macrae
I like your optimism, buts its useful to have a plan B in case the world central bankers (and govt stimulus) are unable to avert a massive contraction in credit and its consequent deflationary effect.
The website site I read daily with negative views is Mish shedlock's at http://globaleconomicanalysis.blogspot.com/
There are others such as:
http://www.prudentbear.com/
http://www.financialsense.com/index.html
http://www.minyanville.com/
etc, etc
In a credit contraction one would expect the risk premium to rise, which is what is happening. The other side to this is that the accepted normal market PE ratio falls. An interesting paper on why PE ratios could fall can be found here http://www.leithner.com.au/newsletter/Dec07%20Newsletter.pdf
Essentially, even if firms maintained their earnings, their share prices could fall appreciably in the face of falling PE ratios. In the event of both falling PE ratios and falling profits (for whatever reason, such as recessions in US/much of Europe, falling commodity prices (heaven forbid for that to happen) etc) share prices would fall much further.
I suspect that the sharemarket could fall a lot further in Australia, maybe even below 4000. In such circumstances even "good" companies will find their share prices punished (its called share price correlation if my memory is right - in fact the really great Robert Holmes A'Court got caught out on this in the 1980s, he invested in a big way with borrowed money in both Australia and the USA thinking he was diversifying risk but then found both markets collapsed concurrently in 1987).
Anyhow, all I can say is its not safe to put your trust in government action in the expectation that they will save our bacon. The all up costs of what the financial insitutions have done may be too great for the taxpayer to carry, and the past excesses may need to be unwound by a collapse in asset prices. I am at a loss to work out the exact adjustment process and timing for such a possibility.
I hope you are not offended by this post, its just a view among many others.
loki
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