Archive through August 31, 2007
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     holycow
Member
Username: holycow
Post Number: 3079
Registered: 08-2004
Rating: N/A
Votes: 0
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| | Thursday, August 30, 2007 - 05:58 pm: | 
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http://tinyurl.com/2bwla2
From higher authority...the latest locally produced "Home and Away" conduit drama coming to a cinema near you. Starring, which bank, this bank, and that bank plus some other banks!
...JP Morgan noted this morning that Australian banks participate in these businesses "with reasonable Conduit exposures likely augmented by further liquidity facilities provided to third party SIV/SPVs." JPM estimates the conduit exposures alone as ANZ (ANZ) $6bn, Commonwealth (CBA) $2bn, National (NAB) $10bn, Westpac (WBC) $5.5bn and St George (SGB) $1.3bn. And that's just the majors.
In short, SIV/conduit vehicles borrow short term from the banks (1-6 months) and invest in higher yielding assets such as CDOs (3-4 years). Some institutions have previously described the practice as an "arbitrage". Now that no one will buy the CDOs, and no one will lend money to the SIVs, banks have been forced to take the CDOs on to their balance sheets, ahead of marking their value (mostly zero) to market.
JP Morgan is quick to point out that given global SIV exposure of an estimated US$1 trillion, Australian bank exposure is very minimal. And Australian banks will not have delved into lending for subprime paper, only higher quality paper. The analysts estimate that all up, the funding required by the Australian banks to absorb SIV exposure would represent $1.2bn of bank capital, and they should easily be able to cope with that...
*** ok, and so they said, let's take note of the "script": "very minimal", "only higher quality paper", "$1.2bn", "easily...cope".
...waiting patiently.
HC
"... he ain't no chart addict, but a TA junkie"
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holycow
Member
Username: holycow
Post Number: 3080
Registered: 08-2004
Rating: N/A
Votes: 0
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| | Thursday, August 30, 2007 - 06:29 pm: |
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... forgot to add this - when subprime was first "blowing up", UBS did something like what the local banks are doing now. They initially injected funds into propping up the two hedgefunds, and then subsequently they "absorbed" them when they found out they couldn't sell part or all of them, and much later and eventually they both became some kind of statistics...
So, I am now all ears and eagle eyes, waiting to find out what will happen to $6bn, $2bn, $10bn, $5.5bn and $1.3bn... small change really.
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HC
"... he ain't no chart addict, but a TA junkie"
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hailoh
Member
Username: hailoh
Post Number: 248
Registered: 04-2003Rating: N/A
Votes: 0
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| | Thursday, August 30, 2007 - 06:49 pm: |
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HC,
How will the overall market stand up if the financial sector bends?
I believe that periodic tremors such as today's announcement of the provisional liquidation of a Basis Capital fund, and nervousness regarding rates could see the finance sector move from Stage 3 into Stage 4. If so that could place a cap on the underlying power of the materials index to keep the market advancing.
I am short XFI but have index buy orders for selected miners if there is a second wave of selling ala Friday 17th.
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holycow
Member
Username: holycow
Post Number: 3081
Registered: 08-2004
Rating: N/A
Votes: 0
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| | Thursday, August 30, 2007 - 08:10 pm: |
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H,
According to Comsec Research, the Financials contributes about 32.5% of the index weighting. Materials & Industrials each contributes about 20.4% and 10% respectively. Real Estates, 10.4%.
If the banks were to suffer the damages as listed in my earlier posts, I think, the index will be taking quite a beating. This is the pessimistic view.
Looking at it from an optimist's eyes, the damage is minimal (say at about 1.2bn shared among the banks), do you think the index (XJO) is capable of moving higher without the Financials' participation? And if it can, would it be aggressive? With this, I mean long white candle in the chart?
A bullish market in general requires all the major sectors to be moving in sync. Dow's theory for example depicts that the index has to be confirmed by the transport sector.
What kind of bull market are we looking at in ASX without the the participation of the banks? My view is it won't be a very bullish rally, if the banks are not moving.
Let's take a look at your chart. Try to see it through my eyes, the red MA's reflects the long term market sentiment and the green, short term market sentiment. They both are declining! The green, more than the red - short term investors in the financials are not bullish, long term, they are showing sign of wavering.
Let's ake a closer look at your chart - are you seeing the same kind of index reaction like before when it has the periodic dips (back May 05, Jun 06)? Your chart, frankly is doing what it is doing, reflecting the market and is telling you something different this time - as a chartist and from my angle, there's cause for concern - the market, todate has not pulled out and recovered from the red zone yet.
At this point, the most positive thing/fact we can say about the chart is it's going sideway and is not going down.
There's no reason to assume it will be bullish moving forward. And since it is a long term chart, from a long term investor's perspective, it is important we not confused the current short term rebound for long term uptrend indication.
If we do then we are not giving ourselves enough time for the market to show us what it's up to. I think it is prudent for us to give the chart enough time to complete the move, considering the whole host of negative news we are reading on a daily basis, esp from the USA.
Being cautious in the current market climate I believe will do no harm to most people. If the market were to be on track for a long term rally, there will be plenty of opportunity for people to catch the train. There's really no need for them, the investors to rush to get in.
Cheers.
HC
"... he ain't no chart addict, but a TA junkie"
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hailoh
Member
Username: hailoh
Post Number: 249
Registered: 04-2003Rating: N/A
Votes: 0
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| | Thursday, August 30, 2007 - 09:23 pm: |
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HC,
Thank you for such a prompt and thoughtful answer.
If the market is entering the transitional phase of Stage 3, which leads by definition to Stage 4, should we really be talking about "concern" or "opportunity" given the ready access to shorting available now. "Concern" maybe for the long term DIYS super investor.
It comes down again to what the horizon is. I see this as a volatile transitional market so I am twitchingly entering both short and long positions at opportunity.
As a fallback there is a superb burns unit in Perth.
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philr
Member
Username: philr
Post Number: 226
Registered: 04-2004Rating: N/A
Votes: 0
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| | Thursday, August 30, 2007 - 10:13 pm: |
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HC
In relation to 'something spooky' at least we can work out from those other charts where the market will end up this time. Around the 1200 mark I would say. Thats the time to start buying for the following steady climb back.
Phil
** Let blockheads read what blockheads wrote.
Warren Buffett
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hilarius
Member
Username: hilarius
Post Number: 2836
Registered: 04-2004
Rating: N/A
Votes: 0
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| | Thursday, August 30, 2007 - 11:24 pm: |
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HC
I totally support your advice to people to be cautious in the present market
In regard to your personal criticisms I ask that you either support them with evidence or withdraw them and apologise
Hilarius
I come in peace to share my thoughts and to shine my candle light on possible long term opportunities
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holycow
Member
Username: holycow
Post Number: 3082
Registered: 08-2004
Rating: N/A
Votes: 0
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| | Thursday, August 30, 2007 - 11:29 pm: |
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Phil,
I will respond to you first - because of my past experience I am now very reluctant to call a spade a spade because of the unpleasantness it will cause. For example, if I believe this correction will correct 18 to 20%, you wouldn't be hearing me saying that, instead I will say let's watch 12% first... and then 15% and then 18% - this is how the market behaves and this is how I can express any negative view without ruffling too much feathers.
If the spooky charts were to be correct, I believe your view of 1200 cannot be ruled out. Other than charts, the really spooky part is in the fundamentals - some are strikingly similar.
~~~~~~~~~
Hailoh,
I find shorting at this stage of the market harder than usual. This is because of: a) you have to deal with both the local and the US markets, for overnight position, you could be "killed" if the US markets were to go against you; b) the local bulls and the instos are still holding very strong bullish inclination - the market tends to rebounce strongly after one or two days of correction as most corrections are usually due to weak sentiment in the US markets. Locally, I find the bullish sentiment is still very strong.
...so shorting the market, I think is harder than a simple "buy on dip" approach.
The current market situation is quite fluid, in that, short term it is showing very high volatility with daily or two daily intraday swing of up to 2%, some bluechips up to 5% or more. Longer term, it is quite directionless (sideway with a downside bias, my view) making medium term position trading quite difficult, if not frustrating because it is not hard to see your profit taken away because of bad overnight US markets.
Conclusion - still think a buy-on-dip short term trade is still the easiest.
Cheers.
HC
"... he ain't no chart addict, but a TA junkie"
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holycow
Member
Username: holycow
Post Number: 3083
Registered: 08-2004
Rating: N/A
Votes: 0
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| | Thursday, August 30, 2007 - 11:30 pm: |
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Hilarius,
What personal criticism?
HC
"... he ain't no chart addict, but a TA junkie"
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hilarius
Member
Username: hilarius
Post Number: 2837
Registered: 04-2004
Rating: N/A
Votes: 0
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| | Friday, August 31, 2007 - 12:14 am: |
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The ones you know about which have now been removed
In view of their removal I leave it to your conscience to forgive those you consider have trespassed against you
I come in peace to share my thoughts and to shine my candle light on possible long term opportunities
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holycow
Member
Username: holycow
Post Number: 3084
Registered: 08-2004
Rating: N/A
Votes: 0
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| | Friday, August 31, 2007 - 12:49 am: |
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Two messages were removed. In any case, my conscience is clear or I won't put them down in writing... as far as I am concerned, in a conflict, I don't ask for apology and I don't give any.
My apologies are only given to mistakes/errors/offence I have made/caused unknowingly.
HC
"... he ain't no chart addict, but a TA junkie"
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resillent1
Member
Username: resillent1
Post Number: 190
Registered: 10-2006Rating: 
Votes: 3
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| | Friday, August 31, 2007 - 01:03 am: |
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We are living beyond our means. I wonder just how good this mining boom will have to get before our income matches our expenses?
To live beyond our means households have been putting it on credit
The chart shows debt as a percentage of disposable income. So it would appear that debt hasn’t been invested productively.
This chart also indicates that no real growth in productive investment has occurred.
But this chart shows that despite our savings now turning negative (despite Superannuation) our assets are growing. Where is the wealth coming from without corresponding growth in productive investment?
House prices funded by debt perhaps.
Does that Home Loan Affordability chart look sustainable to you? What will happen if house prices stall or reverse? How will consumption stand up when people stop borrowing (hit one) and then try to repay debt from disposable income (hit two)? Perhaps consumption is not that important to the Australian economy.
Then again maybe it is.
I think we are up the creek, most just don’t realise it yet. Even if commodities continue to increase our income, we are likely to just spend that as well. When commodities turn down we will finally get the picture.
I don’t think commodities stand a chance of holding up if demand from USA falls – They are the current consumer kings.
I hope that’s not a trend bend for commodity prices already (especially A$ basis)
This post may be a bit one sides but I will leave it up to an intelligent bull (any takers) to post a rebuttal.
Cheers
Resillent1
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hilarius
Member
Username: hilarius
Post Number: 2839
Registered: 04-2004
Rating: N/A
Votes: 0
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| | Friday, August 31, 2007 - 01:46 am: |
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HC
You owe me an apology
Hilarius
I come in peace to share my thoughts and to shine my candle light on possible long term opportunities< | | |
