futures are currently dropping off the cliff. However it ends up tomorrow, up or down, NZX tends to follow. Looks like a DCB at the moment, but looks can be deceiving.

Nothing seems to stop the market ''darlings'' though atm (AIR-ATM)

[dobby41]

How much does the Shanghai stock market matter given that few people actually participate (<6% of the population) and it is retail (sentiment) based.
It is also more akin to a casino than a share market.

[skid]

How much does the Shanghai stock market matter given that few people actually participate (<6% of the population) and it is retail (sentiment) based.
It is also more akin to a casino than a share market.

There are lots of things ,when you sit down and think about it ,that dont seem to make complete sense--But the Shanghai stock market certainly does seem to matter---Its the NZX that doesnt matter....well, except to us..(and that aint to many of NZs tiny population)

[Baa_Baa]

There are lots of things ,when you sit down and think about it ,that dont seem to make complete sense--But the Shanghai stock market certainly does seem to matter---Its the NZX that doesnt matter....well, except to us..(and that aint to many of NZs tiny population)

NZX is looking like a safe haven compared to international equities markets! And there is a lot of big international money here, I wouldn't know the %'ages but I'd guess us retail investors are a very small proportion. When the big players want their profits, perhaps to cover other market losses, we could see some angst here.

Meanwhile Shanghai continues to fall and US futures are down as well (at time of post). Look up the NYSE Composite Index, a compilation of all NYSE stocks and it is a far more grim picture than DOW or SP500, or even Russell2000. At some stage this will revert but in the meantime NZX relative strength looks less and less robust against the carnage going on internationally.

[skid]

How much does the Shanghai stock market matter given that few people actually participate (<6% of the population) and it is retail (sentiment) based.
It is also more akin to a casino than a share market.

Looks like you are going to have a chance to find out Dobby--Its been walloped over 6.5% down--we will see how this affects Europe and USA

[Baa_Baa]

Looks like you are going to have a chance to find out Dobby--Its been walloped over 6.5% down--we will see how this affects Europe and USA

Yep, Shanghai seems only a few short steps away from some sort of capitulation, I'm picking 2400 or thereabouts will eventuate soon enough.

A lens into the future is easy, all the major indices trade futures, you can see them here http://www.investing.com/charts/real-time-futures-charts .. in real time, if inclined. US and Europe down as well so far.

Like you say, we'll see how that flows into the NZX tomorrow, but on recent evidence, it'll be a red day.

[xafalcon]

Looks like you are going to have a chance to find out Dobby--Its been walloped over 6.5% down--we will see how this affects Europe and USA

I think the market participants have forgotten who is leading who in this sheep race to who knows where.

Did China fall because US fell the previous night? Will European stocks follow China and fall as well? Will that then cause US market to fall? How will that feed through into China tomorrow? And so it goes on.

Or will US market find some good news and rally strongly? Will China follow this lead and rally as well? How would that feed through into European markets - a rally as well?

I don't hold out any hope that European markets will be anything other than followers for the foreseeable future, their collective economies are stunted until they reform their labour markets

FFS this is getting STUPID. USA "claims" to be growing strongly and back to "full employment" later this year. China government has reassured the world they will settle their market. China economy grew at a faster rate last year than they grew a year prior, despite all the rubbish analysis trying to prove the opposite. Cheap oil is a growth accelerator for most of the world. So fundamentals are theoretically improving, but traders just aren't buying into it

Meanwhile offshore market volatility is getting insane, and will infect the NZX at some point

I'm thinking it may be time to think about pulling up stumps and waiting for the dust to settle

[Baa_Baa]

I think the market participants have forgotten who is leading who in this sheep race to who knows where.

Did China fall because US fell the previous night? Will European stocks follow China and fall as well? Will that then cause US market to fall? How will that feed through into China tomorrow? And so it goes on.

Or will US market find some good news and rally strongly? Will China follow this lead and rally as well? How would that feed through into European markets - a rally as well?

I don't hold out any hope that European markets will be anything other than followers for the foreseeable future, their collective economies are stunted until they reform their labour markets

FFS this is getting STUPID. USA "claims" to be growing strongly and back to "full employment" later this year. China government has reassured the world they will settle their market. China economy grew at a faster rate last year than they grew a year prior, despite all the rubbish analysis trying to prove the opposite. Cheap oil is a growth accelerator for most of the world. So fundamentals are theoretically improving, but traders just aren't buying into it

Meanwhile offshore market volatility is getting insane, and will infect the NZX at some point

I'm thinking it may be time to think about pulling up stumps and waiting for the dust to settle

@xafalcon, sometimes it's better and easier not to try an rationalise the why's and wherefore's and just focus on the now. Markets are connected, they tend to follow a theme until they don't. It might not be rational, it might not even be sensible, it may be WTF or FFS, but who cares, we can only focus on what we have right now and whether we should protect it, or put it at risk for growth or income. Live in the now and don't question or wonder about the reasons why it all happens, it's a lot easier on the mind and a lot more profitable.

[bull....]

Looks like you are going to have a chance to find out Dobby--Its been walloped over 6.5% down--we will see how this affects Europe and USA

don't think Europe and us care about the china fall , after china closed the futures started to rally and havnt looked back currently nicely up - lets hope the fed tomorrow says soothing words calm things down

[skid]

don't think Europe and us care about the china fall , after china closed the futures started to rally and havnt looked back currently nicely up - lets hope the fed tomorrow says soothing words calm things down

Yep,its looking like Oil trumps all(geez I hope that wasnt a pun):)

(and as far as firepower people still look to the US)

Has the oil started flowing from Iran yet?

cant help to think Oil is still king and all the powers are just using this drop to adjust their stratigic power play

[bull....]

Yep,its looking like Oil trumps all(geez I hope that wasnt a pun):)

(and as far as firepower people still look to the US)

Has the oil started flowing from Iran yet?

cant help to think Oil is still king and all the powers are just using this drop to adjust their stratigic power play

the equity selling could be oil sovereign funds selling to raise cash? Saudi even selling there assets now

[BIRMANBOY]

Zen Baa Baa is always in the now.https://dropstitchknitter.files.wordpress.com/2014/07/tangled-yoga-ewe-web.jpg (https://www.google.co.nz/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwixiemLpsjKAhVJJZQKHdcyBvMQjRwIBw&url=https%3A%2F%2Fdropstitchknitter.wordpress.com% 2F2014%2F07%2Fpage%2F2%2F&psig=AFQjCNEsK6Bn-AphtJnCLeTS041exH9uNQ&ust=1453925870922249)

@xafalcon, sometimes it's better and easier not to try an rationalise the why's and wherefore's and just focus on the now. Markets are connected, they tend to follow a theme until they don't. It might not be rational, it might not even be sensible, it may be WTF or FFS, but who cares, we can only focus on what we have right now and whether we should protect it, or put it at risk for growth or income. Live in the now and don't question or wonder about the reasons why it all happens, it's a lot easier on the mind and a lot more profitable.

[xafalcon]

@xafalcon, sometimes it's better and easier not to try an rationalise the why's and wherefore's and just focus on the now. Markets are connected, they tend to follow a theme until they don't. It might not be rational, it might not even be sensible, it may be WTF or FFS, but who cares, we can only focus on what we have right now and whether we should protect it, or put it at risk for growth or income. Live in the now and don't question or wonder about the reasons why it all happens, it's a lot easier on the mind and a lot more profitable.

I hear what you are saying. But I do not want to count myself as being part of the NZ (or global) flock of sheep. If I did, I would not manage my own share portfolio, I would get a fund manager to do this for me

Before I invest, I do my own research, I listen to people's differing views, try and understand why there are different perspectives on the same data set. Then I make my own decision. That way I have sole responsibility for outcome, good or bad.

I am developing the feeling that contagion is now the biggest risk to NZX. And that is why I am considering a temporary exit.

[skid]

@xafalcon, sometimes it's better and easier not to try an rationalise the why's and wherefore's and just focus on the now. Markets are connected, they tend to follow a theme until they don't. It might not be rational, it might not even be sensible, it may be WTF or FFS, but who cares, we can only focus on what we have right now and whether we should protect it, or put it at risk for growth or income. Live in the now and don't question or wonder about the reasons why it all happens, it's a lot easier on the mind and a lot more profitable.

As with everything its complicated--living in the now is the best way to live ones life,as free of attachments as possible--but sometimes with the markets its good to look at the reasons and try to have a bit of foresight.(right now it seems to be oil)(cheap oil is an accelerator,but it can also destroy countries who depend on it)we are at an extreme,on the low end so theres turmoil ,IMO $50 -80 would be more stable.
But if your invested in the NZX in a successful stock(s) then the now is good. If your sitting on profits then let them ride,but only till the tide turns(there are different ways to achieve this-thus the big debate between TA and FA)
There are times when pulling up stumps is a good thing,if for no other reason than peace of mind until the volatility levels out--theres no easy answers--we only see these things for sure in hindsight (NZ is not in a bear market at this point ,if thats any help)

In a nutshell-the world markets are very uncertain atm,but NZ has been relatively insulated so far,but we are in a world of globalization so everything is interconnected to a certain extent.


for me ,its fun to watch this unravel (but my life savings is not tied up in it)

ps-youve obviously done some research,so if Ive patronized it was not intentional--good luck

(not a bad day on the Dow)

[Beagle]

I am curious...not intended as a dig at anyone that's gone to a huge holding in cash. What are you going to do if it really looks like the global economy has hit the skids and banks are coming under extreme pressure ? How are you planning to handle the RBNZ's open bank resolution ? I think its well worth having a good discussion about that. Open an Aussie Govt guaranteed bank account ? Who's to say they won't pass legislation under urgency so the guarantee only applies to Australian residents ? Cash under the mattress, gold or silver coins...what are you going to do ? Disc, I already have a small allocation to physical silver bullion and it's been a horrible "investment"

[xafalcon]

I am curious...not intended as a dig at anyone that's gone to a huge holding in cash. What are you going to do if it really looks like the global economy has hit the skids and banks are coming under extreme pressure ? How are you planning to handle the RBNZ's open bank resolution ? I think its well worth having a good discussion about that. Open an Aussie Govt guaranteed bank account ? Who's to say they won't pass legislation under urgency so the guarantee only applies to Australian residents ? Cash under the mattress, gold or silver coins...what are you going to do ? Disc, I already have a small allocation to physical silver bullion and it's been a horrible "investment"

I'll buy more rental properties (in / around Hamilton). Property has been my best performing investment, period. I don't see this ever changing. I'm investing in sharemarket to diversify, but dividend returns are becoming more questionable with high level of SP volatility, rising contagion risk (IMO) and current investor sheep mentality

[Schrodinger]

I am curious...not intended as a dig at anyone that's gone to a huge holding in cash. What are you going to do if it really looks like the global economy has hit the skids and banks are coming under extreme pressure ? How are you planning to handle the RBNZ's open bank resolution ? I think its well worth having a good discussion about that. Open an Aussie Govt guaranteed bank account ? Who's to say they won't pass legislation under urgency so the guarantee only applies to Australian residents ? Cash under the mattress, gold or silver coins...what are you going to do ? Disc, I already have a small allocation to physical silver bullion and it's been a horrible "investment"

This is a good point. Correct me if I am wrong, but I think they can take your cash (stop you accessing it) if there is a run on the banks. Similar to what they did in Greece. So in effect cash is not what it used to be.

Makes you wonder for all those too big to fail sectors (housing/banking etc) the Government will step in and act. If you look at the behaviour during then GFC around deposit guarantees and a temporary hold on mortgage payments - relax on repayments (Australia) then its a sure thing that at some point this might happen.

Why is taking someone's hard earned from a supposedly safe bank account the correct response to a run on the banks? What is also concerning is that most of the public do not know about this and a general financial advisor will still say cash is the safest investment......

[stoploss]

I am curious...not intended as a dig at anyone that's gone to a huge holding in cash. What are you going to do if it really looks like the global economy has hit the skids and banks are coming under extreme pressure ? How are you planning to handle the RBNZ's open bank resolution ? I think its well worth having a good discussion about that. Open an Aussie Govt guaranteed bank account ? Who's to say they won't pass legislation under urgency so the guarantee only applies to Australian residents ? Cash under the mattress, gold or silver coins...what are you going to do ? Disc, I already have a small allocation to physical silver bullion and it's been a horrible "investment"

TAB account :)

[skid]

I am curious...not intended as a dig at anyone that's gone to a huge holding in cash. What are you going to do if it really looks like the global economy has hit the skids and banks are coming under extreme pressure ? How are you planning to handle the RBNZ's open bank resolution ? I think its well worth having a good discussion about that. Open an Aussie Govt guaranteed bank account ? Who's to say they won't pass legislation under urgency so the guarantee only applies to Australian residents ? Cash under the mattress, gold or silver coins...what are you going to do ? Disc, I already have a small allocation to physical silver bullion and it's been a horrible "investment"

Your right Roger--Nothing is totally safe,but in the last GFC shares took a beating and banks survived(only just getting by, in the States?) (and with cover bonds those who own are first in line for your money!)Guess you have to try to determine the odds for all options---I still think kiwi bonds are the best if things get really rough.
But i think what you are getting around to is that shares are as safe as anything else in a crash but I dont think that is true for getting you through a really bad situation economically.

I also have held on to property like xafalcon,(guess Im biased towards that)but my other thoughts are more to do with extra cash.

I agree ,silver has not been great..but Im about even on Gold and consider it has been worthwhile as an insurance policy through the bad times,but not an income producer--Both would have been if sold when things were bad,but then that kind of defeats the purpose.

Keep in mind ,holding cash is not going to be a growth play--Its defensive and will never bring fireworks like shares can,one way or the other.

But I believe that even AIR and ATM will correct at some point --its just the nature of the game--but as long as its not ''at some point'' its ticktey boo.

[777]

TAB account :)

Yes but the TAB bank the money in a bank so similarly affected.

[Beagle]

TAB account :)

Can you actually make withdrawals..I never seem to be able too ROFL

[stoploss]

Can you actually make withdrawals..I never seem to be able too ROFL

Just like trading , got to take some off the table now and again . So after a decent collect , I always go down and make a withdrawal. Too easy to whittle it away as it sits there ....tempting you every day .

[Beagle]

This is a good point. Correct me if I am wrong, but I think they can take your cash (stop you accessing it) if there is a run on the banks. Similar to what they did in Greece. So in effect cash is not what it used to be.

Makes you wonder for all those too big to fail sectors (housing/banking etc) the Government will step in and act. If you look at the behaviour during then GFC around deposit guarantees and a temporary hold on mortgage payments - relax on repayments (Australia) then its a sure thing that at some point this might happen.

Why is taking someone's hard earned from a supposedly safe bank account the correct response to a run on the banks? What is also concerning is that most of the public do not know about this and a general financial advisor will still say cash is the safest investment......

This is a big worry and its not widely understood even by paid professionals. My understanding is shareholders funds get collared first, then unsecured bonds then if necessary secured debt and deposits can either be collared, (ring-fenced so you can't withdraw it) or expunged in extreme cases if the RBNZ considers it necessary for the financial stability of the bank or banking system. I think the real issue becomes if the OBR is exercised in respect of one financial institution the resulting run on other banks could mean the intention of the process is overridden by the execution thereof and the resulting run on other banks merely exacerbates the instability in the financial system itself. Counter productive anyone ? Just let the weak bank fail would appear to be a better option.

Shares by their very nature will always have more risk than cash but I see little point in taking an equity risk, (in effect that's what the OBR implies) and getting a call account interest rate.
IMO Digging a hole in the back yard and burying cash would give a better risk adjusted rate than a call account if the "custard really hits the fan" in the world's banking system. Ignoring rampant building costs, (fuelled by the oligopolistic pricing power of the major N.Z. suppliers and insatiable rates increases by bloated local Govt) we already have deflation in N.Z. so digging a hole in the ground and burying your cash would actually get you a return on your money risk free, (provided your neighbour or someone else wasn't watching where you hid it LOL).

[Schrodinger]

[/B]

This is a big worry and its not widely understood even by paid professionals. My understanding is shareholders funds get collared first, then unsecured bonds then if necessary secured debt and deposits can either be collared, (ring-fenced so you can't withdraw it) or expunged in extreme cases if the RBNZ considers it necessary for the financial stability of the bank or banking system. I think the real issue becomes if the OBR is exercised in respect of one financial institution the resulting run on other banks could mean the intention of the process is overridden by the execution thereof and the resulting run on other banks merely exacerbates the instability in the financial system itself. Counter productive anyone ? Just let the weak bank fail would appear to be a better option.

Shares by their very nature will always have more risk than cash but I see little point in taking an equity risk, (in effect that's what the OBR implies) and getting a call account interest rate.
IMO Digging a hole in the back yard and burying cash would give a better risk adjusted rate than a call account if the "custard really hits the fan" in the world's banking system. Ignoring rampant building costs, (fuelled by the oligopolistic pricing power of the major N.Z. suppliers and insatiable rates increases by bloated local Govt) we already have deflation in N.Z. so digging a hole in the ground and burying your cash would actually get you a return on your money risk free, (provided your neighbour or someone else wasn't watching where you hid it LOL).

So is that why safes are still popular and not solely due to cash jobs???

[macduffy]

So is that why safes are still popular and not solely due to cash jobs???

.......... and why physical gold and/or gold stocks still have a place in many investors' portfolios.

http://www.theage.com.au/business/markets/gold-yet-to-shine-though-aussie-miners-doing-well-20160125-gmde0f.html

[BlackPeter]

I am curious...not intended as a dig at anyone that's gone to a huge holding in cash. What are you going to do if it really looks like the global economy has hit the skids and banks are coming under extreme pressure ? How are you planning to handle the RBNZ's open bank resolution ? I think its well worth having a good discussion about that. Open an Aussie Govt guaranteed bank account ? Who's to say they won't pass legislation under urgency so the guarantee only applies to Australian residents ? Cash under the mattress, gold or silver coins...what are you going to do ? Disc, I already have a small allocation to physical silver bullion and it's been a horrible "investment"

Very good question. Not one of the early chickens (currently roughly 75% in stocks, not counting the family home). I don't think that historically there is any asset class always unaffected by crashes, but there always have been some which fared better than others. Diversification is here in my view the key.

Personally - I can't imagine a scenario that would move me totally out of shares, I always intend to hold at least some blue chips producing stuff everybody needs. Graham recommends to keep at least 25% in shares.

Some shares are quite uncorrelated to the performance of NZ companies: to name only two: OGC (a Canadian gold miner), TEM (a British investment fond). I normally hold some as "hedge"

Some of my cash is (and more would likely go) into "safe" bonds - I don't expect utilities including companies like IFT to roll up their toe nails any time soon ... and than there are obviously the government backed bonds. So far I don't expect NZ to sink as low as Greece, i.e. should be fine. Admittedly - bond yields are currently not that exciting - i.e. there is a risk to be a bit late to go into them (but than ... I trust that low bond yields might keep stock prices up).

Bank accounts - I have a rule to put not more than 10% of my portfolio into one share ... and this rule applies as well to (long term) holdings on bank accounts.

I do have some overseas nest eggs (capital life insurances, super scheme) ... and some more likely to go there if the situation looks here more scary than on the other side of the big pond.

Some property is certainly a good idea (and for starters - a mortgage free family home).

Being reasonable self sufficient helps as well ... if bad comes to worse we could minimise grocery bills and live of the land.

Not sure about (physical) gold. The gold coins my grand parents used to give me when I was a child have been one of the worst investments I made so far in my life. Prefer to hold gold miners and expect them to flourish if everything else goes down the drain.

[Onion]

Digging a hole in the back yard and burying cash ...

Where do you live Roger? ;)

[jonu]

Where do you live Roger? ;)

In the Onion patch

[Big Blind]

So is that why safes are still popular and not solely due to cash jobs???

Perhaps an investment in a safe-making company would be a "safe" bet. Taxi!!!

[trader_jackson]

My brief thoughts:
- Many US companies appear to be betting Earnings Per Share estimates, with no seriously adverse outlook comments
- Oil seems to be bottoming out at around $30 barrel, with many other commodities appearing to be bottoming out in price as well ("global tax cut")
- Australian employment, consumer confidence and CPI seem to be alot stronger than analysts estimates
- Europe is stable, with Greece recently receiving an upgrade from S&P
- China remains a mystery (for me), but the rest of the world seems to be doing well enough to "pick up China's slack"
- Volatility will continue, as people worries will continue to exceed that of the actual fundamentals, helped by the fact China has been the "hero people have turned to" for the past 7 years or so and is now slowing down (to a more sustainable growth rate)

[mshierlaw]

The advise to date summarised:

- Do not put silver bullion under the mattress, it's "horrible".
- Always watch what your neighbour is doing in the back garden.
- If you bury gold in the back garden it may be a future GOLD mine.
- In a deflationary environment, cold hard cash is best stored in the freezer.
- Stocks are out of season this summer, may recover after demand for casserole firms up.
- Do not hold too many stocks right now, you may run out of freezer space waiting for a casserole recovery.

DISC .... I like casserole but not this summer & my neighbour is nosey.

[Baa_Baa]

Don't talk about physical bullion holdings in a pseudo anonymous internet forum. Don't even imply you have a holding. Delete your messages immediately if you have. Not joking.

[bull....]

the equity selling could be oil sovereign funds selling to raise cash? Saudi even selling there assets now

Aberdeen asset management confirms what I was thinking about a lot of the selling

http://www.cnbc.com/2016/01/27/top-asset-manager-hit-with-13b-outflows.html

[Leftfield]

Good post Bull. Ouch, $13 Billion withdrawn from overseas markets. It helps explain NZX's relative insulation from the gyrations (so far.)

[Beagle]

Very good question. Not one of the early chickens (currently roughly 75% in stocks, not counting the family home). I don't think that historically there is any asset class always unaffected by crashes, but there always have been some which fared better than others. Diversification is here in my view the key.

Personally - I can't imagine a scenario that would move me totally out of shares, I always intend to hold at least some blue chips producing stuff everybody needs. Graham recommends to keep at least 25% in shares.

Some shares are quite uncorrelated to the performance of NZ companies: to name only two: OGC (a Canadian gold miner), TEM (a British investment fond). I normally hold some as "hedge"

Some of my cash is (and more would likely go) into "safe" bonds - I don't expect utilities including companies like IFT to roll up their toe nails any time soon ... and than there are obviously the government backed bonds. So far I don't expect NZ to sink as low as Greece, i.e. should be fine. Admittedly - bond yields are currently not that exciting - i.e. there is a risk to be a bit late to go into them (but than ... I trust that low bond yields might keep stock prices up).

Bank accounts - I have a rule to put not more than 10% of my portfolio into one share ... and this rule applies as well to (long term) holdings on bank accounts.

I do have some overseas nest eggs (capital life insurances, super scheme) ... and some more likely to go there if the situation looks here more scary than on the other side of the big pond.

Some property is certainly a good idea (and for starters - a mortgage free family home).

Being reasonable self sufficient helps as well ... if bad comes to worse we could minimise grocery bills and live of the land.

Not sure about (physical) gold. The gold coins my grand parents used to give me when I was a child have been one of the worst investments I made so far in my life. Prefer to hold gold miners and expect them to flourish if everything else goes down the drain.

Excellent post BP.
The whole sustainable living thing is a nice goal to work towards. One day there will be a complete breakdown in the monetary system and those with no debt and some land to grow things on will be far better positioned than most.
Debt free is something I'm big on now too.

Government issued Kiwi bonds are Govt guaranteed and NOT subject to the OBR. Returns are low but I think its a good thing we had this discussion because I'd forgotten about the Kiwi bonds and risk adjusted returns are better than term deposits with a bank IMO and its probably a better idea than giving your neighbour a chance at mining your riches :)

[skid]

Im also mortgage free with low demands on living--many underestimate the value of the latter.
I always remember the term i learned back in Economy 101--its called the ''marginal propensity to earn'' Its the amount of income (or assets) you have over and above your basic needs --food ,shelter,etc--everything else is just playing with money(or the toys it buys)

I got almost completely out of the share market in the GFC and it worked for me,so dont fully agree with being 25% in, in a crash,but if it worked for you...I remember some pretty nice dividends with some of the banks available(but its easy to forget they could have gone down the gurgler,or at least it seemed so at the time.--I heard later the UK was weeks away from a total meltdown--(we can only guess what that would have caused.)

Meanwhile the poor Fed was caught between a rock and a hard place--of course they couldnt put up interest rates at this point,but to not do was admitting things were not so rosy on the economic front.

I guess the main question for me is ''what will happen when some of the developing countries start going bankrupt'' (aside from local suffering and being more or less taken over by the world bank).....Who needs war?

[Lewylewylewy]

Tin foil hat time...

For the monetary system to break down, it would require a shift of power control - because the monetary system is what holds those in power up. If there's a shift in power, will the records of land ownership (held by those in power) have any value? If you believe this, you might as well be stockpiling guns to go on your land. :)

Or were you referring to a breakdown being like the 2k8 GFC?

... Does anyone use investments in futures to cover risk?

[skid]

Tin foil hat time...

For the monetary system to break down, it would require a shift of power control - because the monetary system is what holds those in power up. If there's a shift in power, will the records of land ownership (held by those in power) have any value? If you believe this, you might as well be stockpiling guns to go on your land. :)

Or were you referring to a breakdown being like the 2k8 GFC?

... Does anyone use investments in futures to cover risk?

I wasnt talking about complete anarchy (that would be another huge step in a western country)--People still owned their free hold land in the depression)--if you have a mortgage ,not so good..If it gets to a total meltdown it can either cause violent anarchy,or bring people closer--I have faith that New Zealand would be the latter.

I think the futures market would be one of the early ones to go (i believe it has been discontinued before in some places if memory serves)

[bull....]

Tin foil hat time...

For the monetary system to break down, it would require a shift of power control - because the monetary system is what holds those in power up. If there's a shift in power, will the records of land ownership (held by those in power) have any value? If you believe this, you might as well be stockpiling guns to go on your land. :)

Or were you referring to a breakdown being like the 2k8 GFC?

... Does anyone use investments in futures to cover risk?

any serious portfolio investor should use options, futures , short selling as a part of portfolio management, relying on a diversified portfolio only has now been proven in the gfc that this wont protect you as all asset classes can become correlated and lose you money.

I use the above in a tactical way as using them all the time or on every blip down will only reduce returns

[BlackPeter]

any serious portfolio investor should use options, futures , short selling as a part of portfolio management
...


Not sure, whether the investment mastermind Benjamin Graham would agree with you. A citation from his "Intelligent Investor":


An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative"


Not sure either, whether I ever heard that Warren Buffet made his fortune with "options, futures and short selling".

I think what you mean is that speculators tend to use these instruments, and no doubt - some of them make some of the time money that way. Some of them make even serious money and others even make money when they don't make money - that's when they ask in times of crisis for tax payer bail outs.

And don't get me wrong - there are some in my view legitimate applications of some of these instruments (e.g. futures for hedging) and there is as well nothing wrong with speculation if you enjoy it and as long as you can afford to lose the money you speculate with ... just don't call it "investment".

[winner69]

BP - Buffett's recent 'speculation' / big bets

http://www.bloomberg.com/news/articles/2015-05-07/buffett-climbs-from-derivative-hole-that-swallowed-berkshire-aaa

[bull....]

Not sure, whether the investment mastermind Benjamin Graham would agree with you. A citation from his "Intelligent Investor":



Not sure either, whether I ever heard that Warren Buffet made his fortune with "options, futures and short selling".

I think what you mean is that speculators tend to use these instruments, and no doubt - some of them make some of the time money that way. Some of them make even serious money and others even make money when they don't make money - that's when they ask in times of crisis for tax payer bail outs.

And don't get me wrong - there are some in my view legitimate applications of some of these instruments (e.g. futures for hedging) and there is as well nothing wrong with speculation if you enjoy it and as long as you can afford to lose the money you speculate with ... just don't call it "investment".

you need to check up more about buffet - he uses derivatives so I guess he speculates too

[BlackPeter]

you need to check up more about buffet - he uses derivatives so I guess he speculates too

OK - so winner found for you an article mentioning that Warren Buffets company made recently some huge losses using derivatives. As well - Warren is by now 85 years old and might not be involved in every single deal his company makes.

What I said was:

I haven't heard that Warren Buffet made his fortune with "options, futures and short selling".


The article is if anything supporting this my statement ... they report that he was losing money using derivatives. No inconsistency.

As well - just look at one of his famous quotes:


I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.
Warren Buffett

(from http://www.brainyquote.com/quotes/authors/w/warren_buffett.html#meujaU57QOLvDyQV.99)

Not quite consistent with speculating with shorts, options and futures .. is it?

Anyway - happy speculating ... and if you call this for yourself investing, this is ok with me. Just make sure others know what you mean by that. Using your lingo do I probably now need to call my wife an serious investor every time she buys a Lotto ticket. LOL.

[winner69]

Warren says that derivatives are 'the financial weapons of mass destruction'

[BlackPeter]

Warren says that derivatives are 'the financial weapons of mass destruction'

LOL - and Jesus says "who lives by the sword dies by the sword". I guess in this context would I think it prudent for investors to avoid these "weapons"

[bull....]

I think you not understand how derivatives are used in portfolio management

How Derivatives Can Fit into a Portfolio
Investors typically use derivatives for three reasons: to hedge (http://www.investopedia.com/terms/h/hedge.asp) a position, to increase leverage or to speculate on an asset's movement. Hedging a position is usually done to protect against or insure the risk of an asset. For example if you own shares of a stock and you want to protect against the chance that the stock's price will fall, then you may buy a put option (http://www.investopedia.com/terms/p/putoption.asp). In this case, if the stock price rises you gain because you own the shares and if the stock price falls, you gain because you own the put option. The potential loss from holding the security is hedged with the options position.

Read more: Derivatives 101 | Investopedia (http://www.investopedia.com/articles/optioninvestor/10/derivatives-101.asp#ixzz3yV3mSxcA) http://www.investopedia.com/articles/optioninvestor/10/derivatives-101.asp#ixzz3yV3mSxcA

so yes you are correct you can use them for speculating , I was using them in reference to portfolio management

May I ask how you hedge your portfolio when a market falls? A reply such as I would have sold everything and gone to cash is not really an answer as your implying you are an expert at timing markets and never lose portfolio value

[Onion]

For example if you own shares of a stock and you want to protect against the chance that the stock's price will fall, then you may buy a put option (http://www.investopedia.com/terms/p/putoption.asp). In this case, if the stock price rises you gain because you own the shares and if the stock price falls, you gain because you own the put option. The potential loss from holding the security is hedged with the options position.


If I have balanced the up side potential (holding shares) with the downside potential (put option) then why hold the share at all?

Perhaps a reliable dividend stream? Any other reason?

Simple retail investors do not have any obligation to retain a share. If the downside risk keeps you awake at night the easiest option is to sell.

[BlackPeter]

I think you not understand how derivatives are used in portfolio management

How Derivatives Can Fit into a Portfolio
Investors typically use derivatives for three reasons: to hedge (http://www.investopedia.com/terms/h/hedge.asp) a position, to increase leverage or to speculate on an asset's movement. Hedging a position is usually done to protect against or insure the risk of an asset. For example if you own shares of a stock and you want to protect against the chance that the stock's price will fall, then you may buy a put option (http://www.investopedia.com/terms/p/putoption.asp). In this case, if the stock price rises you gain because you own the shares and if the stock price falls, you gain because you own the put option. The potential loss from holding the security is hedged with the options position.

Read more: Derivatives 101 | Investopedia (http://www.investopedia.com/articles/optioninvestor/10/derivatives-101.asp#ixzz3yV3mSxcA) http://www.investopedia.com/articles/optioninvestor/10/derivatives-101.asp#ixzz3yV3mSxcA

so yes you are correct you can use them for speculating , I was using them in reference to portfolio management

May I ask how you hedge your portfolio when a market falls? A reply such as I would have sold everything and gone to cash is not really an answer as your implying you are an expert at timing markets and never lose portfolio value

Look bull, this is not a competition and I suppose not a test either. However - I do understand how derivatives can be used, and if you just look back in this thread, than you even might find that I mentioned hedging (as example).

Re your question ... if the market changes, than I might (if appropriate) modify the composition of my portfolio. There are always shares which are more exposed than others and there is as well the balance between shares, bonds and cash which can be adjusted. And yes - there have been times when I did some shorting (like holding BEAR during an ASX downturn, never shorting individual stocks). However - I would not call the latter an investment decision (despite making some money with it).

Using derivatives as insurance policy is exactly that ... it reduces your risk but you pay for this privilege. This is a sensible move, if you need short term access to your money (like e.g. a company hedging their products against price changes), but it might be just money out of the window if you don't need this short term access.

As well - I normally don't worry too much about a share going down, as long as I am convinced that the underlying value of the company is unchanged. The trick is to hold enough cash to avoid the need for selling shares while they are down.

But everybody to their own. No need for me to convince you ... and no need for you to convince me;). Just keep doing what you do, if it works for you.

[Tomtom]

http://bloom.bg/1NBX15XThere was an interesting segment on Bloomberg about corporate debt today.

[Jinx]

Another couple articles on the current state of the world

Bloombergs article: Amounts of withdrawall from money managers since 2008
http://www.bloomberg.com/news/articles/2016-02-03/managers-bleed-money-as-investors-flock-to-blackrock-doubleline

Royal bank of Scottland report: A 'cataclysmic' year where stocks could fall up to 20%
http://static.guim.co.uk/ni/1452594796380/European-Rates-Weekly-08011.pdf

[Baa_Baa]

Another couple articles on the current state of the world

Bloombergs article: Amounts of withdrawall from money managers since 2008
http://www.bloomberg.com/news/articles/2016-02-03/managers-bleed-money-as-investors-flock-to-blackrock-doubleline

Royal bank of Scottland report: A 'cataclysmic' yearwhere stocks could fall up to 20%
http://static.guim.co.uk/ni/1452594796380/European-Rates-Weekly-08011.pdf

You think that's bad, if you need a fix of deep fiscal depression, you can't go past Zero Hedge. http://www.zerohedge.com/news/2016-02-03/it-time-panic-about-deutsche-bank If the stories doesn't spin your wheels, the comments surely will, Lol :)

[bull....]

watch the support levels, it is trying to carve out a bottom

[percy]

Time Out.!!
Go to Youtube and watch ;
Roger Penske at 2008 winter commencement.
Enjoy!

ps.I think Penske now employs over 40,000 people.!

[Jinx]

Time Out.!!
Go to Youtube and watch ;
Roger Penske at 2008 winter commencement.
Enjoy!

ps.I think Penske now employs over 40,000 people.!

Watched with interested and agree with him, business will continue to connect people of the world and there certainly are countless to be optimistic about the next 50 years.
But in the next two years there is still plenty to suggest that everything may not continue on this optimistic path.
Thoughts?

[percy]

Watched with interested and agree with him, business will continue to connect people of the world and there certainly are countless to be optimistic about the next 50 years.
But in the next two years there is still plenty to suggest that everything may not continue on this optimistic path.
Thoughts?

His motor racing team have won the worlds biggest car race,The Indianapolis 500,16 times.
Do you think he will not bother to enter for the next two years because "everything may not continue on this optimistic path."???
At the time he gave that speech, winter 2008, the out look was very bleak.
I think every day there are opportunities,just some days they are hard to see.!But we miss them if we don't look for them.

[skid]

there are certainly opportunities that can be missed if we dont look for them ,but I suppose this must be combined with market conditions.
For any opportunity,be it share market investing,or starting a business,there will always be some times that are better than others.

For those that are at the top of their game ,this can be an exciting time,but for most it is more dangerous than normal.
As we have seen ,things can happen very quick and a sound strategy is your friend. (Even in the NZX,where we appear sometimes to have a bit of an insulation factor that can create a lag.

I have a friend who,in uncertain times,shorts his shares by the same amount he is invested,and just goes for the Dividends.
In less uncertain times he shorts less,or not at all. (just a thought for those who invest for the Divis,which can be quickly eaten by a SP drop)

[blackcap]

I have a friend who,in uncertain times,shorts his shares by the same amount he is invested,and just goes for the Dividends.
In less uncertain times he shorts less,or not at all. (just a thought for those who invest for the Divis,which can be quickly eaten by a SP drop)

So he just sells his shares in other words and does not get dividends? Bit confused here as to the strategy? :)

[skid]

So he just sells his shares in other words and does not get dividends? Bit confused here as to the strategy? :)

No--He buys and keeps his shares,but in uncertain times,he also buys an equivalent short on the same share--He is essentially betting for and against his share(which keeps him even)--If the SP goes up,he gains on the share,but losses on the short,and vice versa,but pockets the dividend.
This obviously only works on shares with a dividend.

[Bobdn]

there are certainly opportunities that can be missed if we dont look for them ,but I suppose this must be combined with market conditions.
For any opportunity,be it share market investing,or starting a business,there will always be some times that are better than others.

For those that are at the top of their game ,this can be an exciting time,but for most it is more dangerous than normal.
As we have seen ,things can happen very quick and a sound strategy is your friend. (Even in the NZX,where we appear sometimes to have a bit of an insulation factor that can create a lag.

I have a friend who,in uncertain times,shorts his shares by the same amount he is invested,and just goes for the Dividends.
In less uncertain times he shorts less,or not at all. (just a thought for those who invest for the Divis,which can be quickly eaten by a SP drop)

I think your friend might be having you on

[Snow Leopard]

No--He buys and keeps his shares,but in uncertain times,he also buys an equivalent short on the same share--He is essentially betting for and against his share(which keeps him even)--If the SP goes up,he gains on the share,but losses on the short,and vice versa,but pockets the dividend.
This obviously only works on shares with a dividend.

If a shorts a share he has to pay the dividend...

Best Wishes
Paper Tiger

[blackcap]

No--He buys and keeps his shares,but in uncertain times,he also buys an equivalent short on the same share--He is essentially betting for and against his share(which keeps him even)--If the SP goes up,he gains on the share,but losses on the short,and vice versa,but pockets the dividend.
This obviously only works on shares with a dividend.

Yeah I think you have been had as well. If you short a share you pay the dividend to the person or entity you borrowed the stock from. If it were really that easy everyone would be shorting dividend paying stocks ad nausea :)

[Poet]

Yeah I think you have been had as well. If you short a share you pay the dividend to the person or entity you borrowed the stock from. If it were really that easy everyone would be shorting dividend paying stocks ad nausea :)

Is it necessary to borrow stock in order to short it. Couldn't you short shares that you actually owned, thus collecting the dividend for yourself but being guaranteed an agreed exit price at some date in the future.

[blackcap]

Is it necessary to borrow stock in order to short it. Couldn't you short shares that you actually owned, thus collecting the dividend for yourself but being guaranteed an agreed exit price at some date in the future.

Isn't shorting shares you own the same as just selling your shares..... so you do not get dividends?

[skid]

Im not sure of the nuts and bolts as Im not up to scratch with shorting--You bring up good points--Ill have to check on that when I hear from him (unless someone in the know clarifies)

He would certainly keep the divis of the shares he owns--but the short is the question.

In terms of the short--you are buying a short on someone elses shares if Im not mistaken.(and keeping yours)

[pak]

My guess is he is shorting on a cfd account over a relatively smaller time frame than going long and would know exactly when a divy would have to be paid so would close the short order in time to prevent that. After it's gone ex divy date he cld possibly jump back on the short order?

[blackcap]

Im not sure of the nuts and bolts as Im not up to scratch with shorting--You bring up good points--Ill have to check on that when I hear from him (unless someone in the know clarifies)

He would certainly keep the divis of the shares he owns--but the short is the question.

In terms of the short--you are buying a short on someone elses shares if Im not mistaken.(and keeping yours)

Hi Skid, well you do not buy a short, you just short through your broker and normally they provide someone else's shares. Or they short via a CFD account that is possible too. Either way when you short and a stock pays a dividend, you the shorter also end up paying the amount of the dividend so there is no net benefit and you may just as well sell the stock you have. It is exactly the same payout.

[skid]

Cheers BC--lifes a learning experience--guess thats what these discussions are about. Ill have to have a chat to him...find out what its about.

[skid]

Keep an eye on Deutsce Bank in Germany...the country thats suppose to be holding everything together over there

[percy]

I met two very interesting people at a Traders Network NZ meeting last year.
Both had found their "niche market" a few years ago.
One guy just trades the US $ against the Euro.He trades every night for just two hours.
The other guy,Peter McKaskell, sells puts US puts.He has about 5 companies he sells puts.He gets about 12% return for the puts he sells.
Should the sp of those companies go up, he buys more of their shares. Well I think that's what he does.He has a website that may be of interest.www.optionstradingus.co.nz

[Baa_Baa]

Keep an eye on Deutsce Bank in Germany...the country thats suppose to be holding everything together over there

"Here Are The Banks The Market Is Most Concerned About" "http://www.zerohedge.com/news/2016-02-05/these-are-banks-market-most-concerned-about


"Is It Time To Panic About Deutsche Bank?" http://www.zerohedge.com/news/2016-02-03/it-time-panic-about-deutsche-bank :scared:

[Mickey]

Some of you may have received this in an email from Sharechat.co.nz - but makes for interesting reading:

"Do NOT Ignore the Euro-Bank Crash
Mike Larson | Thursday, February 4, 2016 at 4:22 pm
Get a load of these year-to-date losses in the massive euro-banks that trade here in the U.S.:


Deutsche Bank (DB), down 29.8%
Credit Suisse (CS), down 31.4%
HSBC Holdings (HSBC), down 14.8%
Barclays PLC (BCS), down 21.1%
UBS Group (UBS), down 20.6%
Royal Bank of Scotland Group PLC (RBS), down 20.1%
Banco Santander (SAN), down 16.6%


These aren’t tiny banks, or obscure companies I’m cherry-picking to make a point. They are some of the largest banks in the world.
Slightly different methodologies yield varying rankings. But ranked by assets, Barclays is the sixth-largest in the world, Deutsche Bank is the eighth-largest, RBS is the 12th largest, and Santander is the 17th, according to research firm Accuity.

I bring this up because many analysts and portfolio managers who come on CNBC, or who are quoted in the print press, talk about the energy markets. They keep telling viewers and readers that outside of energy, things don’t look too bad.
Credit Suisse was among the European banks hardest hit today in the markets.

I completely disagree. I’ve been flagging the poor action in these and other mega-banks for several months, and warning that it represents a spreading sickness. It’s gnawing away at the credit and equity markets behind the scenes, and becoming too big of a problem to ignore.

Think about it: Deutsche Bank’s U.S. shares are now trading for less than they did at the depths of the Great Recession in 2008-09. Credit Suisse’s U.S. shares just sank to the lowest level since 2002.
The catalyst was another round of horrendous quarter results. CS lost a whopping 5.8 billion Swiss francs ($5.8 billion) in the last three months of 2015. That was a huge swing from the year-ago profit of 691 million francs ($695 million), and the biggest loss in any quarter since the credit crisis of 2008. It’s slashing another 4,000 jobs, and writing down the value of assets to reflect their diminished value.

There are a lot of reasons for the weakness. Negative interest rates are crushing margins. European banks are large relative to the size of their home economies, making it tough to bail them out if they get into trouble.

In addition, bad loans have been piling up and opaque derivatives bets are raising concerns among investors. Many of these banks are also paying out billions of dollars in fines and penalties as part of huge settlements related to market manipulation, sketchy mortgage practices, and other alleged transgressions.
Add it all up and you have the potential for Black Swan-style events – bank meltdowns that shake confidence even further. After all, it happened with U.S. banks here during our credit crisis. So at the risk of sounding repetitive, this is not the time for placing aggressive upside bets. It’s a time for caution and prudent risk-protection measures."

[trader_jackson]

I don't follow nor track many of the European or US banks to much, all I believe is the ones in Australia (and Heartland) are some of the most well run, well capitalized banks in the world... I'm not panicking about the banking sector down under that is for sure... I think results, which are to be announced very soon, are going to be at least in-line, if not slightly above expectations... We'll soon find out!

Disclosure: Long on whole ASF.NZX

[moka]

I discovered this website with very informative articles about oil, the economy and debt written by Gail Tverberg who is an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Lots of interesting reading if you have time. Below is part of her summary of what she sees ahead for 2016.

http://ourfiniteworld.com/author/gailtheactuary/
Why oil under $30 per barrel is a major problem (http://ourfiniteworld.com/2016/01/19/why-oil-under-30-per-barrel-is-a-major-problem/)
Posted on January 19, 2016 (http://ourfiniteworld.com/2016/01/19/why-oil-under-30-per-barrel-is-a-major-problem/)

Economic growth: How it works; how it fails; why wealth disparity occurs (http://ourfiniteworld.com/2015/12/08/economic-growth-how-it-works-how-it-fails-why-wealth-disparity-occurs/)
Posted on December 8, 2015 (http://ourfiniteworld.com/2015/12/08/economic-growth-how-it-works-how-it-fails-why-wealth-disparity-occurs/)

2016: Oil Limits and the End of the Debt Supercycle (http://ourfiniteworld.com/2016/01/07/2016-oil-limits-and-the-end-of-the-debt-supercycle/)
Posted on January 7, 2016 (http://ourfiniteworld.com/2016/01/07/2016-oil-limits-and-the-end-of-the-debt-supercycle/)
“What is Ahead for 2016?


Problems with a slowing world economy are likely to become more pronounced, as China’s growth problems continue, and as other commodity-producing countries such as Brazil, South Africa, and Australia experience recession. There may be rapid shifts in currencies, as countries attempt to devalue their currencies, to try to gain an advantage in world markets. Saudi Arabia may decide to devalue its currency, to get more benefit from the oil it sells.
Oil storage seems likely to become a problem sometime in 2016. In fact, if the run-up in oil supply is heavily front-ended to the December to April period, similar to what happened a year ago, lack of crude oil storage space could become a problem within the next three months. Oil prices could fall to $10 or below.
Falling oil prices are likely to cause numerous problems. One is debt defaults, both for oil companies and for companies making products used by the oil industry. Another is layoffs in the oil industry. Another problem is negative inflation rates, making debt harder to repay. Still another issue is falling asset prices, such as stock prices and prices of land used to produce commodities. Part of the reason for the fall in price has to do with the falling price of the commodities produced. Also, sovereign wealth funds will need to sell securities, to have money to keep their economies going. The sale of these securities will put downward pressure on stock and bond prices.
Debt defaults are likely to cause major problems in 2016. As noted in the introduction, we seem to be approaching the unwinding of a debt supercycle. We can expect one company after another to fail because of low commodity prices. The problems of these failing companies can be expected to spread to the economy as a whole. Failing companies will lay off workers, reducing the quantity of wages available to buy goods made with commodities. Debt will not be fully repaid, causing problems for banks, insurance companies, and pension funds. Even electricity companies may be affected, if their suppliers go bankrupt and their customers become less able to pay their bills.
Governments of some oil exporters may collapse or be overthrown, if prices fall to a low level. The resulting disruption of oil exports may be welcomed, if storage is becoming an increased problem.
It is not clear that the complete unwind will take place in 2016, but a major piece of this unwind could take place in 2016, especially if crude oil storage fills up, pushing oil prices to less than $10 per barrel.
Whether or not oil storage fills up, oil prices are likely to remain very low, as the result of rising supply, barely rising demand, and no one willing to take steps to try to fix the problem. Everyone seems to think that someone else (Saudi Arabia?) can or should fix the problem. In fact, the problem is too large for Saudi Arabia to fix.
The many problems of 2016 (including rapid moves in currencies, falling commodity prices, and loan defaults) are likely to cause large payouts of derivatives, potentially leading to the bankruptcies of financial institutions, as they did in 2008. To prevent such bankruptcies, most governments plan to move as much of the losses related to derivatives and debt defaults to private parties as possible.
All in all, 2016 looks likely to be a much worse year than 2008 from a financial perspective. The problems will look similar to those that might have happened in 2008, but didn’t thanks to government intervention. This time, governments appear to be mostly out of approaches to fix the problems.”

[skid]

I don't follow nor track many of the European or US banks to much, all I believe is the ones in Australia (and Heartland) are some of the most well run, well capitalized banks in the world... I'm not panicking about the banking sector down under that is for sure... I think results, which are to be announced very soon, are going to be at least in-line, if not slightly above expectations... We'll soon find out!

Disclosure: Long on whole ASF.NZX

two words ...- Short term-...globalization... (guess that was 3 words ,but you get my point)

[skid]

I discovered this website with very informative articles about oil, the economy and debt written by Gail Tverberg who is an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Lots of interesting reading if you have time. Below is part of her summary of what she sees ahead for 2016.

http://ourfiniteworld.com/author/gailtheactuary/
Why oil under $30 per barrel is a major problem (http://ourfiniteworld.com/2016/01/19/why-oil-under-30-per-barrel-is-a-major-problem/)
Posted on January 19, 2016 (http://ourfiniteworld.com/2016/01/19/why-oil-under-30-per-barrel-is-a-major-problem/)

Economic growth: How it works; how it fails; why wealth disparity occurs (http://ourfiniteworld.com/2015/12/08/economic-growth-how-it-works-how-it-fails-why-wealth-disparity-occurs/)
Posted on December 8, 2015 (http://ourfiniteworld.com/2015/12/08/economic-growth-how-it-works-how-it-fails-why-wealth-disparity-occurs/)

2016: Oil Limits and the End of the Debt Supercycle (http://ourfiniteworld.com/2016/01/07/2016-oil-limits-and-the-end-of-the-debt-supercycle/)
Posted on January 7, 2016 (http://ourfiniteworld.com/2016/01/07/2016-oil-limits-and-the-end-of-the-debt-supercycle/)
“What is Ahead for 2016?


Problems with a slowing world economy are likely to become more pronounced, as China’s growth problems continue, and as other commodity-producing countries such as Brazil, South Africa, and Australia experience recession. There may be rapid shifts in currencies, as countries attempt to devalue their currencies, to try to gain an advantage in world markets. Saudi Arabia may decide to devalue its currency, to get more benefit from the oil it sells.
Oil storage seems likely to become a problem sometime in 2016. In fact, if the run-up in oil supply is heavily front-ended to the December to April period, similar to what happened a year ago, lack of crude oil storage space could become a problem within the next three months. Oil prices could fall to $10 or below.
Falling oil prices are likely to cause numerous problems. One is debt defaults, both for oil companies and for companies making products used by the oil industry. Another is layoffs in the oil industry. Another problem is negative inflation rates, making debt harder to repay. Still another issue is falling asset prices, such as stock prices and prices of land used to produce commodities. Part of the reason for the fall in price has to do with the falling price of the commodities produced. Also, sovereign wealth funds will need to sell securities, to have money to keep their economies going. The sale of these securities will put downward pressure on stock and bond prices.
Debt defaults are likely to cause major problems in 2016. As noted in the introduction, we seem to be approaching the unwinding of a debt supercycle. We can expect one company after another to fail because of low commodity prices. The problems of these failing companies can be expected to spread to the economy as a whole. Failing companies will lay off workers, reducing the quantity of wages available to buy goods made with commodities. Debt will not be fully repaid, causing problems for banks, insurance companies, and pension funds. Even electricity companies may be affected, if their suppliers go bankrupt and their customers become less able to pay their bills.
Governments of some oil exporters may collapse or be overthrown, if prices fall to a low level. The resulting disruption of oil exports may be welcomed, if storage is becoming an increased problem.
It is not clear that the complete unwind will take place in 2016, but a major piece of this unwind could take place in 2016, especially if crude oil storage fills up, pushing oil prices to less than $10 per barrel.
Whether or not oil storage fills up, oil prices are likely to remain very low, as the result of rising supply, barely rising demand, and no one willing to take steps to try to fix the problem. Everyone seems to think that someone else (Saudi Arabia?) can or should fix the problem. In fact, the problem is too large for Saudi Arabia to fix.
The many problems of 2016 (including rapid moves in currencies, falling commodity prices, and loan defaults) are likely to cause large payouts of derivatives, potentially leading to the bankruptcies of financial institutions, as they did in 2008. To prevent such bankruptcies, most governments plan to move as much of the losses related to derivatives and debt defaults to private parties as possible.
All in all, 2016 looks likely to be a much worse year than 2008 from a financial perspective. The problems will look similar to those that might have happened in 2008, but didn’t thanks to government intervention. This time, governments appear to be mostly out of approaches to fix the problems.”


This start to get back to that problem of just what to do to protect what you have.
Theres of course the posibility of another (worse?) share market crash...and that even more scarier thought of a bank holiday and the ensuing ''hair cuts''
Last time about all I could come up with was --pay off mortgages--keep properties---Put money from bank to Kiwi bonds--some Gold
Not fail safe ...but nothing is.

Another thing to watch out for in the short term is China doing something while their share market is closed for Chinese New Year(in the hope Chinese investors will get used to it by the time things open again) ....just a thought

[Baa_Baa]

I don't follow nor track many of the European or US banks to much, all I believe is the ones in Australia (and Heartland) are some of the most well run, well capitalized banks in the world... I'm not panicking about the banking sector down under that is for sure... I think results, which are to be announced very soon, are going to be at least in-line, if not slightly above expectations... We'll soon find out!

Disclosure: Long on whole ASF.NZX

It's not the Australasian banks per se that is the problem, it's the bigger picture and the flow on effect that it has on companies. Banks and finance companies SP get slaughtered when the global goes bad, the contagion is already apparent and so far it's only stories being told. When it goes bang, which it will as the debt and leverage overhang catches up with the party least able to sustain the defaults, then we'll see how robust the NZ companies are. Unlike GFC, the current situation seems to be slow-motion entree to something truly catastrophic. It's never a good outcome when globals enter a currency war, however that manifests itself.

[Baa_Baa]

p.s. I hate it when NZX is closed on a Monday especially after the US, China and Euro markets had a bad Friday. Can only hope those markets Monday (our Monday afternoon/night) is a lot better, or our Tuesday will be hell.

[trader_jackson]

It's not the Australasian banks per se that is the problem, it's the bigger picture and the flow on effect that it has on companies. Banks and finance companies SP get slaughtered when the global goes bad, the contagion is already apparent and so far it's only stories being told. When it goes bang, which it will as the debt and leverage overhang catches up with the party least able to sustain the defaults, then we'll see how robust the NZ companies are. Unlike GFC, the current situation seems to be slow-motion entree to something truly catastrophic. It's never a good outcome when globals enter a currency war, however that manifests itself.

The difference is this time, all the fear driven stories, will remain (mostly) stories... everyone is affected by a housing collapse, mainly because the biggest thing banks lend on is housing (yes, they don't lend more on oil etc than what they have in mortgages... a vital point many people seem to be forgetting) will cheap resources? no... obviously the people who are employed in these industries and those who have given these industries loans, bonds etc will struggle (ie less profits) and some may collapse as they are probably inefficient in production... the rest? "Global tax cut" with cheap oil + lowers input costs for many producers. I highly doubt we are heading for a repeat of the GFC... in any motion.

Things to consider:
For years resources boomed, it encouraged anyone with a few dollars to start mining somewhere somehow and you'll be rewarded with a return as a result of china's seeminly never ending demand for resources... now, these sorts of, mostly small, companies are going to collapse, these small to mid sized companies who hold large amounts of debt relative to their size are ultimately the least able to sustain themselves... we ain't going to see BHP and Rio, or Glencore, the ones who do hold most of the debt, fall over tomorrow, like we did with Lehman Brothers.

Reminds me of the days in 2011 when everyone though the whole EU was going to collapse, instead the years that followed resulted in great returns... anyway this is just my view and obviously time will tell what really happens... one thing is for sure, 2016 will be interesting

[Daytr]

Still awaiting the energy related debt crisis that is bound to unfold in 2016. The ramifications will reach far and wide.
There are also rumors circulating about Deutsche Bank and their derivatives exposure. Apparently the CDS has gone through the floor.

[Valuegrowth]

2016 will be more or less like 2015. I believe the stock market still offers the best place to find outperformance. Bond rally should end as rates likely to rise from 2016. Real estate will lose luster too. This is going to be year of stock picker. We should avoid average stocks and should find kind of stocks which can outperform others.Stocks could outperform bonds for the fifth consecutive year. Sectors such as financials, telecommunication, consumer staples and healthcare should outperform others.

[bull....]

2016 will be more or less like 2015. I believe the stock market still offers the best place to find outperformance. Bond rally should end as rates likely to rise from 2016. Real estate will lose luster too. This is going to be year of stock picker. We should avoid average stocks and should find kind of stocks which can outperform others.Stocks could outperform bonds for the fifth consecutive year. Sectors such as financials, telecommunication, consumer staples and healthcare should outperform others.

agree , utilities and telecoms performed well in the US this year also gold
Verizon- us and spark nz are my stock picks

[Valuegrowth]

agree , utilities and telecoms performed well in the US this year also gold
Verizon- us and spark nz are my stock picks

Market tanked but Verizon is one of the shares which bucked the trend. It went up by more than 1% on Friday on a huge volume.

Intelligent market participants will find way to beat this market storm by picking winners in the market.

[skid]

2016 will be more or less like 2015. I believe the stock market still offers the best place to find outperformance. Bond rally should end as rates likely to rise from 2016. Real estate will lose luster too. This is going to be year of stock picker. We should avoid average stocks and should find kind of stocks which can outperform others.Stocks could outperform bonds for the fifth consecutive year. Sectors such as financials, telecommunication, consumer staples and healthcare should outperform others.

Interesting you have mentioned financials as Ive heard banks are holding onto their reserves which is not helping with investment liquidity--Its not been a good year for them in some European countries.

Im not so sure I agree with your outlook ,but consumer staples would certainly be the right sector if your right IMO

[Valuegrowth]

Interesting you have mentioned financials as Ive heard banks are holding onto their reserves which is not helping with investment liquidity--Its not been a good year for them in some European countries.

Im not so sure I agree with your outlook ,but consumer staples would certainly be the right sector if your right IMO

Some banks stocks have taken enough punishment globally. The current selloff may have already priced for bad news or in an economic recession (highly unlikely). I see some upside potential for banks such as JPM(J.P. Morgan),GS(Goldman Sachs Group), BAC(Bank of America Corp ),C (Citigroup Inc,)MS( Morgan Stanley),BK( Bank of New York Mellon Corp.),CFG( Citizens Financial Group),Inc, and FITB(Fifth Third Bancorp).

In addition, there are attractive banking stocks in Asian frontier markets.

This is my opinion. Please don’t take this as an investment advice.

[bull....]

I wouldn't consider Friday a tanking apart from the techs, the vix implies a move of over 1% a day at the moment so Fridays action was a normal day in my opinion for most stocks

[Valuegrowth]

I wouldn't consider Friday a tanking apart from the techs, the vix implies a move of over 1% a day at the moment so Fridays action was a normal day in my opinion for most stocks

Yes I agree with you. Except for some tech stocks there were some support for other stocks. Some utilities (mainly telecommunications) and some consumer staples (mainly food related stocks) were big winners on Friday not only in the USA but also in small markets. They have more legs. Some of the winners in the USA on Friday were Tyson Foods (TSN) and PT Telekomunikasi Indonesia Tbk (TLK).

[bull....]

reading some posts here about the coming collapse of the global economy some of you might want to read this

http://www.newshub.co.nz/business/reserve-bank-wary-of-deposit-insurance-proposal-2016020513#axzz3zV80Xwy4

after reading that I wonder where you will store your money now? is cash really king lol

[Valuegrowth]

It is a very intersecting article. Cash will be king provided we park them at the correct places. Those who make use of cash wisely will make it king. Risk management comes into my mind. I can remember those who deposited their money in some financial institutions through out the world in the past. Even cash is not safe during period of economic crisis. Do not follow cash is king theory in this financial system. Keeping 100% cash is very risky.

There were so many predictions on collapse of globally economy in the past as well. Collapse of global economy means collapse of financial system as well. Money (cash) will become worthless. After commodity, we can expect some sort of collapse in overvalued property market .We can see collapse of some over valued currencies as well. These are not abnormal. .

On the other hand undervalued assets including undervalued stocks will have demand. Rather than collapsing global economy we may see readjustment of over valued assets. These types of thing will rebalance different types of markets. So we can see sustainable development. If we don’t see those readjustments then we might see another bubble.

Year of 2016 is another great opportunity for value investors.

This is my view. Don’t take it as an investment advice.

[Beagle]

http://www.cnbc.com/2016/02/05/citi-world-economy-trapped-in-death-spiral.html Not sure I concur with Citi's prognosis but an interesting clip and perspective nonetheless.

[Valuegrowth]

Yes. It is also very interesting one. We have to wait and see until end of this year to find out some results.


http://www.bloomberg.com/news/videos/2016-01-15/is-now-an-opportune-moment-for-non-u-s-equities-


Is Now an Opportune Moment for Non-U.S. Equities


http://www.bloomberg.com/news/articles/2016-02-05/oil-gas-loans-not-likely-to-choke-big-u-s-banks-moody-s-says


Oil, Gas Loans Not Likely to Choke Big U.S. Banks, Moody's Says


http://www.cnbc.com/2016/02/05/is-now-the-right-time-to-buy-european-banks.html


Is now the right time to buy European banks?


http://itsourfuture.org.nz/top-ten-predictions-2016/


Top Ten Predictions 2016

[NZSilver]

dow down a casual 400 points....

[skid]

I wouldn't consider Friday a tanking apart from the techs, the vix implies a move of over 1% a day at the moment so Fridays action was a normal day in my opinion for most stocks

Combine that with Monday and its starting to look a bit bleaker (mind you the Dow has a habit of diving and recovering right on the home stretch)

[skid]

Yes. It is also very interesting one. We have to wait and see until end of this year to find out some results.


http://www.bloomberg.com/news/videos/2016-01-15/is-now-an-opportune-moment-for-non-u-s-equities-


Is Now an Opportune Moment for Non-U.S. Equities


http://www.bloomberg.com/news/articles/2016-02-05/oil-gas-loans-not-likely-to-choke-big-u-s-banks-moody-s-says


Oil, Gas Loans Not Likely to Choke Big U.S. Banks, Moody's Says


http://www.cnbc.com/2016/02/05/is-now-the-right-time-to-buy-european-banks.html


Is now the right time to buy European banks?


http://itsourfuture.org.nz/top-ten-predictions-2016/


Top Ten Predictions 2016

Duechbank down 30% this year so Europeon banks a worry(Its always hard to interpret a bargain from a nightmare)--US banks are better(thank goodness) they have already had their bailouts

[bull....]

Combine that with Monday and its starting to look a bit bleaker

only if you own financials , technology , materials , energy although energy is performing today , financial are really sick

utilities , telecoms , gold or gold stocks all continue to perform

[bull....]

if the s&p holds above 1846 - 47 on close maybe hope?

[Yeshiva]

Would it not be better to have a short sharp shock to the markets (eg, a 5% drop in a day to shake out those who are panicking) rather than having some slow meaning bear that gradually declines?

[bull....]

big rally into the close

[Southern_Belle]

Oversold bounce.

[bull....]

Oversold bounce.

or setting up for a rally tomorrow?

[Southern_Belle]

Going to be stock specific IMHO. Where there is change there is opportunity. ....hold tight for the ride.

[Hoop]

Would it not be better to have a short sharp shock to the markets (eg, a 5% drop in a day to shake out those who are panicking) rather than having some slow meaning bear that gradually declines?

Forget the media...
These drops from last years highs are not investors exiting in panic..It is an orderly withdrawl of sane investors realising their capital gain...The people who use the word panic are usually those investors still "in" feeling the pain and refuse to believe the party may be over..Often during a bull market correction these investors are proved as being right and so create their "expert "status...At Stage 1 Bear market cycle (I think most markets are in this position now ..not NZX50 still Bull) the majority of investors still think selling out is a mistake and use their "expert" status again to criticise the sellers..The media noise from this majority is deafening............with each down wave of this new Bear cycle these investors become fewer and fewer in numbers and their voices become less audible within the media...Media could be considered as a lagging indicator...

Panic occurs much later on in the bear market cycle and that panic and fear irrational behaviour pushes the stock to ridiculously low valuations such as normalised PE Ratio of 5 or below..

so I'm amused at the moment when people say panic...I assume they haven't experienced a bear market cycle because if they had they would know the true meaning of panic

[skid]

Forget the media...
These drops from last years highs are not investors exiting in panic..It is an orderly withdrawl of sane investors realising their capital gain...The people who use the word panic are usually those investors still "in" feeling the pain and refuse to believe the party may be over..Often during a bull market correction these investors are proved as being right and so create their "expert "status...At Stage 1 Bear market cycle (I think most markets are in this position now ..not NZX50 still Bull) the majority of investors still think selling out is a mistake and use their "expert" status again to criticise the sellers..The media noise from this majority is deafening............with each down wave of this new Bear cycle these investors become fewer and fewer in numbers and their voices become less audible within the media...Media could be considered as a lagging indicator...

Panic occurs much later on in the bear market cycle and that panic and fear irrational behaviour pushes the stock to ridiculously low valuations such as normalised PE Ratio of 5 or below..

so I'm amused at the moment when people say panic...I assume they haven't experienced a bear market cycle because if they had they would know the true meaning of panic

agree--they would have at least had to have been around for the GFC party some years back.--That was kind of ''share market behavior 101'' for beginers,who now know the meaning of what can happen.

it is interesting this pattern of the Dow tanking big time in the middle of the day to then pulling out (somewhat) at the end (usually enough to change the headlines for the day .

Must say ..the European banks do make me a bit cautious--Its far better to have a share market crash ,than a banking crash.--(I personally believe the former would cause the latter ..but thats just me. (I dont need to tell those to DYOR...Hell, even if you do ,things are so unpredictable atm you could easily go astray.)

[skid]

Geez--you gotta feel for the Japanese---They have gone to negative interest rates and are still down over 5% today. I seem to remember they have tried quantitative easing as well.

They import all their oil--you would think that this would be a good time for them.:confused:

[kura]

While I'm not a big TA fan, I do like the guys blunt comments http://tradingdiary.incrediblecharts.com/2016-02-09-markets-gold.php

[bull....]

yep supports now broken 16k dow - S&p 500 1867 , 47 looks like the big sideways channel could play out dow 14000

I don't think nz will be able to buck this trend for much longer

[Major von Tempsky]

India is growing strongly, China has been telling fibs and making it's data up, the USA is growing reasonably, Western countries are growing, hold on and logic will prevail.

[Daytr]

There was an interesting piece on CNBC this morning is that negative or zero rates creates a psychology of fear with consumers and particularly retirees. Give them an income steam I.e. some interest & they will feel more confident abut spending.


Geez--you gotta feel for the Japanese---They have gone to negative interest rates and are still down over 5% today. I seem to remember they have tried quantitative easing as well.

They import all their oil--you would think that this would be a good time for them.:confused:

[Daytr]

Or take money off the table and look to re-enter when you think things have recovered. If there is an oil related debt crisis which at this point must have a high probability of unfolding, then things will get a lot worse before they get better.
I shifted all my super out of equities some time ago into a mixture of cash and property.
Been shorting equities & oil for over a year.
In the long term you maybe right, but it depends what equities you are holding.
Banks? Absolute loser at this point. Energy related stocks the same.
By the way China isn't the only one that has been telling fibs, they are learning from the best, the US.
4.9% unemployment ! Yeah right!
Participation rate is much bester indication and that is at 62%ish. Down from around 67.5% at its peak.
That is a loss of around 10M jobs!


India is growing strongly, China has been telling fibs and making it's data up, the USA is growing reasonably, Western countries are growing, hold on and logic will prevail.

[Daytr]

With oil tanking again you have to think any rally in global equities will be capped as crude producing nations sovereign wealth funds sell their equity holdings to make up for the loss in revenue from crude. Sovereign wealth funds were major drivers on the way up as higher oil meant they had money piling in day after day to buy stocks. Now many of them are having to return funds to governments to fund their budget deficits .


agree--they would have at least had to have been around for the GFC party some years back.--That was kind of ''share market behavior 101'' for beginers,who now know the meaning of what can happen.

it is interesting this pattern of the Dow tanking big time in the middle of the day to then pulling out (somewhat) at the end (usually enough to change the headlines for the day .

Must say ..the European banks do make me a bit cautious--Its far better to have a share market crash ,than a banking crash.--(I personally believe the former would cause the latter ..but thats just me. (I dont need to tell those to DYOR...Hell, even if you do ,things are so unpredictable atm you could easily go astray.)

[dobby41]

China has been telling fibs and making it's data up,

China has been telling fibs for years.
They get their results out within weeks of the closing quarter!

[bull....]

or setting up for a rally tomorrow?

nice buying yesterday and holding those levels still hope but watch the levels

[BlackPeter]

India is growing strongly, China has been telling fibs and making it's data up, the USA is growing reasonably, Western countries are growing, hold on and logic will prevail.

Major, I think you are right ... in the long term. Doesn't stop markets though to go lower before they come up again.

[Leftfield]

Finding the bottom??

http://www.bloomberg.com/news/articles/2016-02-09/a-stronger-jobs-outlook-at-builders-and-factories-alleviates-u-s-recession-fears

[bull....]

In the US I believe they are going to be conducting new stress testing on the banks shortly for a negative rate environment.
Bond yields went negative in japan last night to so japan and a large part of Europe is now in a negative rate environment soon to be followed by US? maybe NZ and Aust lol should just say the world a

Don't know how people will feel when banks start charging you to deposit your money with them

[dobby41]

Don't know how people will feel when banks start charging you to deposit your money with them

Not happy but they will be happier when banks start paying you to have a mortgage :-)

[skid]

In the US I believe they are going to be conducting new stress testing on the banks shortly for a negative rate environment.
Bond yields went negative in japan last night to so japan and a large part of Europe is now in a negative rate environment soon to be followed by US? maybe NZ and Aust lol should just say the world a

Don't know how people will feel when banks start charging you to deposit your money with them

Of course the public would be pretty POd..but looking at it another way ,they are then more of less trying to force people not to save and throw their money into the share market,etc.--It may work, or it may make people want to hold on to their dosh all the more (if they are trying to force me there must be something wrong )

US markets looked very much like investors looking for a rally to unload.-----Lets see what Janet comes up with(we know there wont be an increase in interest ...but what words will she use?....Meanwhile earnings coming in..

[Hoop]

Not happy but they will be happier when banks start paying you to have a mortgage :-)

The above situation occurs when deflation sets in..thats if the banks are forced to lend by regulation rather than hoard money...

The USA hasn't had a decent period of deflation for quite some time...amazing considering we are in and experiencing the 3rd Industrial Revolution (deflationary)

https://upload.wikimedia.org/wikipedia/commons/thumb/2/20/US_Historical_Inflation_Ancient.svg/400px-US_Historical_Inflation_Ancient.svg.png

[skid]

Not happy but they will be happier when banks start paying you to have a mortgage :-)

Of course you know that will never happen...but its a weird thought to think that banks would be charging you for both putting money in and borrowing!

Some speak of changing over to a cashless society to prevent money hoarding--(of course they would say its to prevent money laundering)

[sb9]

Seems as though the afternoon blues hitting markets, all modest gains both here and across ditch from this morning have fizzed out....

[bull....]

US markets looked very much like investors looking for a rally to unload.-----Lets see what Janet comes up with(we know there wont be an increase in interest ...but what words will she use?....Meanwhile earnings coming in..

yes big night tonight make or break

[Hoop]

Of course you know that will never happen..........
It's already happened :D :D......... Denmark ...

Quote Wall St Journal 8th Dec 2015 {http://www.wsj.com/articles/less-than-zero-living-with-negative-rates-1449621094} (http://www.wsj.com/articles/less-than-zero-living-with-negative-rates-1449621094)
"....And other peculiar consequences are sprouting. In Denmark, thousands of homeowners have ended up with negative-interest mortgages. Instead of paying the bank principal plus interest each month, they pay principal minus interest....."

[workingdad]

It's already happened :D :D......... Denmark ...

Quote Wall St Journal 8th Dec 2015 {http://www.wsj.com/articles/less-than-zero-living-with-negative-rates-1449621094} (http://www.wsj.com/articles/less-than-zero-living-with-negative-rates-1449621094)
"....And other peculiar consequences are sprouting. In Denmark, thousands of homeowners have ended up with negative-interest mortgages. Instead of paying the bank principal plus interest each month, they pay principal minus interest....."


What a great time to increase ones mortgage :cool:

Interesting headline in the Herald typical of the media.... 'ASB on alert as credit risk fears hit Australian banks', actually read the article and here is the context of it

Michael McCarthy, chief market strategist at CMC Markets, said the idea that banks were facing a liquidity crisis was "absurd".
"We are at historic levels of stimulus from central banks around the globe - there's never been so much money sloshing around the monetary system," McCarthy said.
Investors had a relentless focus on risks at present, he said, and shareholders in the Australian banks were simply responding to "price action".
"They're seeing [the stocks] go down; they're not understanding the argument but they're selling anyway," McCarthy said.
"Just as a crowd can riot, a sharemarket can sell off for no good reason."
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11587689

I really think the media have a big part in stoking the fire of doom and gloom.

[dobby41]

I really think the media have a big part in stoking the fire of doom and gloom.

Media drive things up and down - whatever sells papers!
Unfortunately the herd follows.

[JohnnyTheHorse]

Increasing talks of negative rates in the US (but still unlikely at this stage I would think) - we may see high dividend producing stocks outperform the market significantly.

[bull....]

not very promising price action after aunty janet spoke.

Ill be watching japan now I believe the Chinese are really cranking up the screws

[BlackCross]

http://www.ft.com/cms/s/0/b4a763ba-cfe2-11e5-831d-09f7778e7377.html#ixzz3znk77rDC

Exerts from todays article on banks...

.....

This manifests its worst effect on the banks through the so-called yield curve — the extra yield available on long-term bonds compared with short-term bonds. Long-dated bond yields have fallen far more sharply than shorter term interest rates as markets have given way to deflation fears. Yields on 10-year treasuries now exceed yields on two-year notes by only 104 basis points, less than at any point during the crisis year of 2008. The yield curve is at its flattest in almost nine years.

This is dreadful news for banks,....

An extra factor comes from the Bank of Japan’s decision at the end of January to move to negative interest rates on some reserves. .....

The message the market appears to have heard is that not only the BoJ but any central bank can keep stimulating the economy by cutting rates further into negative territory. Mainstream research is feeding into this, with the economics team at JPMorgan producing on Tuesday a research paper titled: “Negative policy rates: The bound is lower than you think”. Based on experience in Japan, it suggested rates could drop as low as -4.5 per cent in the Eurozone, and -1.3 per cent in the US. As rates this negative would be surpassingly hard for banks to pass on to consumers, that damages their profit outlook further.

All of this damages banks because other potential sources of profits have been closed off.....
If the US were to slip into recession, as many now speculate, this would be bad for banks’ profits.

Is there an opportunity here? Probably. ..... After such a sharp fall, some short-term rebound at some point soon is likely.
But in the longer term, the sell-off reflects risks that are real and difficult to measure. ....... There will be profits to be made from this scare at some point in the future, but there is no harm in waiting for them.
authers@ft.com

[bull....]

nz market looking negative break below 6000 wont be good, top 10 index nearing new lows , divergences and breadth looking weak ive gone from 195% invested to 65% cash in the last week

[winner69]

nz market looking negative break below 6000 wont be good, top 10 index nearing new lows , divergences and breadth looking weak ive gone from 195% invested to 65% cash in the last week

We aren't immune are we bull

The beta of the NZX over global shares is about O.6% (monthly) . Global shares go up/down 1% NZX goes up/down 0.6%

[xafalcon]

nz market looking negative break below 6000 wont be good, top 10 index nearing new lows , divergences and breadth looking weak ive gone from 195% invested to 65% cash in the last week

I am interested in why you have sold out on the eve of NZ reporting season. Were you not expecting good results from many of the companies you held shares in?

My feeling is that NZ results are likely to meet/exceed previous expectations for many companies, so I see upward potential at current SP's

[Leftfield]

nz market looking negative break below 6000 wont be good, top 10 index nearing new lows , divergences and breadth looking weak ive gone from 195% invested to 65% cash in the last week

'Scuse my ignorance…. but "195% invested'? I take it that you were loaned/leveraged to get to that position??

[bull....]

I am interested in why you have sold out on the eve of NZ reporting season. Were you not expecting good results from many of the companies you held shares in?

My feeling is that NZ results are likely to meet/exceed previous expectations for many companies, so I see upward potential at current SP's

results are already factored in , will only rise if unexpected surprise ,, only reason to hold now is for dividends

[bull....]

'Scuse my ignorance…. but "195% invested'? I take it that you were loaned/leveraged to get to that position??

ive been double leveraged since 2008 loan on house + margin loan on that loan very risky but I was confident in my conviction has worked out well last 7 yrs time to sit back now and see how things play out

[skid]

It's already happened :D :D......... Denmark ...

Quote Wall St Journal 8th Dec 2015 {http://www.wsj.com/articles/less-than-zero-living-with-negative-rates-1449621094} (http://www.wsj.com/articles/less-than-zero-living-with-negative-rates-1449621094)
"....And other peculiar consequences are sprouting. In Denmark, thousands of homeowners have ended up with negative-interest mortgages. Instead of paying the bank principal plus interest each month, they pay principal minus interest....."


WOW! (I though I read some where the banks wouldnt do that with Mortgages:confused:

[skid]

http://www.ft.com/cms/s/0/b4a763ba-cfe2-11e5-831d-09f7778e7377.html#ixzz3znk77rDC

Exerts from todays article on banks...

.....

This manifests its worst effect on the banks through the so-called yield curve — the extra yield available on long-term bonds compared with short-term bonds. Long-dated bond yields have fallen far more sharply than shorter term interest rates as markets have given way to deflation fears. Yields on 10-year treasuries now exceed yields on two-year notes by only 104 basis points, less than at any point during the crisis year of 2008. The yield curve is at its flattest in almost nine years.

This is dreadful news for banks,....

An extra factor comes from the Bank of Japan’s decision at the end of January to move to negative interest rates on some reserves. .....

The message the market appears to have heard is that not only the BoJ but any central bank can keep stimulating the economy by cutting rates further into negative territory. Mainstream research is feeding into this, with the economics team at JPMorgan producing on Tuesday a research paper titled: “Negative policy rates: The bound is lower than you think”. Based on experience in Japan, it suggested rates could drop as low as -4.5 per cent in the Eurozone, and -1.3 per cent in the US. As rates this negative would be surpassingly hard for banks to pass on to consumers, that damages their profit outlook further.

All of this damages banks because other potential sources of profits have been closed off.....
If the US were to slip into recession, as many now speculate, this would be bad for banks’ profits.

Is there an opportunity here? Probably. ..... After such a sharp fall, some short-term rebound at some point soon is likely.
But in the longer term, the sell-off reflects risks that are real and difficult to measure. ....... There will be profits to be made from this scare at some point in the future, but there is no harm in waiting for them.
authers@ft.com

So Im a bit miffed at the news item last night saying interest rates may rise because foreign banks are charging more and NZ has to borrow alot from overseas----This is like a Rubics cube trying to make sense of it all.

[skid]

ive been double leveraged since 2008 loan on house + margin loan on that loan very risky but I was confident in my conviction has worked out well last 7 yrs time to sit back now and see how things play out

Your very smart to get off that train--Keeping lots of equity in your house is a very smart move these days--Definitely want to protect that.

Those who are actually freehold have one less thing to worry about and you dont want to be owing heaps with deflation if it comes.
The basics for survival should be non negotiable if at all possible--whats left over is the stuff one has the luxury of speculating on--or to put more diplomatically -going for growth or profit.

....when I got up a bit earlier today and checked the markets,they were up a respectable amount(over 1% if I remember correctly)--these drastic endings are enough to make all take notice.

CHINA-So far they have not done what I thought they might...make some change while the market was closed so it couldnt react without a bit of time to get used to it--but now outside markets could spook them I suppose---''I suppose'' should be the catch phrase for this year so far.

i was happy to see the big bounce in Duetchbank in Germany (those banks make me uneasy)

Well...gotta go increase the equity in my house...(Im painting it:D)

[Leftfield]

ive been double leveraged since 2008 loan on house + margin loan on that loan very risky but I was confident in my conviction has worked out well last 7 yrs time to sit back now and see how things play out

Thanks Bull, I appreciate you sharing your strategy. For what it is worth, I once went down the leveraged path, but would never venture that way again. I'm sure you've made the right move to de-risk.

[Joshuatree]

"Anybody watching overseas markets will know that the Europeans are carking it after the report from Societe Generale. (What was so bad? Beats me.) SocGen currently down about -13% and everything seems to be following. Germany -2.81%, France -3.73%, London -2.6%. And Dow Futures down more than 300 points." GULP

[bull....]

key levels broken on charts now doesn't look good, bank shares pummelled again in Europe and us , Sweden lowers rates again to -.05% gold is going parabolic oil is tanking

[Valuegrowth]

Current situation is creating another great opportunity for value investors. Current sell off should ease by next week.

Despite selloff we find great individual wining stocks globally. It is time to find those types of stocks. Some food related stocks are great place to park some money. They have become safe heavens for global investors. They are the one going to break 52 weeks high and all time high due to earnings outlook.

[Entrep]

Current situation is creating another great opportunity for value investors. Current sell off should ease by next week.

What's happening next week?

[skid]

Current situation is creating another great opportunity for value investors. Current sell off should ease by next week.

Despite selloff we find great individual wining stocks globally. It is time to find those types of stocks. Some food related stocks are great place to park some money. They have become safe heavens for global investors. They are the one going to break 52 weeks high and all time high due to earnings outlook.

Well,that depends doesnt it?
When do you get to the tipping point where the landslide starts(except for things like Gold-up over 5%)
Yellen has finally increased interest rates and now there talk of negative short term rates.
They have done the experiment and the first attempt to get back to normal with a small interest increase (admittedly along with oil) has blown up in their face.
Buying into this market is pretty rash IMO,at the very least,in terms of the fact that the real bargains may be yet to come.
Many say the US market is still overvalued -especially if our value system needs to be ''reset''--(gets into the interesting question of how value is determined)
Might be a good time to set aside our preconceived ideas about value until things take their course and we see if our present day way of working this out is still the norm.
A good company that goes down 20% is still a good company in a market that has gone down 40%-(Everything is just valued less)
We can only guess at this stage.

Disc-the Dow is continuing its habit of falling big time in the middle of the day and then gaining back in the end--so it aint over till the fat lady sings --still 50min to go..

[bull....]

Disc-the Dow is continuing its habit of falling big time in the middle of the day and then gaining back in the end--so it aint over till the fat lady sings --still 50min to go..

Really funny is the word, the S&P 500 was going to break below 1811 lows would have seen losses excelerate and all of a sudden a headline hits about oil meeting lol right at that moment that causes the markets to rally big time.

coincidence? or what?

[Hoop]

Really funny is the word, the S&P 500 was going to break below 1811 lows would have seen losses excelerate and all of a sudden a headline hits about oil meeting lol right at that moment that causes the markets to rally big time.

coincidence? or what?

or what.....All to do with market physics.....Oil prices in the $20's (and $30's) is destructive ... $110 Trillion asset reserve valuation in the Oil market is a large number and if these low oil price levels persist for the longer term there will be a world wide financial meltdown.

[winner69]

......Many say the US market is still overvalued -especially if our value system needs to be ''reset''--(gets into the interesting question of how value is determined)
..

I always find this chart from Crestmont fascinating

Valuations are driven from expectations (usually earnings. eps)

The chart shows that expectations are generally very bullish and often actuality ends up a lot lower

Just look at the 2015 line - 18 months ago the S&P500 earnings forecast was 145 - the forecast has been gradually lowered and and will come in around 91. Earnings actually 40% lower than what was forecasted 18 months ago.

The 2016F line starting to creep down as well.

Even if 2016 comes in with an eps of 100 and historical secular bear trends play out and the PE ratio goes sub 10 than the S&P at 1000 is not beyond the bounds of probability

Just as well this time is different eh

[xafalcon]

or what.....All to do with market physics.....Oil prices in the $20's (and $30's) is destructive ... $110 Trillion asset reserve valuation in the Oil market is a large number and if these low oil price levels persist for the longer term there will be a world wide financial meltdown.

Oil prices in the $20's (and $30's) is highly stimulatory for the vast majority of the world. Much of the money that would have been spent on oil products (when $100/bbl) is now free to be spent elsewhere. More & better food, consumer goods, holidays, hobbies etc.

Global growth will accelerate from what it would have been at higher oil prices, which will help accelerate the recovery from GFC

The only looser is emissions reductions

[winner69]

This guy been around as long as me

http://www.radionz.co.nz/audio/player/201788972

[winner69]

Oil prices in the $20's (and $30's) is highly stimulatory for the vast majority of the world. Much of the money that would have been spent on oil products (when $100/bbl) is now free to be spent elsewhere. More & better food, consumer goods, holidays, hobbies etc.

Global growth will accelerate from what it would have been at higher oil prices, which will help accelerate the recovery from GFC

The only looser is emissions reductions

And once the mess shorted out and the distressed production bought at $30 or less profit levels future production cost base is $30 eh - plenty of oil and zillions of profits

[skid]

Oil prices in the $20's (and $30's) is highly stimulatory for the vast majority of the world. Much of the money that would have been spent on oil products (when $100/bbl) is now free to be spent elsewhere. More & better food, consumer goods, holidays, hobbies etc.

Global growth will accelerate from what it would have been at higher oil prices, which will help accelerate the recovery from GFC

The only looser is emissions reductions

Im afraid that is not the only loser--whole developing countries are facing possible bankruptcy,not to mention a few larger economies that are also having a rough time -Russia-even Saudi Arabia.
The problem with your premise IMO is that you are not thinking Globally--Whole countries used to be able to pay their bills and now that is in doubt. Many economies are slowing ,which means the hunger for oil has decreased as well.
That money that is now free to be spent elsewhere pales in comparison.

Have a look at the world markets
http://money.cnn.com/data/world_markets/europe/

air New Zealand..a well run company with good numbers that benefits from cheap oil is down 5% today

I would describe that as ..collateral damage

[percy]

With the schools back Percy is back selling books.[with renewed vigour]
So far sales are great.
With lower petrol prices my biggest overhead, petrol has just come down very nicely.
I feel I am "well positioned" for another fantastic year.

[vin]

With the schools back Percy is back selling books.[with renewed vigour]
So far sales are great.
With lower petrol prices my biggest overhead, petrol has just come down very nicely.
I feel I am "well positioned" for another fantastic year.

May I ask what you're holding percy?

[Jinx]

I must say, as a new investor I really seemed to have entered the market with terrible timing. With global markets looking the worst they have since 2008 and banks introducing negative interest rates its a bleak looking future :(

[macduffy]

I must say, as a new investor I really seemed to have entered the market with terrible timing. With global markets looking the worst they have since 2008 and banks introducing negative interest rates its a bleak looking future :(

But wait!

Could this chap have something here?

http://www.mauldineconomics.com/the-10th-man/whip-deflation-now

[percy]

May I ask what you're holding percy?

NZ stocks;AIA,AIR,AWK,CVT,EBO,FPH,HBL,MEL,RYM,SCL,SEK ,SKL,SUM,TIL,TNR.

[Jinx]

But wait!

Could this chap have something here?

http://www.mauldineconomics.com/the-10th-man/whip-deflation-now

I'll take the positivity but based on the last two weeks of NZX performance I'm still shaking in my boots

[winner69]

But wait!

Could this chap have something here?

http://www.mauldineconomics.com/the-10th-man/whip-deflation-now

I enjoy Jared's weekly rave

More often than not he's right

[skid]

I must say, as a new investor I really seemed to have entered the market with terrible timing. With global markets looking the worst they have since 2008 and banks introducing negative interest rates its a bleak looking future :(

Its very simple...You've just chosen the wrong avatar name

[Jinx]

Its very simple...You've just chosen the wrong avatar name

How did I not think of that, silly mistake. Will be doomed forever

[xafalcon]

Im afraid that is not the only loser--whole developing countries are facing possible bankruptcy,not to mention a few larger economies that are also having a rough time -Russia-even Saudi Arabia.
The problem with your premise IMO is that you are not thinking Globally--Whole countries used to be able to pay their bills and now that is in doubt. Many economies are slowing ,which means the hunger for oil has decreased as well.
That money that is now free to be spent elsewhere pales in comparison.

Have a look at the world markets
http://money.cnn.com/data/world_markets/europe/

air New Zealand..a well run company with good numbers that benefits from cheap oil is down 5% today

I would describe that as ..collateral damage

These are simply market pressures, no different to any other traded goods or commodities.

Lower prices will guide economic diversification, reform market distortions through removal of subsidies, improve efficiencies, drive structural economic changes etc

There may be pain along the way for some companies / countries with large exposure to oil EXTRACTION, but the world will see a net improvement as a result of low oil prices since consumers >> producers

As you must know, oil prices were around US$10/bbl at the end of the century, after the peaks of the 70's oil shocks. The world did not stop when oil prices were comparatively low, growth flourished. The same will happen in this oil price cycle. It was just the stimulus the world economy needed

We have been living in an OPEC supply constrained market for so long now, most have forgotten this is an artificial construct. Since shale hydraulic fracturing released more oil to the market, the supply side constraint has been removed. We are finally in a "real" crude oil market.

The equity markets are risk sensitive right now, and looking for things to blame. Oil and banks seem to be this weeks target

[King1212]

How did I not think of that, silly mistake. Will be doomed forever

I really like it, even on bear market like now, you all still have good sense of humour!:)

[mfd]

I'll take the positivity but based on the last two weeks of NZX performance I'm still shaking in my boots

If you've just started investing, this is good news, right? You'll be a net buyer of shares for years or decades presumably, them being cheaper is great news for you. Anything else you buy in your everyday life that you want to be more expensive?

[skid]

These are simply market pressures, no different to any other traded goods or commodities.

Lower prices will guide economic diversification, reform market distortions through removal of subsidies, improve efficiencies, drive structural economic changes etc

There may be pain along the way for some companies / countries with large exposure to oil EXTRACTION, but the world will see a net improvement as a result of low oil prices since consumers >> producers

As you must know, oil prices were around US$10/bbl at the end of the century, after the peaks of the 70's oil shocks. The world did not stop when oil prices were comparatively low, growth flourished. The same will happen in this oil price cycle. It was just the stimulus the world economy needed

We have been living in an OPEC supply constrained market for so long now, most have forgotten this is an artificial construct. Since shale hydraulic fracturing released more oil to the market, the supply side constraint has been removed. We are finally in a "real" crude oil market.

The equity markets are risk sensitive right now, and looking for things to blame. Oil and banks seem to be this weeks target

Yep ,eventually it will work itself out,if you dont mind the real chance of the carnage along the way. Two big things are at play here ,Oil and China (in a backdrop of an economy that has become an experiment in progress)--unlike the turn of the century.
I personally think your downplaying the importance of oil,but time will tell.

[Baa_Baa]

Technically, NZX two daily closes below 6000 looks bad but it's free-fallen through recent supports as well, including the rising trend line from the August lows, and closed below 5950 support at 5927 (but just above the 200MA). NZX finally catching up with the global equities sentiment?

[Beagle]

Technically, NZX two daily closes below 6000 looks bad but it's free-fallen through recent supports as well, including the rising trend line from the August lows, and closed below 5950 support at 5927 (but just above the 200MA). NZX finally catching up with the global equities sentiment?

Yes I think so. Watch the big European banks. It would seem the market believes they're carrying a lot of zombie debt they not disclosing properly. If they continue to tank this bear could have some real teeth AND claws.

[fungus pudding]

If you've just started investing, this is good news, right? You'll be a net buyer of shares for years or decades presumably, them being cheaper is great news for you. Anything else you buy in your everyday life that you want to be more expensive?

I read somewhere that most people prefer to wait until they're not so cheap.

[Daytr]

I agree Skid. So much of the global economy has been based on oil for so long and this structural change is going to hurt. This is the first time in history that lower oil prices are hurting the global economy. There is now so much disparity in production cost that was artificial and also debt funded. Before OPEC was the swing producer now its high cost production that will go broke. Oil consumption in my view is likely to start dropping in the next 5 years as electric vehicles make inroads into the car market.


Yep ,eventually it will work itself out,if you dont mind the real chance of the carnage along the way. Two big things are at play here ,Oil and China (in a backdrop of an economy that has become an experiment in progress)--unlike the turn of the century.
I personally think your downplaying the importance of oil,but time will tell.

[trader_jackson]

300 point rally? WTI up 12.3%? (one of the best gains since 2009), maybe the market is beginning to match up with the fundamentals (which in my view are far better than stock prices would indicated...)

[percy]

I can't help thinking that lower oil prices will benefit the world economy more than quantitative easing.
Lower petrol prices,lower plastic prices,cheaper resins,cheaper hair products,asphalt,detergents,packaging,cheaper transportation.And so the list continues.Lower pump prices mean more money for NZders to spend.
Another sector to benefit will be tourism. A German tourist coming to NZ will benefit from our low $, his flight to NZ will be lower,his fuel bill will be a lot lower for his rental vehicle.As it becomes more affordable,so the number of tourists will increase.
I think the NZ economy will benefit in a big way as a lot of people are employed in the tourist sector.

[skid]

I can't help thinking that lower oil prices will benefit the world economy more than quantitative easing.
Lower petrol prices,lower plastic prices,cheaper resins,cheaper hair products,asphalt,detergents,packaging,cheaper transportation.And so the list continues.Lower pump prices mean more money for NZders to spend.
Another sector to benefit will be tourism. A German tourist coming to NZ will benefit from our low $, his flight to NZ will be lower,his fuel bill will be a lot lower for his rental vehicle.As it becomes more affordable,so the number of tourists will increase.
I think the NZ economy will benefit in a big way as a lot of people are employed in the tourist sector.

I think that is true,Percy if oil is still cheap,but not extremely cheap (to the point that it brings down developing countries who depend on it and affects banks that are heavily involved) Somewhere around the $50 mark where its still a good deal for the things you suggest,but not at the expense of the reasons I suggested. (its not a great thing for countries to fall over for many reasons).--I get the feeling that those who are thinking of the benefits are not considering this--They are thinking of how things look in their western country--Its easy for us to get an insular frame of mind but we are better off IMO if everyone is looked after(at least on a basic economic survival level)

These wild swings are typical in this kind of economic (most say Bear)markets overseas--expect more

Shanghai will open on Monday so they will be in the mix this week

[winner69]

300 point rally? WTI up 12.3%? (one of the best gains since 2009), maybe the market is beginning to match up with the fundamentals (which in my view are far better than stock prices would indicated...)

t_j - how can fundamentals be as good as you think when currently there is an earnings recession (S&P earnings) - the last 3 quarters earnings been down year on year

[skid]

300 point rally? WTI up 12.3%? (one of the best gains since 2009), maybe the market is beginning to match up with the fundamentals (which in my view are far better than stock prices would indicated...)

i agree with winner--Also keep in mind that this whole post GFC has been a fiscal experiment that has yet to prove itself--Yellen finally raised interest rates in an attempt to return to normalcy and look what has happened ,now that markets are not getting the free ride of QEs.
Successful,gradual raising of interest rates by the Fed is what will show if this scheme has worked ..or not-(along with good solid earnings as winner suggested)-Its very easy to think it can go on forever(injecting money) but it cant,the debt repercussions will catch up at some point---They know this ..thats why they are doing it(interest rates)--Ten years ago would you have ever dreamed that countries would desperately be trying to achieve inflation?

OPEC has agreed to try to achieve some cutbacks in oil production,(which is what has caused this rally)but their are alot more players involved now that are desperate so we will see how that goes.

[trader_jackson]

earnings has generally been in line with expectations, some above, some below. Looking at several underlying indicators (in both NZ and the US) are looking good (particularity relative to how world markets are reacting) ... manufacturing activity, retail sales, employment data

It is hard to say "things are terrible" when several 'bottom line' indicators are looking good, and this could show in the next quarter.

[skid]

earnings has generally been in line with expectations, some above, some below. Looking at several underlying indicators (in both NZ and the US) are looking good (particularity relative to how world markets are reacting) ... manufacturing activity, retail sales, employment data

It is hard to say "things are terrible" when several 'bottom line' indicators are looking good, and this could show in the next quarter.

http://www.bloomberg.com/news/articles/2015-11-04/this-is-the-worst-u-s-earnings-season-since-2009

http://www.marketwatch.com/story/woeful-earnings-threaten-to-intensify-stock-market-bloodbath-2016-01-15

[trader_jackson]

From what I have seen, the big earning season drop is mainly thanks to energy and materials sector, with other sectors expecting a drop, but only in the very low single digits, and some continuing to improve - it could not be further from the truth to assume every sector is going backwards, something truly indicative of a recession.

The first article, that is about 3 months old, mentions: "When compared with analyst expectations, about 72 percent of companies have beaten profit forecasts. That's only because the consensus has been sharply cut in the past few months." Even if the consensus has been sharply cut, clearly things were no where near as bad as the 'consensus' believed.

The (potentially) more accurate and more recent retail sales, employment data and manufacturing activity would suggest things are not going backwards, rather just stumbling along, which would not be a surprice given the low inflation environment we are in... certainly not falling off a cliff.

http://www.fxstreet.com/analysis/indices-insider/2016/02/01/05/

"The energy sector is currently reporting a -78.6% decline in profits from last year, driven heavily by a -35.9% drop in revenues; the equivalent numbers for the materials sector are -24.7% and -14.9%. On the other side of the coin, the Telecom (+28.1% earnings growth and +11.9% revenue growth) and Health Care (+7.2% and +7.7%) sectors are outperforming"

"According to the earnings mavens at FactSet, the “blended” (combining actual results from companies that have already reported and estimated results for companies yet to report) earnings decline is tracking at -5.8% year-over-year, with the blended revenue decline currently coming in at -3.5% y/y.

"Analysts do expect earnings and revenue growth to return in the first half of this year, though traders are understandably skeptical until results actually start to improve"

Alot of the disappointing US earnings results has been heavily impacted by the US dollar strength, not necessarily by a 'world slow down' and although I haven't bothered working out sales of every S&P 500 company converted with 'last years' exchange rate, it would probably look significantly better. Also good to note than analysts expect things to improve, something I'm not surprised at as global oil prices stabilize and US companies further get use to a high(er) exchange rate.

[winner69]

http://www.bloomberg.com/news/articles/2015-11-04/this-is-the-worst-u-s-earnings-season-since-2009

http://www.marketwatch.com/story/woeful-earnings-threaten-to-intensify-stock-market-bloodbath-2016-01-15

That chart (Bloomberg link) is pretty telling - esp if we put another down quarter for dec15 and the likelihood of a down Mar16 quarter.

Analysts expect ions are positive - did you like that chart I posted yesterday showing how the analyst earnings expectations are generally pretty useless.

[winner69]

t_j - an "earnings recession" indicates that the recovery since the last recession is running out of steam - and they are often a prequel to the next full-blown recession.

Earnings decline in an over valued market not good

[skid]

300 point rally? WTI up 12.3%? (one of the best gains since 2009), maybe the market is beginning to match up with the fundamentals (which in my view are far better than stock prices would indicated...)

Maybe I misunderstood you TJ--This post gives the impression you think the fundamentals are good (rather than not that bad or only some are terrible) ---Granted stock prices have been pretty bad so even not so good fundamentals might look ok.--but if you think the fundamentals of the US economy are good ,then I would disagree,even though its not a recession at this stage.

Is this recent enough for you?
http://www.marketwatch.com/story/earnings-outlook-is-getting-even-worse-as-first-quarter-expectations-tumble-2016-02-12?mod=MW_story_latest_news

Note....--The energy sector is looking worst, but all 10 S&P 500 sectors are facing lower expected earnings-growth rates for the first quarter than at the end of September

[trader_jackson]

Maybe I misunderstood you TJ--This post gives the impression you think the fundamentals are good (rather than not that bad or only some are terrible) ---Granted stock prices have been pretty bad so even not so good fundamentals might look ok.--but if you think the fundamentals of the US economy are good ,then I would disagree,even though its not a recession at this stage.

Is this recent enough for you?
http://www.marketwatch.com/story/earnings-outlook-is-getting-even-worse-as-first-quarter-expectations-tumble-2016-02-12?mod=MW_story_latest_news

Note....--The energy sector is looking worst, but all 10 S&P 500 sectors are facing lower expected earnings-growth rates for the first quarter than at the end of September

The share market has priced in a recession already, and yet the US economy is really not near that stage, nor showing signs of heading for a recession, just a slow down. The US fundamentals are good, compared to what the share market is saying...

[winner69]

The share market has priced in a recession already, and yet the US economy is really not near that stage, nor showing signs of heading for a recession, just a slow down. The US fundamentals are good, compared to what the share market is saying...

.....but slowing quite dramatically

,
GDP growth was 3.9% in the spring, to 2.0% in the summer, and forecast to be be 0.7% in autumn .......and then?

I don't agree with you a recession is currently "priced in"

[skid]

Recession priced in? Man, TJ, you gotta be joking :laugh:

[Tomtom]

I'd go with CAPE to look at current valuations and where we are in the business cycle.

[xafalcon]

I believe the US economy will behave very similarly to the NZ economy. Growth without inflation

We had 2 "false starts" before the apprpriate monetary conditions were established. The RB even hiked the interest rates 4 times for the second false start, only to fully reverse them the following year.

IMO The US economy is likely to follow a similar path, as the post-GFC economic settings required to achieve a 2% inflation rate appear quite different to what was established before the GFC. The US also has a low employment participation rate, so there are plenty of workers to fill vacancies without needing to offer higher pay rates and fuel inflation

The US monetary policy also considers growth and employment. So the FED really has a tougher job than our RB which is focused primarily on inflation

Janet's "pause" may be quite long, or will she be a hawk like our Graeme and push on regardless.

[Baa_Baa]

http://tradingdiary.incrediblecharts.com/trading_diary.php Colin has a knack .. and insight into China propping the Yuan, and other insights like re Aus Banks ... "Now is not the time to go bargain-hunting. What looks cheap today may be even cheaper tomorrow." Just his opinion of course, but always insightful.

[Baa_Baa]

I believe the US economy will behave very similarly to the NZ economy. Growth without inflation

We had 2 "false starts" before the apprpriate monetary conditions were established. The RB even hiked the interest rates 4 times for the second false start, only to fully reverse them the following year.

IMO The US economy is likely to follow a similar path, as the post-GFC economic settings required to achieve a 2% inflation rate appear quite different to what was established before the GFC. The US also has a low employment participation rate, so there are plenty of workers to fill vacancies without needing to offer higher pay rates and fuel inflation

The US monetary policy also considers growth and employment. So the FED really has a tougher job than our RB which is focused primarily on inflation

Janet's "pause" may be quite long, or will she be a hawk like our Graeme and push on regardless.

Most times is not about what you, I or anyone else thinks is 'causing' the situation, it's about understanding what the situation is, especially the situation that affects us each individually, and doing something about it. Doing nothing while explaining our views on why it's a problem or not a problem, as the case may be, is still doing nothing. While doing nothing is a valid strategy it may not be a good one when the situation is obviously not good.

[Baa_Baa]

The only sound reason for buying a stock is that it is rising in price. If that is happening, no other reason is required. If that is not happening, no other reason is worth considering. ~ Nicholas Darvas

[percy]

The only sound reason for buying a stock is that it is rising in price. If that is happening, no other reason is required. If that is not happening, no other reason is worth considering. ~ Nicholas Darvas

Do you think Warren Buffett would be following him on Facebook?...
I must admit I will not be...lol.

[winner69]

Quite a character that Nicholas Darvas

https://en.m.wikipedia.org/wiki/Nicolas_Darvas

Don't think Warren ever appearedt with Judy Garland or Bob Hope

[skid]

Do you think Warren Buffett would be following him on Facebook?...
I must admit I will not be...lol.

I appreciate Warrens achievements as much as the next guy,but he had a shocking year last year--Sometimes taking him as the Gospel can be good and sometimes not.

[winner69]

I appreciate Warrens achievements as much as the next guy,but he had a shocking year last year--Sometimes taking him as the Gospel can be good and sometimes not.

That Nicholas guy investing strategy is essentially pick a good company and follow the EMA200 line on the chart.

[skid]

Most times is not about what you, I or anyone else thinks is 'causing' the situation, it's about understanding what the situation is, especially the situation that affects us each individually, and doing something about it. Doing nothing while explaining our views on why it's a problem or not a problem, as the case may be, is still doing nothing. While doing nothing is a valid strategy it may not be a good one when the situation is obviously not good.

unless your mostly out and doing nothing but watching and learning, when things are not good:)
KW once put a link on the value of patience--(in this case being patient and not always having to be involved until the time is right)
When the sell signals fire -dont question why...sell and wait.
Its used to be Greed vs Fear....atm ..IMO..its Greed vs security.
Its still fun to look at all the possible causes of todays situation--after all ,they are trying to rewrite the whole economic system.Fiscal policies have replaced market forces--We'll see who wins in the end.

[percy]

I appreciate Warrens achievements as much as the next guy,but he had a shocking year last year--Sometimes taking him as the Gospel can be good and sometimes not.

Those who invested with him in 1980 would still take him as Gospel.
Being down 12.83% during the past year means their return is now only 74,515.00%.Yes that is seventy four thousand,five hundred and fifteen percent.

[Baa_Baa]

Tomorrow, Monday morning should be fine, maybe a bit of a relief rally after the US rebounded significantly on Friday. Eyes will on China as it returns from holiday, a week off after a US/Europe rout, who knows what will happen. So perhaps a market rebound in the morning and who knows what for the afternoon. Sure is volatile at the moment.

[Beagle]

Tomorrow, Monday morning should be fine, maybe a bit of a relief rally after the US rebounded significantly on Friday. Eyes will on China as it returns from holiday, a week off after a US/Europe rout, who knows what will happen. So perhaps a market rebound in the morning and who knows what for the afternoon. Sure is volatile at the moment.

Green day...can you remember the last time we had two takeover offers in one day ? Ever ?

[winner69]

Whew - disaster avoided

The world is all happy again

Onwards and upwards to new highs?

[theace]

Green day...can you remember the last time we had two takeover offers in one day ? Ever ?

Takeover 1 - DIL
Takeover 2 ???

[sb9]

Takeover 1 - DIL
Takeover 2 ???

Nuplex...plenty of discussion on that thread this morning.

[sb9]

Seems its the Tech stocks day today..DIL affect rubbing off on them.

[winner69]

Takeover 1 - DIL
Takeover 2 ???

Don't good things come in 3s

1- DIL
2 - NPX
3 - PEB at $1?????

[Beagle]

Don't good things come in 3s

1- DIL
2 - NPX
3 - PEB at $1?????

LOL I was thinking AIR at $5 :D

[Sideshow Bob]

LOL I was thinking AIR at $5 :D

Or ATM at $2.50! :t_up:

[winner69]

Or ATM at $2.50! :t_up:

PGW at 25 cents - an opportunistic go by majority holder

[vin]

Why are people being so optimistic with barely 1 day of trading? Excuse my ignorance.

[macduffy]

Why are people being so optimistic with barely 1 day of trading? Excuse my ignorance.

Not a trend. Relief.

:mellow:

[Bilbo]

Don't good things come in 3s

1- DIL
2 - NPX
3 - PEB at $1?????

SLI has to be a sitting duck for a takeover/trade sale. MC of $48M with annualized revenue of $35M+ growing at around 30% yoy. If it was absorbed into a competitor who could cut the fat of management and sales/marketing, it could turn a nice profit.

[Baa_Baa]

Shanghai opened, gap down almost 3% ... probably be right though eh, won't affect the NZX.

[Beagle]

Dow futures pointing north by 117 points at present. Market is telling Janet Yellen to capitulate on interest rate increase(s) aka do a RBNZ... egg on your face better than a rampant savage bear with claws and teeth isn't it !

[winner69]

Dow futures pointing north by 117 points at present. Market is telling Janet Yellen to capitulate on interest rate increase(s) aka do a RBNZ... egg on your face better than a rampant savage bear with claws and teeth isn't it !

If Janet relents now it will only make the end result worse

Anyway Janet doing a good job by making sure no real turmoil before the elections - they will be happy

[Beagle]

Bring back Helicopter Ben and let the money rain down...then we all be happy and the smart ones can pile into silver and gold before it all turns to...you know what.

[JohnnyTheHorse]

Shanghai opened, gap down almost 3% ... probably be right though eh, won't affect the NZX.

Just playing catch up. Was closed last week.

[sb9]

Dow futures pointing north by 117 points at present. Market is telling Janet Yellen to capitulate on interest rate increase(s) aka do a RBNZ... egg on your face better than a rampant savage bear with claws and teeth isn't it !

US market closed today (Monday) to mark Washington's b'day, so we (and rest of markets) are on our own for one more day.

[skid]

Those invested in Japan must have nerves of steel--down 5+% one day...up6+% the next.
It will be interesting to see if opec talk comes to fruition(cutbacks) so far the talk itself has helped oil.
Chinas not down that much so European markets should bounce---We are in the beach ball phase---Stability it aint..

[skid]

Pretty good few days --opec guys talking gave oil a boost--couple days of market rallies took the shine off gold--but wait...opec guys are not really coming to the party--They wouldnt lie would they?--oil drops -gold rises....yesterday the dow defied a small drop in oil and rose---will this continue?....oil currently below $30 again($29)....stay tuned

[JohnnyTheHorse]

Pretty good few days --opec guys talking gave oil a boost--couple days of market rallies took the shine off gold--but wait...opec guys are not really coming to the party--They wouldnt lie would they?--oil drops -gold rises....yesterday the dow defied a small drop in oil and rose---will this continue?....oil currently below $30 again($29)....stay tuned

US markets broke areas of quite strong resistance yesterday (SP500 ~1880), so I am expecting a rally to at least ~1950. I am bearish longer term though.

[Bobdn]

So far, earnings wise, I'm enjoying this full scale collapse of markets and western civilization tremendously. Roll on Spark tomorrow and Chorus on Friday - I'm trembling as I write this.

[pierre]

So far, earnings wise, I'm enjoying this full scale collapse of markets and western civilization tremendously. Roll on Spark tomorrow and Chorus on Friday - I'm trembling as I write this.

No need to tremble Bob - the Dow is up 287 points as I write this. What a crazy market!

[Bobdn]

I know! At this rate I might even break even on my BHP shares (bought for $16.74!!!)

[skid]

No need to tremble Bob - the Dow is up 287 points as I write this. What a crazy market!

Oil and Share market up...ok I get it ...but oil,,share market..and Gold up..thats a bit more unusual

Alot of nerves however have been settled Im sure

I think oil still has a way to go to calm my main concern--big banks ....DB in Germany seems to have settled a bit so thats good,but alot are invested big in energy

People live through share market corrections,bear markets and recessions ...but banks falling over is much more scary.

although things have stabilized I think many have seen how eventually the NZX does get affected by these things (last week)

Its tough being in the oil market though--They say they are going to talk(opec and others) and work something out in terms of production ,but Im not holding my breath.

[bull....]

the market bounced of the 15500 level again last week for a third time, looked like it was going to collapse thru the level but due to an oil announcement which funny enough coincided with this level it has bounced hard and maintains a trading range. On the weekly it still held levels I mentioned a while back so still hope for a bottom

[skid]

the market bounced of the 15500 level again last week for a third time, looked like it was going to collapse thru the level but due to an oil announcement which funny enough coincided with this level it has bounced hard and maintains a trading range. On the weekly it still held levels I mentioned a while back so still hope for a bottom

Certainly looking better now than then--looks like 3 + days in a row

[Hoop]

No need to tremble Bob - the Dow is up 287 points as I write this. What a crazy market!

Not crazy Pierre ...the DOW is operating very orderly, as per the TA text book.... see my latest DOW post (http://www.sharetrader.co.nz/showthread.php?6114-Dow&p=607979#post607979)


the market bounced of the 15500 level again last week for a third time, looked like it was going to collapse thru the level but due to an oil announcement which funny enough coincided with this level it has bounced hard and maintains a trading range. On the weekly it still held levels I mentioned a while back so still hope for a bottom

That announcement was nicely timed (see my latest DOW chart)......makes you think...eh? (suspicious mind:mellow:)...notice how the oil market has settled back down,,they think that announcement is a bunch of "Porkies"


Certainly looking better now than then--looks like 3 + days in a row

Not looking better to me...this rally has just reached the caution zone (see my latest DOW chart)..Maybe another market inspired announcement will be released tomorrow or Monday...Janet its your turn:).

If the DOW is operating in a bear tide (not primary yet)...then this rally looks to be done, tomorrow will tell.. do we see profits taken..shorts started...if so then Friday could be the start of the next downturn....Next Monday a Black Monday in NZ?

[trader_jackson]

http://www.afr.com/markets/earnings-vindicate-rbas-upbeat-view-of-economy-cooling-recession-fears-20160218-gmy8yq

http://www.afr.com/brand/chanticleer/insights-from-the-profit-reporting-season-20160219-gmyso3

And apparently things are really bad across the ditch...?
(to read the article, try stopping it from fully loading)

"At the halfway point in the reporting season, with some painful exceptions, earnings are holding up surprisingly well."

"Halfway through the latest profit reporting season, investors can rest assured that the bulk of the Australian-listed corporate sector is in good shape. "

[trader_jackson]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11593279

and the UK banking sector is about to crash as well, right?

Man things are really bad in the world right now... lol

[Baa_Baa]

Sometimes it easier, perhaps better to just track the international markets sentiment and forget about whether we think the various companies we invest in are sound. They go up and come down for reasons that have nothing to do with fundamental strength. A lot of NZ shares are tightly correlated to international market sentiment, we've seen this before a number of times. Ignoring it assumes one is content with capital gyrations offset by returns from the truely sound companies that go about their business, not worrying about the SP.

[Daytr]

Dividends aren't necessarily a good reflection of performance as you can see by many companies around the world maintaining dividends to the detriment of their balance sheet. They are scared that withdrawal of divs will see the share price crushed.

[percy]

Dividends aren't necessarily a good reflection of performance as you can see by many companies around the world maintaining dividends to the detriment of their balance sheet. They are scared that withdrawal of divs will see the share price crushed.

Correct.
Yet companies with eps growth have the capacity to keep increasing dividends.So invest in them.

[Jinx]

Not quite a black Monday today but certainly nothing to shout about, If European stocks can creep up like the Asian markets did today the US should follow creating a decent Tuesday before reports start dropping later in the week?

[Daytr]

I've heard talk of a short gold, long oil trade that is in play.
That will be hurting today and will be interesting for other markets if that position is shaken out.
i.e. selling long position in oil and buying back short in gold.

[pak]

Short term maybe. I shorted gold over night and did very well percentage wise. Closed out when it approached the 1200 support level. Keeping an eye on it if it breaks down. Will depend on sentiment and/or news to break or bounce I assume.

[skid]

Sometimes it easier, perhaps better to just track the international markets sentiment and forget about whether we think the various companies we invest in are sound. They go up and come down for reasons that have nothing to do with fundamental strength. A lot of NZ shares are tightly correlated to international market sentiment, we've seen this before a number of times. Ignoring it assumes one is content with capital gyrations offset by returns from the truely sound companies that go about their business, not worrying about the SP.

It will be interesting if todays action reflects that--Dow was down ,but not spectacularly (just really erased the gains the day before )still up on the last 3 days or so--It may need more of a substantial drop to have an affect--(although I think the fact that it had a multiday run made some feel the bottom had been formed)and maybe it did --who knows at this stage

[skid]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11593279

and the UK banking sector is about to crash as well, right?

Man things are really bad in the world right now... lol

As usual things are not quite that simple TJ--The fear about the banking sector ,aside from derivatives,(especially Duetchbank ) is that alot of them have a big stake in financing the energy sector(which is having a bad run at this point)--Of course not all are overexposed ,but with banking it only takes a few....Energy may stabilize and banks come out smelling like roses...or not.

With banks,its usually a case of the odds are in your favor ,but if 1 or 2 fall then things get serious,so it pays to be prudent.

Its not guaranteed,but there is usually some warning rumblings that at least give the informed investors a bit of time to at least try to get their capital somewhere a bit safer(Kiwi bonds-gold ,etc) to avoid a possible ''haircut''

Its obviously a worse case scenario and hopefully will not happen----But as you know ,none of us are right all the time,and adopting a dismissive approach could be a hard lesson.

PS-Its interesting they use HSBC as an example --one of the more corrupt merchant banks(they have certainly been known to hide things and fiddle with results)

http://www.theguardian.com/business/2015/jun/04/hsbc-fined-278m-over-money-laundering-claims

[Hoop]

TJ..As I see it.................A tipping point scenario...All it takes is a seemingly insignificant event to cause a failure within a very big industry that has massive financial wobbles..the resulting failure being huge enough to flow on to set off a global banking crisis ..

In history the main culprits have been property crashes or Bank systemic deviations..or maybe any other individualistic anomaly that had gravitated huge amounts of National funds towards its market..such as the ridiculous tulip investment mania ..

However. I've observed from past history that the recognising of the culprit doesn't always result in the imminent collapse as Michael Burry found out when He realised that many subprime home loans were in danger of defaulting.{Film - The Big Short}..It requires a catalyst which may happen now or take months or years to happen... or may not happen at all as time may correct/lessen the culprit problem....

One common catalyst is crowd panic which creates a bank run....then as Warren Buffett would say "Only when the tide goes out that you learn who's been swimming naked"
...............
..............

TJ ....At the moment the markets sees the culprit..The Petroleum Industry, the biggest industry in the world, which was once loosely valued including oil reserves at $US~173 Trillion (@$US100/Barrel) shrinking to $US~30 Trillion....

The market is obviously worried that a catalyst may emerge while Oil is still at its $US~30/barrel level and result in a realisation of that evaporated $US 70 trillion...That realisation event could be Globally destructive enough to send the world into another severe global recession .. .....The catalyst could be anything, it could be a very large event or it could be a trival seemingly insignificant event...(the extreme example in the Film The Butterfly Effect it was as small as air disturbance from Butterfly wings)

So its a natural behavioural thing at the moment for the world markets to flinch at any negative global event happening no matter how big or small in fear of that one unknown event being the catalyst...

Its also the reason why the normally uncorrelated Oil/sharemarket relationship is now correlating..

[xafalcon]

The oil industry won't fail.

Unlike tulips, the world relies on oil. Not just for transport, but most plastics and industrial chemicals as well. It's everywhere

Supply has been constrained by OPEC for many years, massively distorting the real value of oil

Shale fracturing has removed the supply constraint, and for the first time in a generation (or two) the market is behaving normally

Low prices will systematically remove higher-cost producers, and demand will increase as lower prices continue to flow through the economy or the world

The economics of oil consuming businesses will be improved if they don't pass-through all the benefit (refer NZR result today as an example)

Low oil prices are very good for the world economy overall, as there is more discretionary spending money available for other more productive uses

A few oil companies will fail, but business failure is part of the natural evolution of economies as technology and/or circumstances change (eg Kodak)

[dobby41]

But low oil prices aren't so good for some companies that can only make money at a higher price.
If they fail, and they have borrowed big $ then the lender could be in trouble - the banks!
It isn't about the failure of the oil industry per se.

A few countries will have problems also - not a happy time for their residents. A bit of unrest maybe?

[stoploss]

But low oil prices aren't so good for some companies that can only make money at a higher price.
If they fail, and they have borrowed big $ then the lender could be in trouble - the banks!
It isn't about the failure of the oil industry per se.

A few countries will have problems also - not a happy time for their residents. A bit of unrest maybe?

I think the arms companies might take a hit , less oil dollars to finance all the fighting ......

[Hoop]

Of Course Not...The oil industry will not obliterate but all things fail with time, they correct (evolve) to gain more life expectancy (chaos theory) ....systemically....the oil industry could fail at any time and that failure would cause a beginning of an industry structure correction, Financial Default (bank crisis) and a very unpleasant global market correction...

As you said natural evolution, but at a higher level (sector) not at a sub-level (individual businesses)..These processess can be slow motion plays eg Property Market Failure 2007 USA, Spain, Ireland, Greece..which (accept Greece, maybe Spain?) has lasted for up to 8 years before the system finished correcting (evolving).

Low oil prices are very good for the world economy overall, as there is more discretionary spending money available for other more productive uses...The market doesn't agree with you on this one

[Hoop]

I think the arms companies might take a hit , less oil dollars to finance all the fighting ......

Estimated at $US1 trillion/year

[xafalcon]

Low oil prices are very good for the world economy overall, as there is more discretionary spending money available for other more productive uses...The market doesn't agree with you on this one

The market will in time, once it takes a step backwards and sees the "bigger picture" - to use your words "higher level" (country and world levels), not sector level

The current market volatility is being exacerbated by extreme "herd mentality"

People will come to understand that post-OPEC-cartel oil pricing is not the anomaly, and that we have just been fleeced by OPEC for the last 25 years out of how many trillions.... Wealth transfer on a massive scale through corrupt business practises into the wallets of the lucky few who have oil deposits

Low oil prices have always fed through into higher world growth, it's a form of QE. As the longer term oil price contracts expire, the "low oil price" positive effect on global growth will accelerate

[skid]

The market will in time, once it takes a step backwards and sees the "bigger picture" - to use your words "higher level" (country and world levels), not sector level

The current market volatility is being exacerbated by extreme "herd mentality"

People will come to understand that post-OPEC-cartel oil pricing is not the anomaly, and that we have just been fleeced by OPEC for the last 25 years out of how many trillions.... Wealth transfer on a massive scale through corrupt business practises into the wallets of the lucky few who have oil deposits

Low oil prices have always fed through into higher world growth, it's a form of QE. As the longer term oil price contracts expire, the "low oil price" positive effect on global growth will accelerate

Have you ever tried standing in front of a stampeding herd?

The banks have been financing oil companies that have been operating within the framework of the OPEC era-not the post OPEC era.
we may pass into a post OPEC era where oil readjusts but the possible carnage left in its wake is the issue IMO

[xafalcon]

At some point the stampeding herd realises there is actually no need or purpose to the stamped and returns to business as usual, or even notices that the pastures they now find themselves in are much greener than the ones they left behind

In the US a few high-cost oil companies will fail, maybe a bank or two that over-exposed themselves to oil extraction/exploration will also fail. The oil market will start to correct to a happier price point as US fraking swing supply reduces. World growth accelerates, demand for many things grows as money not spent on "necessary" oil based products is spent elsewhere, including demand for (now cheaper) "discretionary" oil based product purchases. The oil market continues to correct to a happier supply/price point.

This has already happened to most commodities - minerals, coal, natural gas, dairy, oilseeds, consumer products. High oil prices only lasted this long due to the OPEC cartel, which has now lost it's relevance thanks to to new disruptive technologies.

Did the banks fail when other commodity prices reduced significantly? No, not on a scale that made the news. Countries and businesses adapted or closed, and life and the economies went on

I have zero sympathy for OPEC member states that now find the going tough. Although I acknowledge that as they withdraw funds from their many offshore investments vainly trying to maintain their extravagant lifestyles, that there may be a short term reduction in various asset values around the world. But I truly believe that this effect will be short, and then swamped by the following worldwide increase in discretionary spending. The wealth is being redistributed globally, rather than being concentrated in the lucky few countries with large oil reserves

The worldwide explosion in air travel and tourism is one example. Shipping rates on every import & export across the globe falling significantly is another

[bull....]

oil and commodities prices are simply just correcting back to there long term averages. artificially inflated by chinas big growth phase
oil long term price is 20 - 30, eventually this lower price will feed thru into other industries who enjoy bigger margins at the moment from the fall in commodities but eventually competition will cause prices in other industries to fall - simple economics
low inflation for yrs as this all plays out

anyway nice turn around in the us markets bullish a?

[skid]

At some point the stampeding herd realises there is actually no need or purpose to the stamped and returns to business as usual, or even notices that the pastures they now find themselves in are much greener than the ones they left behind

In the US a few high-cost oil companies will fail, maybe a bank or two that over-exposed themselves to oil extraction/exploration will also fail. The oil market will start to correct to a happier price point as US fraking swing supply reduces. World growth accelerates, demand for many things grows as money not spent on "necessary" oil based products is spent elsewhere, including demand for (now cheaper) "discretionary" oil based product purchases. The oil market continues to correct to a happier supply/price point.

This has already happened to most commodities - minerals, coal, natural gas, dairy, oilseeds, consumer products. High oil prices only lasted this long due to the OPEC cartel, which has now lost it's relevance thanks to to new disruptive technologies.

Did the banks fail when other commodity prices reduced significantly? No, not on a scale that made the news. Countries and businesses adapted or closed, and life and the economies went on

I have zero sympathy for OPEC member states that now find the going tough. Although I acknowledge that as they withdraw funds from their many offshore investments vainly trying to maintain their extravagant lifestyles, that there may be a short term reduction in various asset values around the world. But I truly believe that this effect will be short, and then swamped by the following worldwide increase in discretionary spending. The wealth is being redistributed globally, rather than being concentrated in the lucky few countries with large oil reserves

The worldwide explosion in air travel and tourism is one example. Shipping rates on every import & export across the globe falling significantly is another

"at some stage" when the stampede stops,does not help the person standing in front of it--but its fine for those who got out of the way and waited.
From what I see ,the banks are not invested in the other commodities that you mentioned anywhere near that of the oil industry---What other commodity could do the damage Im referring to or the good your referring to---nothing competes with oil.

Its not a debate on how cushy the OPEC states have had it--Its a debate a on the possible damage from the banks jumping in big time

A happy outcome in the end does not mean that there may not be alot of carnage in the meantime.
Why do you think the volatility has happened?
One or two banks may fall...One or two banks were about to fall in the GFC--something the economic system deemed so horrible ,the Gov, decided to use bail outs and go down the QE road experiment.

I hope you are right ,but think theres a chance you are wrong,and even a chance is reason for caution.

The big banks are reason for concern IMO--I think we would be far better off if there were alot banks of a more manageable size,rather than a small number of mega Merchant banks,who seem to be infatuated with speculation.

[xafalcon]

Worth reading in the context of this exchange of views

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11595230

[winner69]

No real problem at the moment

Inflation adjusted DOW chart below

Only worry if it retreats to 5000

[Daytr]

There is likely to be pain before the wide spread benefits you are suggesting xafalcon.
If oil stays at these sort of levels or lower then SOME of the oil industry will fail, after all that's what the Saudis want.
Some countries could 'fail' as well and the exposure to banks and the wider economy shouldn't be underestimated.
We have zero interest rates which should also put more money in people's pockets yet world growth in most Western economies is sputtering.
We now have low oil which will add to that.
The problem is we have had asset bubbles in equities, bonds & property & cash is returning zero.
So where do you put your money?

[xafalcon]

Yes, some oil companies will fail. That is the fundamental basis of capitalism - the best performers survive, the worst performers don't

Zero interest rates can't work in isolation. The banks must lend the money to productive enterprises, trade practices (esp subsidies/tariffs) must be reformed, and labour laws freed up.

The US and NZ are good examples of what is possible with low interest rates if the other elements are supportive - heck NZ's still has very high interest rates by world standards, and look how well we are doing with diversification and new industries flourishing to take advantage of new opportunities. Yes the US does currently have the "speed wobbles" but seems to be heading in the right general direction

The EU nations (by and large) are good examples of the ineffectiveness of low interest rates if the other elements aren't supportive. Banks aren't keen to lend, labour unions aren't keen to allow greater flexibility in employment, employers aren't keen to take on more workers due to inflexible labour laws, governments aren't keen to forgo their import tariffs, and EU producers aren't keen to surrender subsidies. This breeds inefficiencies which are now entrenched in many EU countries

Economic effects of low oil price and zero interest rates are simply not comparable with regards to raising growth

I would put my money into heathcare, retirement and tourism sectors. The boomers are now retiring, generally have sound financial backing and will be strong supporters of all 3, with tourism getting a boost from working age people as well

But yes, there could be some pain to come. I'm not saying there won't be. What I am saying is that there will be a huge boost to world growth as a result of low oil price, and the benefit will out-weigh the detriment

[Daytr]

In theory you are correct, however places like Japan is proving otherwise. There is also a psychology around confidence and that is impacting the consumer. retirees have the biggest collected wealth in the demograph, but they can't get any interest and that is creating a hoarding cash mentality to a degree.

I would suggest NZ is doing very well due to the level of immigration.
Without that I would suggest NZs growth would be flat at best.