Blame Caterpillar for the Dow decline.
Printable View
Well does anyone recall during the Greek crisis, the DAX was bouncing between 10700 - 11500. Its now trading at 9400. I really can't see things getting much worse in Europe and if stocks start to recover there, I would expect US stocks to recover also.
I think the next few weeks will be volatile, but the next Quarters earnings will start to be reported in a few weeks and they may help to halt this recent pull back.
"Beware the Bear" .. says Colin Twiggs. http://tradingdiary.incrediblecharts...ding_diary.php
Are you optimistic about next quarters earnings?--Things have been pretty volatile lately --We are addicted to sensationalism by the media-but by far the worse scenario is a slow but consistent (with of course variations along the way) downturn in the markets.
Alot of ''just a little bit lower'' start to really hurt. At some point you realize you are a boiled frog.
Caterpillar is a mega large company and the main reason for its decline is China.
More and more countries are going to start to fell that bite if indeed the possibilities we are starting to suspect really do play out.
Those running one of the world leading economies really have no track record in how to manage this sort of thing,so the juries out on that.
the emerging countries will be the first to really get into trouble-(remember when Greece was our biggest worry?)--there are some new ones on the list now--Had a good look at Brazil lately(debt)
The talk seems to have changed from ''Im gonna make a fortune on the potential growth co.'' to Dividends (and thats a step in the right direction)--If your gonna play this game,it better be with caution at this stage---Our new potential economic leader has stumbled. IMO-DYOR
I have been doing some off the wall thinking
Since the GFC, developed economies around the world are consistently failing to follow "proven" economic models dating back 40+ years
The surrounding economic conditions are certainly very atypical - very low global interest rates, very low global inflation (except for a few hot-spots like Russia), various treasuries printing mountains of cash or just finished doing so, commodity prices almost universally depressed to multi-year lows
So should we still expect global sharemarkets to behave the same way they did pre-GFC? ie. will models of the past actually work in the current environment?
This uncertainty may go some way to explaining the diverging views of how this market will play-out
Nothing "off the wall" about that thinking. I guess even the most backward thinking analyst is by now aware that we are in uncharted territory and that the so far prevailing stock cycles do not work anymore. This makes obviously a fertile breeding ground for nutters and doomsday prophets.
The only model we could look at how long term low interest rates combined with low growth rates might work out is Japan, and this is not a very flash example, though it was not the big doomsday scenario either (Japan going for 20 years or so sidewards with a mild downtrend).
So - yes, you are right ... the established patterns don't apply anymore, the previously reasonably effective control of the Feds (interest up when times are good and interest down when they are bad) don't work anymore due to the Fed's under-steering ... and so the vehicle of the world's economy is currently sliding off the road.
Nobody really knows where we will end up this time. We just might end up undamaged in a nice meadow and drive back onto the road, or we might crash against a tree. On the positive side ... humans are sort of used to be in uncharted areas ... and the best achievements typically come when we explore them - i.e. it is probably a fair assumption that we will get out of this mess and upwards again, but we don't know when and how.
Whatever it is, it is always sensible not to panic - and particularly as long as interest rates are low would I think that good stocks with sound PE's will stay in demand. I don't know what the stock markets will make next week or next month, but I do know that good companies providing services and products people need will win long term over other investments.
-Its been ''short term fix ''at the expense of the economy in general(in terms of its underlying health-debt,etc)
They may be able to postpone for longer with a QE4 or something but the end result will be the same or worse,unless the basics are fixed.
China has created the perfect bubble--the new middle class certainly didnt see it coming with the share market and all the excess real estate created--the rest of the world (especially certain countries)have lapped it up with all that demand for commodities from China-(fueled by all that easy money greed)-but now that has slowed and some new emotions ,doubt and fear have crept in.
Japan was not doomsday as it was only one country,but many,especially property owners were horribly affected(many wiped out)
Im sure the Japan situation would be more than enough for most to deal with-
It may be worth looking into just what companies and what services survived Japan-and the other actual crashes(besides the obvious cash in hand)
Ie. Pic your favorite stock, and look at the 10 year (or longer, chart)
In NZ residential property prices have been pretty resilient in downturns. For example there was a dip in house prices during the GFC but nothing like what occurred with share prices. Much of the resilience would be because of NZ's tax policies...favoured treatment of owner-occupied housing, lack of capital gains, easy ability to leverage investor housing in conjunction with negative gearing meaning that investors in NZ can off-set losses against other income sources (including salaries). I do not know how Japan treats investor housing or housing in general but the Japanese experience (and American for that matter) may not be relevant in the current NZ investment and tax regime which favours investment in housing.
If you believe this guy.....then yes, the bear is certainly just starting. What is a bit interesting in the clip is the way he relates the economic outcomes to demographics. Specifically, he identifies the baby boomers ending their bubble of spending as a problem.
Quite interesting...he reckons deflations is coming to the US in a big way...holding cash won't be so bad afterall if that comes to fruition.
http://pro.dentresearch.com/DOW_IES_EXT/LBNBR921?h=true
Hope the link worls