After reading my e-mails for the day it was surprising how many of the “GURUS” said in their newsletters that “Of course we knew it was coming” If so why the panic??

I have been it the market long enough now to realise that “A correction ” will come eventually but I have yet to see anyone put a time frame on it and be spot on.

Personally I “LOVE” any corrections,falls,recessions or whatever name you want to call them.

Beause I see it as a “TIME TO BUY” You can get good excellent blue chip stocks at “Bargain basement Prices.”

So what do I advocate??
BUY IN GLOOM AND SELL IN BOOM

Because as strange as it might seem Share Prices will go upwards again
They always do. Well so far so good and I’ll keep my fingers crossed and where’s my lucky rabbits foot?

In the mean time read the report so you will also know the reasons why?

February 28 2007 - Australasian Investment Review – (AIR)Markets Fall: Time For A Correction?

Is this the rattle of a market correction we are now hearing?

Wall Street had its biggest one day fall since September 11 overnight after European shares fell sharply for a combination of reasons.

And this morning the New Zealand stockmarket opened 2.9 per cent lower.

Driving the sharp falls was a near nine per cent drop in Chinese stockmarkets late yesterday, the biggest fall in a decade.

That came mostly after the Australian market had closed. The impact hit touched Japan, hit Hong Kong and then spread into Europe, sending markets sharply lower.

Why? Fears of an official crackdown on investment schemes and other fiddles which are now rife through the country’s stockmarket.

Our market fell 50 points on the ASX 200 and 44 points on the All Ords yesterday on emerging concerns the market was overvalued.

So trading in the Share Price Index overnight was showing a fall of 161 points in the ASX 200 at the opening today.

European markets closed lower, oil and gold were volatile, down, up and then easing at the end: oil just under $US62 a barrel on continuing worries about Iran: gold around $US685 an ounce, shy of the nine month high of $US689 reached on Friday.

But the prices of other commodities, such as zinc, copper and some of the grains fell in Europe and the US. Commodity prices have just recovered after the sharp sell off in January.

Overseas reports said the worldwide falls were a combination of the plunge in Chinese markets, worries around the world that equities are now over priced, fears of slowing growth, especially in the US and those tensions over Iran.

Wall Street was also hurt by the concerns about the health of the economy after durable goods orders fell 7.8 per cent in January: that was a bigger fall than forecast and seems to have been partly driven by that housing industry crunch.

The Dow fell around by 500 points at one stage to close more than 415 lower for a loss of 3.2 per cent. The NASDAQ lost 3.8 per cent in value or more than 96 points, the S&P 500 plunged more than three per cent or around 50 point.

And traders fled stockmarkets for the safety of cash and US bonds: yields fell sharply, hitting a low of 4.49 per cent for the benchmark 10 year security before closing at 4.5 per cent. That compares to 4.62 per cent on Friday.

European markets had their biggest single-session fall since the correction last May, when high valuations, high commodity prices and fears about inflation saw interest rates rise.

That shakeout was compounded by the fighting in Lebanon between Israel and Hezbollah but then markets steadied as interest rates rose, commodity prices fell, especially oil and petrol prices. Inflation started easing and stocks rebounded sharply.

In London the FTSE 100 was off 2.2 per cent, German’s Xetra Dax lost 2.9 per cent in value and the CAC 40 in Paris slid 3 per cent.

As in Asia, it was financial stocks that took the biggest hit in continental Europe – particularly those geared to emerging markets – as investors removed cash from exposure to risk.

The shakeout comes amid record highs for several Asian equity markets, including China and South Korea, six-year peaks for European bourses and record highs in the US for the Dow and in Australia in the past week.

And showing it’s hard to keep the old dog out of the spotlight; former Federal Reserve chairman Alan Greenspan played a part in the sell off by saying that he though it was “possible” the US economy may fall into recession later this year.

There are fears in the US that with the housing market hurting, the subprime mortgage sector tanking, a sharp fall in Wall Street could be just enough to tip the economy into recession.

For us in Australia the sell off will add to worries about valuations fears for a large number of stocks.

Questions to be posed include: What will any prolonged price weakness do to the valuations of Qantas, Coles and other shares where private equity is playing?

The Qantas buyout is down the track and will go ahead, all things being equal. But Coles?

The collapse of the Flight Centre buyout yesterday when investor, Lazards refused to go along with the proposal and voted no, might have some life if the sell off is prolonged. A FLT price around $17.20 in a weak market would look better than dreams of $20.

If the US economy is weakening, what does that do to the Rinker Group’s defence against the bid from Cemex?

And with financial stocks in China taking a hit and European banks and others with investments in emerging markets also being sold off, there’s obviously concerns about how stretched some companies in the sector might be.

So watch for any price pressure on local banks and investors with exposures in China (such as the ANZ and IAG) and some fund managers with known exposures (such as Platinum).
Remember it’s only early days.

AIRpublishesweeklymagazine.CopyrightAustralasianInvestmentReview.
Subscriptions are free at.
www.aireview.com.au


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