{"id":23205,"date":"2011-08-15T10:50:36","date_gmt":"2011-08-15T14:50:36","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=23205"},"modified":"2011-08-15T10:50:36","modified_gmt":"2011-08-15T14:50:36","slug":"two-decades-of-boom-and-bust","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2011\/08\/15\/two-decades-of-boom-and-bust\/","title":{"rendered":"Two Decades of Boom and Bust"},"content":{"rendered":"

By Kris Sayce<\/abbr><\/strong> <\/abbr><\/p>\n

\u201cThis is going back to 1992, so that\u2019s 20 years of this massive credit-induced dot-com bubble going into 2000.\u00a0 We then had the recession going into 2002.\u00a0 The start of the [first Iraq] War and the turnaround.\u00a0 The housing boom.\u00a0 We then had the crash from 2008\/09. \u00a0And we\u2019ve seen this free money induced Fed Reserve money-printing created rally over the last two years\u2026\u201d<\/em><\/p><\/blockquote>\n

That\u2019s where we are now.<\/p>\n

So what happens next?<\/p>\n

Slipstream Trader<\/a><\/em>, Murray Dawes says he knows exactly<\/em> where the market is going next.<\/p>\n

Call it bravado if you like.<\/p>\n

He picked the market sell-off like a peach and now he\u2019s placing bets on the next market move. Already he\u2019s received comments from his trading members such as this:<\/p>\n

\u201cYou Sir, are a genius. I took your\u2026 advice and <\/em>moved<\/em> my Super out of the stock market and into cash at the end of June.\u201d<\/em><\/p><\/blockquote>\n

Murray posted his latest free weekly analysis last Wednesday. If you\u2019d like to check out what he had to say and where he reckons the market is going next, click here<\/a>.<\/p>\n

And that\u2019s the great thing about Murray\u2019s analysis. You can use it to protect and grow your investment wealth, no matter which way the market\u2019s moving. You can go long on the way up. Short on the way down. And get out when things look shaky.<\/p>\n

Even if you don\u2019t want to short-sell stocks (perhaps you don\u2019t like the risk, you\u2019re not familiar with it, or you\u2019ve got a moral objection to short-selling) wouldn\u2019t it be useful to know when the market is set to tank?<\/p>\n

So, like the reader above \u2013 and many of Murray\u2019s readers \u2013 you can sell your stocks when he says the market is set to take a hit. You can move to cash and sit tight for the next buying opportunity.<\/p>\n

Because odds are, volatility is here to stay. And that means, if you missed out on this rally, another is sure to follow.<\/p>\n

We\u2019ve had two decades of boom and bust. What are the odds on that ending anytime soon?<\/p>\n

Already, since the market bottomed last Tuesday, the benchmark S&P\/ASX 200 has gained 12.6%.<\/p>\n

A rally like none before<\/strong><\/p>\n

To understand the scale of the bounce, consider this\u2026<\/p>\n

After the Fukushima crash and recovery the market moved no more than a few percentage points in a week.<\/p>\n

After the March 2009 low, the market only gained 4.2% over the following week. It took more than two weeks for it to pile on 12%\u2026 and that\u2019s when stocks really were super-cheap.<\/p>\n

And if we go further back, after the 13 March 2003 low, it took until 30 April 2003 for the main Aussie index to gain 12%.<\/p>\n

So to us, the current quick rally spells danger.<\/p>\n

As we wrote early last week, that was time to buy cheap stocks. Trouble is, we can\u2019t say the same thing with the same conviction today.<\/p>\n

To get a 12% bounce in a week is almost unheard of. And it takes stocks from cheap to\u2026 well, not so cheap.<\/p>\n

That\u2019s what makes this market tough for fundamental investors\u2026 but fun for technical investors.<\/p>\n

The issue is how much buying strength the market has left. You\u2019ll always see a big bounce after a sell-off. But it\u2019s hard for the market to maintain that momentum.<\/p>\n

So what you have to figure out is which way the momentum will swing next. To answer that we have to ask, is all the risk gone from the market? Or are things just as bad today as they were a week ago?<\/p>\n

In all honesty, it\u2019s hard to fathom what\u2019s changed.<\/p>\n

The Europeans still want Germany to bail out the rest of Europe. And the U.S. debt clock continues to tick higher \u2013 USD$14.6 trillion as we write. That\u2019s USD$300 billion more since the debt ceiling was raised two weeks ago!<\/p>\n

And in Australia, in a sign of economic strength (not), ANZ Bank [ASX: ANZ]<\/strong> joined Commonwealth Bank [ASX: CBA]<\/strong> and Westpac Bank <\/strong>(or should that be WestPascoe Bank?) [ASX: WBC]<\/strong> in cutting fixed-rate mortgages.<\/p>\n

But it\u2019s not just mortgage rates they\u2019ve cut. As Dow Jones Newswires<\/em> reported last week:<\/p>\n

\u201cANZ Banking Group Ltd\u2026 cut term deposit rates for savers by up to 20 basis points [0.2%]\u2026 Rates on 12-month deposits have been cut to 5.80% from 6%, on five-month deposits rates are now 5.8% and three-month savings rates are now 5.5%, down from 5.6%.\u201d<\/em><\/p><\/blockquote>\n

In other words, Australia joins the global trend of cutting interest rates to stimulate risk-taking.<\/p>\n

Granted, we\u2019re not talking the same extent as the U.S., where savers in government bonds get just a 0.19% yield on their investments\u2026 a negative yield when you factor in inflation.<\/p>\n

But even so, the real return for Aussie investors isn\u2019t much better. If you assume the inflation rate is much higher than the official 3.6% quoted by the Australian Bureau of Statistics (ABS), then conservative Aussie investors are likely getting close to a negative return on savings too.<\/p>\n

Especially for those who can\u2019t afford to squirrel away cash in a term deposit.<\/p>\n

Yet despite the warnings, investors have gone all smug again. Our early warning signals show that. Fear is a thing of the past\u2026 apparently.<\/p>\n

Fear is so \u2018last week\u2019<\/strong><\/p>\n

The Aussie dollar has taken off against the Swiss Franc \u2013 although that\u2019s mainly due to rumours of the Swiss National Bank (SNB) planning to \u201cpeg\u201d it against the terminally ill Euro:<\/p>\n

\"\"<\/a><\/strong><\/p>\n

A bizarre course of action. A bit like S.S. Titanic survivors choosing to \u201cpeg\u201d themselves to the anchor rather than a life vest!<\/p>\n

It\u2019s also rallied against the U.S. dollar. And gold and silver have dropped.<\/p>\n

Meanwhile, the U.S. S&P 500 Volatility Index (VIX) dropped 7% on Friday night as the underlying stock index bounced.<\/p>\n

So, is this still a buyers\u2019 market? Or is it a wait-and-see market?<\/p>\n

Who knows?<\/p>\n

What we do know is it\u2019s still a super risky market.<\/p>\n

If you plan on having a flutter with stocks make sure you remember that nothing has changed over the past week. With one exception, today stocks are more expensive today than they were then\u2026<\/p>\n

And that means when investors remember how bad things are, stocks will have much further to fall.<\/p>\n

Cheers.<\/p>\n

Kris Sayce<\/strong>
\nMoney Morning Australia <\/em><\/p>\n

Source: Two Decades of Boom and Bust<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Even if you don\u2019t want to short-sell stocks (perhaps you don\u2019t like the risk, you\u2019re not familiar with it, or you\u2019ve got a moral objection to short-selling) wouldn\u2019t it be useful to know when the market is set to tank?<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-23205","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/23205","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=23205"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/23205\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=23205"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=23205"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=23205"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}