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Market chaos - when will it end?

With the chaos in the markets, it got me wondering what the wider-ranging impacts are going to be. Obviously the sharemarket is affected, but for how long? And what other things will be impacted as a result - jobs, housing prices, interest rates, small businesses?

Tags: investing, markets

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Permalink Reply by Natalie Bochenski on October 1, 2008 at 6:09pm

It's an interesting question, Mary M, one that we're all wondering a bit about at the moment I fancy!

It seems likely that we'll get an interest rate cut next week (possibly even a 0.5% reduction), but it's still unknown as to whether the banks will pass the cut on in full. The market turmoil means it's harder and more expensive for banks to borrow money - so they're not that keen to give us more (are they ever?). Treasurer Wayne Swan has called for the banks to pass on the rate cut, but admits it may not happen, and of course he cannot force them.

Australia's economy is in a stronger position than the US, so I don't believe we're set for the bread queues just yet. Certainly a slump is possible - we may not have quite as rosy an employment rate as we have had. House prices will probably settle a bit - the Housing Industry Association says a few rate cuts are needed to get the market cooking again. I think houses close to urban centres will remain sought after, but the suburbs may suffer.

Anybody else want to share their take - I'm happy if you think I'm wrong!

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Permalink Reply by italiandragon on October 6, 2008 at 8:17pm

Hi, I was looking at the Dow jones historic chart and it seems that we are reaching soon a level that should hold the long term uptrend.....the one that held it in around 2002 -2003 and projected it from about 7,600 point to above 14,000

Now we are down at 10,300 and I don`t think this time will go under 9,000 so in the next few weeks I want to be ready to strike.

Anyway, trying to answer to your question: I think that we may have some trouble for up to 12 months but the biggest worry is if that uptrend won`t hold it, then technically it will be a big problem, in that case the decline in prices and value of every equity would just be started and when/if a recession hit, than you are better off without debts and cash is king.

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Permalink Reply by Matthew Reader on October 8, 2008 at 10:45am

Well, your question was timely Mary - the US market has plunged 13% since you posted this!!!

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Permalink Reply by Mary M on October 23, 2008 at 1:27pm

And it seems that the chaos continues...

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Permalink Reply by Bandwidth on October 24, 2008 at 8:14am

Think of it like this

We are at the bottom of the bungie jump

The overextended speculators were holding on with only a thin short cord which snapped

Those that thought the cord would not stretch this far let go at the bottom, with little hope of return.

We are bouncing up and down until we stabilise and then we can swing over to a platform that lets us climb.

The brave will want to get in early and they will drive and initial climb.

The conservative investors will enter in dribs and drabs over an extended period of time

The unwashed masses will eventually see the market as the way to make a fortune.

Those that jumped in a panic and or were forced out will be the last to get in and will come in as we are standing on the jump platform

from that platform we will bungie jump again.

Does this sound like a familiar cycle :-)

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Permalink Reply by J.P.T. on October 27, 2008 at 9:55am

Is now the time to get in?
It seems like a god time to buy (cheap)!
But what to buy into?

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Permalink Reply by Bandwidth on October 27, 2008 at 11:58am

My system is still keeping me out but that is my system, we will see

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Permalink Reply by JeffK on October 28, 2008 at 3:22pm

I'm with you Bandwidth. I see no reason to buy into a falling market. You can have the first 20% and the last 20% - I'll take the 60% in the middle ;)

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Permalink Reply by LS on November 3, 2008 at 7:08am

Hey JPT, read this article the other day that is in line with your question:

Is that stock a bargain?

Personally I think once companies start reporting things will get even uglier. And what is going to happen when all the US banks have to revalue their assets - i.e. the houses that have been handed back to them as per the laws over in the US where homeowners can just give the bank the keys if they can't pay off their debt. These assets are worth significantly less now and once this hits their balance sheets all hell will break loose (again).