Black Monday - Apparently

Graham_Devon

Telegraph has it's top story today with the headline "Black Monday". It's more of a live feed than an article, but interesting choice of title!

Not much on all of this on here.

However:
- Shanghai composite has fallen 9%
- FTSE has fallen 2.5%
- Brent Crude has fallen 4.5%

And this is just today.

The live feed does have something for everyone.....

"I told you so" in the form of you can't keep shoveling money at a market.

"Don't panic" they will shovel more money at the markets.

and finally "Time for a reality check" while QE was needed, maybe this is simply the result. All stocks overvalued, countries trying to race to the top. How can anyone really be surprised that this would happen.

http://www.telegraph.co.uk/finance/markets/11819812/Markets-Black-Monday-China-panic-grips-investors-rouble-collapses-and-stocks-undergo-selling-bloodbath-live.html

So what do you think? Temporary blip again? Or something more?

The above article is stark - there are quite a few experts stating what will happen next. The key thing is, they all say something different.

wotsthat

Graham_Devon wrote: »

So what do you think? Temporary blip again? Or something more?

The above article is stark - there are quite a few experts stating what will happen next. The key thing is, they all say something different.

I've invested a large chunk of cash in my pension today and am pleased with the prices. I'm rubbish at betting on short term movements in share prices so stick to betting on the continued long term success of equity investing.

However, my falling market strategy has been initiated. When prices are going up I check my portfolio frequently and when they're going down I check once a month as I top up. In the early 2000's I used to check once a year!

Generali

Maybe more of a Grey Monday than a Black Monday. The sell-off could well still have a long way further to go I think.

The US stock market was priced at something like a PE of 26. That means that when you buy a share it will take 26 years of earnings (at current value) to pay the price of the share. That is a little less than twice the long term average and has been driven by low interest rates, including QE which is really just another way to hold down interest rates. That is a high price to pay for a share.

At the moment this is a 'correction' in most countries (a fall of 10%). To become a bear market (fall of 20%) the markets will have to fall further but that isn't impossible.

chucknorris

Generali wrote: »

Maybe more of a Grey Monday than a Black Monday. The sell-off could well still have a long way further to go I think.

The US stock market was priced at something like a PE of 26. That means that when you buy a share it will take 26 years of earnings (at current value) to pay the price of the share. That is a little less than twice the long term average and has been driven by low interest rates, including QE which is really just another way to hold down interest rates. That is a high price to pay for a share.

At the moment this is a 'correction' in most countries (a fall of 10%). To become a bear market (fall of 20%) the markets will have to fall further but that isn't impossible.

I'm not convinced, the composite index is only roughly where it was in January, the ftse 100 is about 6% lower than it was in January, apparently reacting to the Chinese dip (but that was from a real surged price), doesn't quite make sense to me, I think it is an over reaction.

I'm no expert, that is just my humble opinion. I nearly invested another £10k this morning, but compared to what I already have invested, that, so I didn't bother. But this is a handy experience, because this morning I was thinking, 'how would I feel, right now, if I had just invested a million' putting almost everything into equities might not be a great idea.

Generali

chucknorris wrote: »

I'm not convinced, the composite index is only roughly where it was in January, the ftse 100 is about 6% lower than it was in January, apparently reacting to the Chinese dip (but that was from a real surged price), doesn't quite make sense to me, I think it is an over reaction.

I'm no expert, that is just my humble opinion.

The price is high because interest rates are low IMHO. If interest rates are low then dividends become more valuable.

IMHO QE and ZIRP has made (almost) all yielding assets behave like bonds and commodities behave like cash proxies.

michaels

Generali wrote: »

Maybe more of a Grey Monday than a Black Monday. The sell-off could well still have a long way further to go I think.

The US stock market was priced at something like a PE of 26. That means that when you buy a share it will take 26 years of earnings (at current value) to pay the price of the share. That is a little less than twice the long term average and has been driven by low interest rates, including QE which is really just another way to hold down interest rates. That is a high price to pay for a share.

At the moment this is a 'correction' in most countries (a fall of 10%). To become a bear market (fall of 20%) the markets will have to fall further but that isn't impossible.

Pe of 26...can we call that a yield of 4%? Ie still more than you get on gilts

Generali

michaels wrote: »

Pe of 26...can we call that a yield of 4%? Ie still more than you get on gilts

No because not all earnings are paid out as dividends.

A payout ratio of 50% would be pretty respectable for a relatively safe yet decent yielding company such as a mature miner. A 100% payout ratio implies that you know better than the company how to deploy capital. If that's the case, why are you giving the company your money?

Graham_Devon

Well something just happened - FTSE100 down nearly 4% now.

Graham_Devon

chucknorris wrote: »

I'm no expert, that is just my humble opinion. I nearly invested another £10k this morning, but compared to what I already have invested, that is just peanuts, so I didn't bother. But this is a handy experience, because this morning I was thinking, 'how would I feel, right now, if I had just invested a million' putting almost everything into equities might not be a great idea.

Feel free to pass a peanut over

chucknorris

Graham_Devon wrote: »

Feel free to pass a peanut over

I couldn't resist the price, just invested £10k in the ftse 100.

Generali

Graham_Devon wrote: »

Well something just happened - FTSE100 down nearly 4% now.

It's not so much that the market is down 4% today that it's down something like 14% in the last fortnight.

Big drops either way. Buying opportunity or time to get out? Time will tell.

Here's the list of FTSE100 companies that had increased in value as of 10:12am:



Really though, the market is being dragged down by miners (e.g. RIO and BHP) plus companies such as HSBC and some of the luxury firms with high exposure to China.