Pete Wargent blogspot


'Must-read, must-follow, one of the best analysts in Australia' - Stephen Koukoulas, ex-Senior Economics Adviser to Prime Minister Gillard.

'One of Australia's brightest financial minds, must-follow for accurate & in-depth analysis' - David Scutt, Markets & Economics Editor, Sydney Morning Herald.

'I've been investing 40 years & still learn new concepts from Pete; one of the best commentators...and not just a theorist!' - Michael Yardney, Amazon #1 bestseller.

Thursday, 12 March 2020

Absolute fustercluck

Stock market crash investigation

Not all that surprisingly Aussie stocks crashed again by another -7.4 per cent, or -421 points again today, closing just above 5,300, down from a peak of 7,200.  

It was, once again, the worst day of trade since the financial crisis. 

The ASX 200 index has dropped back to mid-2015 levels (and sits miles below 2007 levels). 

As noted, however, markets are far from cheap or offering particularly good value.

So although some people are talking about 'buying the dip' I'm not going anywhere near this thing. 

Source: SBS Money

US and European futures point towards another horror trade ahead, with the first futures circuit breaker already triggered, with a 30 per cent correction now hoving into view for US stocks, and little sign of the bleeding ending any time soon.

Aussie futures are now trading below 5,300.

No bright side

Aussie stocks are down just shy of -27 per cent in the past three weeks, which often gives rise to 'dips are usually a good time to buy' type articles.

Well, maybe, but the problem with that is that valuations matter., and stock prices are coming down from insanely high and speculative levels, especially in the US, which is the global market which matters most of all.

Even if US stocks prices crashed by another -30 per cent from here, that would still only bring the CAPE back down to about 18.

Earnings are also set to be crushed, and in the short term sentiment is what matters. 

President Trump will suspend all travel from Europe, excluding the UK (wth?), while the Aussie Prime Minister has discussed extending the travel ban from China, Iran etc. out to include Europe as well.

It's no exaggeration to say that this could be a 1987 or GFC type of moment for stock markets, with the remainder of 2020 having the potential to get extremely messy.

Hedge fund returns are already blowing up all the over the place, so who knows what on earth this will bring to light?