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  • treasury : third wave group
    Leave a Comment Issue 26 On 12 November 2008 the ABC s Kerry O Brien was interviewing Treasurer Wayne Swan O Brien So let me hear in plain English that the budget is within a hair s breadth of going into deficit It seems silly that anybody would bother to argue that proposition Will you accept going into deficit if you have Filed under tidal reports Tagged with australia budget debt deficit economy europe great depression intergenerational report kerry o brien recession stockmarket treasury wayne swan subscribe Have our blog posts delivered straight to your inbox categories general posts tidal reports latest posts The story silver tells Is the end game in sight for Greece Descending the Slope of Hope Australia s sugar daddy stalling What housing undersupply Australian banks vulnerable still Chicken or egg the unemployment effect The recovery that isn t McKibbin you ve done it again What does this chart tell you tag cloud alan kohler australia banks ben bernanke britain china commodities currency debt deflation deleveraging demographia report economy employment europe first home owners global financial crisis great depression greece interest rates international monetary fund ireland japan jim chanos karl denninger kevin rudd leith van onselen

    Original URL path: http://www.thirdwavegroup.com.au/tag/treasury/ (2013-02-03)
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  • Tidal Report – 8 Mar 2009 – Is the Market Cheap? : third wave group
    cycle where earnings tend to be quite volatile Comparing the market s value to only one year of earnings can be misleading The cyclically adjusted P E ratio for the US markets is currently around 14 It had been as high as 27 in this recent bull market so on face value the market may well appear cheap This current downturn however is no ordinary recession We have repeatedly by historical data attempted to demonstrate this The cyclically adjusted P E ratio when seen through the lens of history tells an entirely different story During the January 2000 tech bubble for example the cyclically adjusted PE ratio peaked at 44 3 the highest in the Graham Shiller measure since first recorded in 1881 The previous peak which occurred just before the Great Depression was 32 6 When viewed from the opposite angle in the recession of the early 1980 s the P E ratio bottomed out at under 10 after World War I and II the ratio fell to under 8 and in 1932 after the Great Depression it fell below 5 To put those moves into context a fall in the P E ratio to below 10 which may prove to be conservative would see the S P 500 fall to around the 550 mark This would be a fall of a further 20 per cent from current levels In a more devastating move a fall to below 5 would put the S P 500 down at the mid 200 s This would constitute a fall of 70 per cent from current levels Simply put buying because the market is perceived to be cheap would appear to be foolhardy The concerning and unknown quality of the P E ratio is of course the earnings component E In this economic environment the profitability of companies is highly uncertain A simple yet startling example was revealed during the week with US car sales for February falling nearly 50 per cent Drawing comparisons between the current market and the Great Depression is not done to be overly pessimistic but as a simple examination of historical data History does not always repeat but we feel that it rhymes The market movements of those years are the only ones now of any relevance When the legs down during the Great Depression are averaged it would indicate that the current fall we are experiencing should conclude at around 610 in the S P 500 This is a fall of a further 10 per cent from current levels Wherever the bottom may be however there is no point trying to guess it Barack Obama s misguided comments regarding the cheapness of the market were an attempt to instil much needed confidence Such attempts by politicians around the world whether they be stimulus packages bailouts or confidence inducing comments have not worked and will continue to not work Everything that is happening now has happened before and the steps being taken by governments now have been taken

    Original URL path: http://www.thirdwavegroup.com.au/tidal-report/tidal-report-16-mar-2009-is-the-market-cheap/ (2013-02-03)
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  • Tidal Report – 11 Jan 2009 – Honey, I Shrunk the Economy : third wave group
    1974 It must be noted however that big falls can be followed by equally impressive gains The market improved by 11 3 per cent in 1931 19 9 per cent in 1932 and 48 5 per cent in 1975 Indeed in the US the S P 500 increased 177 per cent in one year one month from the lows in June 1932 to July 1933 Whilst already substantial in price decline this current bear market is still a young one As far as length is concerned in the US the present bear market ranks only 17th out of 28 since 1886 Yet with a fall of 53 per cent it is already the third greatest in history in terms of price decline being beaten only by the fall of 89 per cent in the Great Depression and 54 per cent in 1937 Clearly none of this augurs well for the economy in 2009 The great saviour for the Australian economy was of course going to be China Yet even China has felt the global pinch As a consequence of our heavy reliance on revenue from the sale of our resources the balance sheet of governments around the country will be decimated Indeed the treasurer of South Australia recently admitted his state s revenues had literally evaporated overnight If history repeats as it usually does this would be indicative of severe economic contraction around the world evidence of which has started to emerge Governments around the world have been aggressively reducing interest rates in an attempt to kick start economies The Bank of England recently reduced its official rate to 1 5 per cent the lowest in its 300 year history Both the US and Japan have no further room to move Stock markets are predictive of economic conditions which is why they topped out ahead of evidence of the emerging contraction Consequently they will bottom prior to the economic cycle We are clearly in a bear market that is of historic proportions Markets such as this cannot simply fall in a straight line and recover We have already had one bear market rally from March 2008 to May 2008 of 18 7 per cent and as we have previously indicated are expecting another before a final low occurs Even in the greatest bear market of 1929 to 1932 there were six bear market rallies ranging from 19 to 52 per cent At some point the market will bottom and there will eventually be historic money making opportunities for the patient Usually one expects this to occur after the market finds a bottom and is followed by a period of consolidation A commonly used tool to indicate a bottoming process is in play is when the 200 day moving average flattens meets the index and starts moving up As far as the S P ASX 200 is concerned the moving average is still well above the current position of the market and has shown no signs of flattening As we indicated

    Original URL path: http://www.thirdwavegroup.com.au/tidal-report/tidal-report-11-jan-2009-honey-i-shrunk-the-economy/ (2013-02-03)
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  • Tidal Report – 23 Nov 2008 – When Others Despair . . . : third wave group
    which of course heavily influence our economy remain in free fall Oil has fallen 67 per cent from its highs in just over four months and is now trading under 50 The Australian dollar has fallen 39 per cent in four months from its highs where it was trading almost at parity with the US dollar The huge fall in prices in both equity markets and commodities has been partially attributed to the huge unwinding of hedge fund positions New York hedge fund Atticus Capital for example revealed last week that as a result of both market declines and sales its US equities holdings fell from US 8 1 billion to just US 510 million during the third quarter To what extent that was due to client redemptions is not known Redemptions in particular however are forcing many fund managers to sell down holdings regardless of strategy in order to meet client demands for cash As we have previously discussed the stock market is reflecting future anticipated conditions and there is thus an expectation that things will turn down severely next year There are already examples of a slowdown appearing particularly in the motor vehicle industry and more disturbingly the rampant mining industry GM Holden announced it will cut its production by almost 50 per cent in the first three months of next year with its Adelaide plant having just 28 production days during that quarter This will of course have a flow on effect in associated industries A trip this week to Mount Isa a mining town in Western Queensland also demonstrated a slowing down of the economy Xstrata the owner of the Mount Isa mine has put new work on hold leading to the loss of jobs for contractors Activity in the town itself is starting to slow One publican did however say quickly in response to a question as to whether there was less money going through the poker machines NO When that happens THEN its time to panic Interestingly as now the Great Depression saw interest rates drastically lowered as governments attempted to stimulate economic activity No matter how low interest rates go this does not necessarily work Japan has been at near zero per cent interest rates for over a decade but the volume of credit still contracted The Bank of England recently cut rates by 1 5 per cent to 3 per cent the lowest level since 1954 but this only led to a temporary bounce on the FTSE It always goes back to confidence and human psychology No one will borrow money even at zero per cent to buy an asset they believe will be cheaper in 3 months time Interestingly a recent South East Queensland property survey revealed that 40 per cent of respondents cited that the biggest factor currently deterring them from buying was uncertainty about price growth This market crash whilst vicious has not been a shock to everyone Robert Prechter a renowned exponent of the Elliott Wave Theory of

    Original URL path: http://www.thirdwavegroup.com.au/tidal-report/tidal-report-23-nov-2008-when-others-depair/ (2013-02-03)
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  • hedge funds : third wave group
    formed a new low on Friday of 3217 5 as did the US markets with the Dow Jones reaching 7392 and the S P 500 741 Filed under tidal reports Tagged with great depression hedge funds motor vehicles psychology robert prechter stockmarket subscribe Have our blog posts delivered straight to your inbox categories general posts tidal reports latest posts The story silver tells Is the end game in sight for Greece Descending the Slope of Hope Australia s sugar daddy stalling What housing undersupply Australian banks vulnerable still Chicken or egg the unemployment effect The recovery that isn t McKibbin you ve done it again What does this chart tell you tag cloud alan kohler australia banks ben bernanke britain china commodities currency debt deflation deleveraging demographia report economy employment europe first home owners global financial crisis great depression greece interest rates international monetary fund ireland japan jim chanos karl denninger kevin rudd leith van onselen louis christopher market history mike shedlock oecd psychology real estate recession robert prechter sentiment sovereign debt steve keen stimulus stockmarket super profits tax technical analysis terry mccrann undersupply united states archives November 2011 September 2011 August 2011 July 2011 June 2011 May 2011 April

    Original URL path: http://www.thirdwavegroup.com.au/tag/hedge-funds/ (2013-02-03)
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  • david uren : third wave group
    the story of a recent first home buyer who spends 80 per cent of her salary on her mortgage As mind boggling as Filed under tidal reports Tagged with australia david uren foreign debt glenn stevens interest rates real estate ross garnaut subscribe Have our blog posts delivered straight to your inbox categories general posts tidal reports latest posts The story silver tells Is the end game in sight for Greece Descending the Slope of Hope Australia s sugar daddy stalling What housing undersupply Australian banks vulnerable still Chicken or egg the unemployment effect The recovery that isn t McKibbin you ve done it again What does this chart tell you tag cloud alan kohler australia banks ben bernanke britain china commodities currency debt deflation deleveraging demographia report economy employment europe first home owners global financial crisis great depression greece interest rates international monetary fund ireland japan jim chanos karl denninger kevin rudd leith van onselen louis christopher market history mike shedlock oecd psychology real estate recession robert prechter sentiment sovereign debt steve keen stimulus stockmarket super profits tax technical analysis terry mccrann undersupply united states archives November 2011 September 2011 August 2011 July 2011 June 2011 May 2011 April

    Original URL path: http://www.thirdwavegroup.com.au/tag/david-uren/ (2013-02-03)
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  • Tidal Report – 22 Nov 2009 – The Mother of all Bubbles : third wave group
    the world safe for now for the mother of all carry trades and mother of all highly leveraged global asset bubbles While this policy feeds the global asset bubble it is also feeding a new US asset bubble Easy money quantitative easing credit easing and massive inflows of capital into the US via an accumulation of forex reserves by foreign central banks makes US fiscal deficits easier to fund and feeds the US equity and credit bubble Finally a weak dollar is good for US equities as it may lead to higher growth and makes the foreign currency profits of US corporations abroad greater in dollar terms The reckless US policy that is feeding these carry trades is forcing other countries to follow its easy monetary policy Near zero policy rates and quantitative easing were already in place in the UK eurozone Japan Sweden and other advanced economies but the dollar weakness is making this global monetary easing worse Central banks in Asia and Latin America are worried about dollar weakness and are aggressively intervening to stop excessive currency appreciation This is keeping short term rates lower than is desirable Central banks may also be forced to lower interest rates through domestic open market operations Some central banks concerned about the hot money driving up their currencies as in Brazil are imposing controls on capital inflows Either way the carry trade bubble will get worse if there is no forex intervention and foreign currencies appreciate the negative borrowing cost of the carry trade becomes more negative If intervention or open market operations control currency appreciation the ensuing domestic monetary easing feeds an asset bubble in these economies So the perfectly correlated bubble across all global asset classes gets bigger by the day But one day this bubble will burst leading to the biggest co ordinated asset bust ever if factors lead the dollar to reverse and suddenly appreciate as was seen in previous reversals such as the yen funded carry trade the leveraged carry trade will have to be suddenly closed as investors cover their dollar shorts A stampede will occur as closing long leveraged risky asset positions across all asset classes funded by dollar shorts triggers a co ordinated collapse of all those risky assets equities commodities emerging market asset classes and credit instruments Why will these carry trades unravel First the dollar cannot fall to zero and at some point it will stabilise when that happens the cost of borrowing in dollars will suddenly become zero rather than highly negative and the riskiness of a reversal of dollar movements would induce many to cover their shorts Second the Fed cannot suppress volatility forever its 1 800bn purchase plan will be over by next spring Third if US growth surprises on the upside in the third and fourth quarters markets may start to expect a Fed tightening to come sooner not later Fourth there could be a flight from risk prompted by fear of a double dip recession or

    Original URL path: http://www.thirdwavegroup.com.au/tidal-report/tidal-report-22-nov-2009-the-mother-of-all-bubbles/ (2013-02-03)
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  • bubble : third wave group
    housing bubble that burst in the US in 2006 the stockmarket bubble that burst in 2007 and the commodities bubble that burst in 2008 This Filed under tidal reports Tagged with bubble debt economy interest rates kenneth davidson nouriel roubini subscribe Have our blog posts delivered straight to your inbox categories general posts tidal reports latest posts The story silver tells Is the end game in sight for Greece Descending the Slope of Hope Australia s sugar daddy stalling What housing undersupply Australian banks vulnerable still Chicken or egg the unemployment effect The recovery that isn t McKibbin you ve done it again What does this chart tell you tag cloud alan kohler australia banks ben bernanke britain china commodities currency debt deflation deleveraging demographia report economy employment europe first home owners global financial crisis great depression greece interest rates international monetary fund ireland japan jim chanos karl denninger kevin rudd leith van onselen louis christopher market history mike shedlock oecd psychology real estate recession robert prechter sentiment sovereign debt steve keen stimulus stockmarket super profits tax technical analysis terry mccrann undersupply united states archives November 2011 September 2011 August 2011 July 2011 June 2011 May 2011 April 2011 March

    Original URL path: http://www.thirdwavegroup.com.au/tag/bubble/ (2013-02-03)
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