Thinking of Buying a New (or used) 4WD ?

Tazbaz,
What do you mean the future is intrinsically unknowable. It may be in specific detail but the future economic trends ARE knowable. Its not rocket science – the first industry to suffer in any economic downturn is the motor vehicle industry as it relates to a large capital purchase that is deferrable. If people believe or have a perception their economic future is under threat its common sense to postpone unnecessary purchases (such as a new motor vehicle). The second industry (with a time lag of 6 months or more) to be impacted in a downturn is usually the building industry – but this time the water has been muddied by slashing interest rates and boosting first home buyer grants. How these balance out next year is unknown. Economics is NOT an exact science – never has been and never will be – but there are economic fundamentals that always work in a certain known direction. We know for example the $Aus dollar will most likely weaken in the coming months as it is linked to our export performance – a world recession will certainly dampen demand for our mineral exports But economics cannot tell how much it will weaken – some economists are saying it could go to 40 cents while others are saying around 60 cents. This does not mean economists do not get it right – it is the trend they generally get right but the quantum of that trend can only ever be an estimate. In my opinion your comment about Bank Economists is not only derogatory but unfounded. I have personally met Dr Shane Oliver and Alan Oster for example and hold these gentlemen in high regard as economists – men of utmost integrity I believe. But as stated they are working in an inexact science and all the pitfalls that entails. Where are the examples that they have got always wrong according to you. If comments like that are made you should back up your comments with factual examples.
Cheers,
GPM

Saharaman

Do a Google News Archive timeline search and you will see what I mean - type in Alan Oster then Shane Oliver. These and other folk who should know better would say 'the fundamentals are ok' - wrong!

The RBA increased interest rates earlier this year to control inflation but they failed to realize that the drivers of inflation were: 50% imported and 50% domestic - rises in housing rents, financial services, health and education being the 'culprits'.

Don't get me wrong - I love the subject of economics. I do know a fair bit of it and have served on economic forecasting and modelling committees.

Cheers

tazbaz

Guys,

Great! Tell me what shares to buy please?


Cheers

Hi Corio,
The only shares to buy in times like these are those with robust fundamentals. This share market crash has really proven that in extreme situations technical analysis and charting does not work (remember all those experts who said at the beginning of this year how the All Ords would not fall below 5100 as that was on the long term trend line - how wrong they were). Support levels continue to fail and the share price dips lower in some cases than its been for the past 5 years.
I would stick with robust companies who are dominant in their industry, have strong balance sheets and have acceptable debt levels like QBE, LEI, CSL, BHP, WOW etc etc and only buy on market weakness. Who knows if the market has bottomed or not - but by averaging - buying some of those companies on dips in the market over the next 12 months is, in my opinion, the way to go.
That is, study the financial reports of companies and base your decisions on fundamental analysis. There are many more to consider other than the ones mentioned above.
Cheers,
GPM

Saharaman,

Looking more at a 5 year plan and those stronger companies as you suggest particluarily those with decent yields ie.,profitable with good dividends.

Wouldnt this apply to the banks as they appear to be the first to recover and now have the guarantee from the Government.

Anyway thanks for your opinions we,ll just have to wait and see however not that i,m a huge investor but have just purchased CBA and BHP.BHP not so much for the yield but because I believe they are secure and cheap at the moment.


Cheers

Corio,
The problem with the banks is we do not know how much more bad news is in store for them. Just in the past few days they have all taken a hit with Allco Finance and ABC Learning going into receivership. CBA exposure to ABS is $460million and $170m to AFG. They will get some of it back –but how many more companies will go into receivership in 2009 – probably many more to come. Of all the Banks I would favour Westpac as they have tended to be more conservative and they are buying SGB at below asset value. Once this merger is integrated over the next few years they should emerge as one of the strongest and biggest banks in Australia.
Just my opinion though. CBA may still be a good investment at the right prices.
Cheers,
GPM

This risks getting off topic (already is)...however, working in financial markets we rely on economic modelling and forecasting every day. How good is it...it is only as good as what you know, and how you interpret that information might affect the future.

As for shares, I'm no expert but I'd be looking at infrastructure companies. I think governments around the world willl poor money into large scale infrastructure projects to revitalise ecoomies. It is the best bang for your buck.


Email if you want to discuss further........