chat with md, page-13

NK you have obviously been around a while and are a wise head perhaps it is never unwise to contemplate the worst case scenario. However, with todays GLOBAL economic picture I do not believe the sub prime issue in the USA is at all significant to the Australian Share market except to companies with some exposure.

I think the softening of some areas of the the housing market in the USA is a short term and healthy situation. The tightening of credit to the gung ho sub-prime lenders had to be done and if the major banks handnt acted the way they have the US goverment regulators would have had to act. I don't see this leading to a major credit squeeze in any sense. Although debt is getting a little out of hand I cant see an major global economic slowdown coming in the near future. I think China has at least another 18 months to run at current growth rates and pehaps even longer buoyed on by the stimulus of the Olympic Games on their economy. India is just cranking up and globalism is creating new stong economies in emerging countries. We are entering an era that history has no lessons for us. Yes there will be some bubbles along the way and some governments in some countries will stuff things up temporarily but the inertia is there.

Because the stock market has been so boyant the pyschology of investors at the moment is they are anticipating a major correction or crash. It is always a natural fear (naturally when it involves so many retirement funds). The resultant volatility of the market over the last 9 months from the Japanese Carry Trade Scare in Feb and now the Sub-prime lending event is indicative of the tactical scare mongering that goes on from the highest levels of the investment world. Creating bursts of Fear and Panic are one of the major tactics the big end of town use to create opportunity in the market. Volatility is their best friend.

Ive pinched a couple of posts from anothe HC thred discussing the US housing and sub-prime fiasco -

"Roger Cole, the Fed’s Director of Banking Supervision and Regulation, told the Senate Banking Committee today that he didn’t see “spillover effects from the problems in the subprime market to traditional mortgage portfolios….”

Also, it is not defaulters so much that is killing subprime mortgage lenders. It is the banks who are refusing to give them easy credit anymore! I certainly would not lend them my money either!

and

This is hot from from Moody's Credit Trends ...
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Previous Record Appreciation Softens Blow of Home Price Deflation ... even if the moving 12-month average of the real median prices of existing homes sold sinks by -10% from its May 2006 zenith, it will still exceed all readings prior to March 2005.

Index of Pending Home Sales Lifts Some of the Gloom From Housing ... Both July's unexpected 5% monthly jump by the index of pending home sales and the better-than-9% yearly growth of mortgage applications for the purchase of a home hint of a decent demand for housing.

Consumers Plan To Spend More On Cars, Appliances and Housing ... after slowing from Q1 2007's +3.7% to Q2 2007's +1.3%, the annualized sequential increase of real consumer spending should rise to +2.0% in Q3 2007, which would limit the slowing of the annualized quarterly growth of real GDP from Q2 2007's +3.4% to something no slower than +2.0% for Q3 2007.
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I am not saying there is or was no us housing slow down. I am just saying this was not largely due to subprime mortgage factors. I just can't see any evidence for the doom and gloom all the recent subprime mortgage hype portrays. I reckon, its just a bunch of subprime lenders going down kicking and screaming. "

Back to my own discussion now:

The current correction in the Australian Share market will be no worse than February and will bounce back over a couple of months. We are into reporting season and I anticipate enough strong company earnings to restore confidence in stock with good value. Naturally stocks with bad results will suffer. I think the timing of the current correction in the market is excellent for the heath of the market generally and for investors that can pick stock with good growth prospects and attractive P/E ratios.

Sure by all means wait for some more positive announcements from TTR and some upward price mommentum before you buy in again - but for me Im happy to stay on board (been there since 6 cents in 2001) and ridden the ups and downs but I like what I see in this company.

Although this current market correction probably has a little way to run yet (until we all get bored with it and start focussing again on fundamentals) I don't see it quite the same as you I am far more optomistic.