I certainly think Australia is in recession, but for various reasons I can't see it being as bad as in the USA or Europe.
The current surge could possibly crest 4,000 before a correction. At this stage the move has performed very similarly to first legs of other significant upward moves - many wait for 'the correction' only to find the market carries on. That builds buyer frustration, more fuel.
My guess is the market will top out early May and correct, but to the surprise of the bears, I don't believe it will correct all the way back to the lows, or take them out. For me, the jury is out as to whether this is the first leg of a new bull market, or whether it is very strong upward move in a series of big trading moves around the lows over the next year or two - as happened after the 1987 crash through to mid-January 1991.
It is obvious the Americans are working hard to re-instil confidence. Bernanke does have evidence to support his 'first green shoots' commentary backed up by the Fed's Beige Book anecdotal report from its 12 districts. Banks led the US market down, and there are certainly 'green shoots' appearing there. There would want to be given the immense effort thrown at kick starting a wrecked US banking system.
American Express reported a slowing in the rate of its bad debt accumulation, a good sign. As RIO has showed there is a thawing in the corporate bond market at a price, and that is a positive. RIO is hardly Robinson Crusoe in wanting to get away from its dependence on a series of banks in a syndicate. As one veteran businessman said to me, "Murdoch learned that lesson in the late 80s".
Copper - the so called guide to global industrial production is up nearly 80 per cent in price in just four months. And that's against a background of a horrendous global economy. It would appear that China is the main buyer as it prepares for its major infrastructure stimulus program which should impact its economic statistics in the second half taking Chinese GDP growth from the first half rate around 6 per cent to levels running at an 8 per cent per annum rate. Its car market is already larger than the USA. Chinese strength is not enough to kick start a global recovery, but it sure is a huge boost to Australia, as we export the materials needed to build its infrastructure!
Time does tell
I look at the cycle as usually kicking off in years ending in two, then ending in years ending from seven to zero. This time in the seven I saw danger and constantly warned against using debt against the portfolio but did not warn against investing in companies with high levels of debt. I did warn against one of the usual causes of Aussie bear market pain - mining specs. Pain came to those who used margin debt to leverage their portfolios, but also there was the odd disaster too. Again, adequate diversification is always the rule.
On the timing front, I recognised that a market running at plus 20 per cent growth rates couldn't last for ever but I felt that after a strong correction it had, say, another year in it. My lesson here is that when you run into the fifth year of such a bull market you not only reduce any debt, but also build some precautionary cash on the basis that you will be able to invest it ever so much better over the next year or so when panic brings bargains galore. A less explosive bull may well last longer but it makes sense to lighten in the later years especially against a climate of rising interest rates, when good returns stem from 10 year bonds.
Source: by Ian Huntley
http://au.pfinance.yahoo.com/b/ian-huntley/32/economys-bottom-behind-us
The current surge could possibly crest 4,000 before a correction. At this stage the move has performed very similarly to first legs of other significant upward moves - many wait for 'the correction' only to find the market carries on. That builds buyer frustration, more fuel.
My guess is the market will top out early May and correct, but to the surprise of the bears, I don't believe it will correct all the way back to the lows, or take them out. For me, the jury is out as to whether this is the first leg of a new bull market, or whether it is very strong upward move in a series of big trading moves around the lows over the next year or two - as happened after the 1987 crash through to mid-January 1991.
It is obvious the Americans are working hard to re-instil confidence. Bernanke does have evidence to support his 'first green shoots' commentary backed up by the Fed's Beige Book anecdotal report from its 12 districts. Banks led the US market down, and there are certainly 'green shoots' appearing there. There would want to be given the immense effort thrown at kick starting a wrecked US banking system.
American Express reported a slowing in the rate of its bad debt accumulation, a good sign. As RIO has showed there is a thawing in the corporate bond market at a price, and that is a positive. RIO is hardly Robinson Crusoe in wanting to get away from its dependence on a series of banks in a syndicate. As one veteran businessman said to me, "Murdoch learned that lesson in the late 80s".
Copper - the so called guide to global industrial production is up nearly 80 per cent in price in just four months. And that's against a background of a horrendous global economy. It would appear that China is the main buyer as it prepares for its major infrastructure stimulus program which should impact its economic statistics in the second half taking Chinese GDP growth from the first half rate around 6 per cent to levels running at an 8 per cent per annum rate. Its car market is already larger than the USA. Chinese strength is not enough to kick start a global recovery, but it sure is a huge boost to Australia, as we export the materials needed to build its infrastructure!
Time does tell
I look at the cycle as usually kicking off in years ending in two, then ending in years ending from seven to zero. This time in the seven I saw danger and constantly warned against using debt against the portfolio but did not warn against investing in companies with high levels of debt. I did warn against one of the usual causes of Aussie bear market pain - mining specs. Pain came to those who used margin debt to leverage their portfolios, but also there was the odd disaster too. Again, adequate diversification is always the rule.
On the timing front, I recognised that a market running at plus 20 per cent growth rates couldn't last for ever but I felt that after a strong correction it had, say, another year in it. My lesson here is that when you run into the fifth year of such a bull market you not only reduce any debt, but also build some precautionary cash on the basis that you will be able to invest it ever so much better over the next year or so when panic brings bargains galore. A less explosive bull may well last longer but it makes sense to lighten in the later years especially against a climate of rising interest rates, when good returns stem from 10 year bonds.
Source: by Ian Huntley
http://au.pfinance.yahoo.com/b/ian-huntley/32/economys-bottom-behind-us
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