June 30th, 2008
ANZ and NAB drop significantly ever since its peak in November 2007. NAB has reached its August 2004 bottom. There is still another $2.50 more to go before ANZ reach its bottom in November 2003. Have a closer look at the line that i draw vertically. When NAB is at $26.00, the ASX200 was only at 3500 point. Does that mean that with the current bear market, it will pull the ASX200 to 3500 level again ? If it is, that means ASX200 will drop another 1700 point. At this time, we need to consider that the two major company that are supporting the index are BHP and RIO. Although most of the companies are at the negative territory, if BHP and RIO are going up, it might be able to push the overall index for ASX200. Having these two company in ASX200 that are doing so well in the mining sector, it might not give people a correct picture on what is going on in the market by looking at the ASX 200 index. Commonwealth Bank, Westpac and St George are still no where at the bottom yet. So it is still abit risky to consider those three bank. Especially for St George when Westpac is still in the process of acquiring the company. When the economy is not good, bank will be the first sector to get effected especially with the high interest rate introduced by the Reserved Bank. So not suprising that certain bank has already reach the bottom as there are many debts that they would have to write off because people who has a mortgage couldnt meet their repayment. The drop from the top to the bottom doesnt happen in a night. Neither it will goes up from the bottom to the top within a day. And of course buying stock is not a one day process as well. Through out the process, there are plenty of time for you to analyze which stock you would want to get into and at the same time save a bit of cash every month to purchase the stock you have in mind. It is possible that the market remain stagnant for a couple of years before actually start picking the momentum up again. Such situation can be either good or bad. For those who do not have much cash, they have a longer span to purchase the shares. For those who needs cash urgently, you might be entering and exiting the market without making any profit. This is really a game that depends on lots of patience. It maybe a 3-5 years process or it might be longer then that.
Why banking sector ? If you do realise banking sector pretty much follow the trend of the economy. Bank do well if the economy do well. IT sector used to do well last time. Then follow by resource sector. Who is able to gurantee that resource sector able to last till the next market bull run ?
Would thought that this economy down turn will be as bad as the one back in 1989. US was having recession during then. Other sources actually mention that this will be as bad as the one in 1929 which people called it as “The Great Depression”. How true is this ? Heard a lot about the 1989 recession. But this is the first time I heard about the 1929 depression. Will need to find out more information about the 1929 depression and see what is the similarities between 1929 and now.
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Tags: ANZ, ASX, CBA, depression, NAB, RBA, recession, shares
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