ASX bath of blood sprays in all directions

See the latest Australian dollar analysis here:

Australian dollar, ASX to the moon!

All those long only equities managers calling buy the dip are being minced again today.  The Australian dollar is down hard again:

Bonds are bid bigly:

XJO’s  bath of blood is hosing everything, gapping down 8%:

And the damage is still not priced.

Big Iron is down:

Big Oil too:

And Big Gold:

Big Banks are slaughtered:

CDS was at 109bps Friday, worse today no doubt:

Big Realty has far, far yet to fall:

More pain ahead.


David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super which is very conservatively positioned for coronavirus risks including a falling Australian dollar, so far falling just 0.7% through mid-March versus -32% for the ASX200:

Nucleus Outperformance

If you’re interested in the fund, contact us below.

David Llewellyn-Smith

Comments

  1. Ha ha ha ha …. the debt-based money system giveth … and the debt-based money system taketh away.

    Fire up those printers boys — you’ll need to run 24/7

    Oh, and send cheques … 😉

      • BoomToBust, are you are not worried about the imminent arrival of Trump’s stimulus plan, or do you know that it will be insufficient to please the market?

        If it pleases the market, you wouldn’t want to be holding a short position.

        • BoomToBustMEMBER

          They are ONLY spending 10% of GDP, its a short term sugar hit. Unemployment is already sky rocketing and the shutdown has barely begun.

          We were already heading for a depression on the back of the largest debt and asset bubble in history, then throw Covid-19 on top of it and you are in for a wold ride to the bottom. As Allen Kohler said the other night P:E ratio is finally starting to look more reasonable, the biggest issue is no-one knows what the E is currently.

          Note: All bear views expressed are mine, and I take no responsibility for your investment losses or gains !!

    • NBD, you cashed in. But, do you really think things are going to improve from here, even after the 8% haircut this morning? I’m expecting some Govt type messages over the next week that hammer home the reality that we are farked, we are all farked. I mean, it was probably known from the outset and this was a way to manage expectations to the end game. Vs sparking riots and panic, oh hold it’s Australia we’d just nod and agree.

    • Don’t fret, Swampster – there are traders having their ar$es handed to them as we speak. Fund managers / asset collectors as well as hedge funds will be shutting down in their droves. The best ‘trade’ these past couple of months has been to go to cash, fire up the Netflix and ignore the market. The time to dip your toe in is still weeks (if not months) away.

      • Dominic, I don’t think many people have factored in what is happening. I suspect they’re out by one or two orders of magnitude.

        Why the hell would you buy shares in anything right now? It’s likely almost every corporate balance sheet (except food and medicine) and, to some degree, small parts of the logistics chain and the utilities we need to survive (water, electricity, gas) are going to evaporate unless bailed out. And the bailout will have government equity strings attached, which may well mean wiping out the existing shareholders as the only way to extract wealth out of the wealthy to pay for it all.
        We’re all Italian now…and soon to be Italian communists

        • Nailed it.

          Quite literally any company could find themselves insolvent in the coming crisis. The only stocks I have left I’m happy to see go to zero as the risk/reward was set up on that basis.

        • +1000s. The magnitude of this is simply awe-inspiring (and not in a good way). Watch the current fiscal stimulus of $189bn blow through a trillion by the end of this.

    • Dominic – can confirm.
      My super is 100% intact, as are my trading accounts. Well, mainly….can’t help myself in this volatility!
      But I’m itching to short that c%^t Gerry Harvey to the floor…
      And yes, months away before any bargain buying available. I’m looking for a 3000 handle or even below on the ASX200.

    • I did too ………. but 111% return is not to be sneezed at…. said I will BTFB (buy the @#$&ing bounce) which meant I should have bought back in Friday when it was 4% up…. it will (hopefully) bounce again ….. and again…… and again…… for some further opportunities.
      I have the US version SDS on the go though so double whammy with USD.

    • Swampy, you might be the smart one.
      At some point, maybe very soon, Trump will announce his stimulus plan.
      The market will go one way or the other in a very big way.
      If it goes up, you will look like a scholar with your sale.
      Roubini reckons it will be too small, but others are predicting over $1T.
      It is impossible to say with certainty.

      The end of the quarter is not that far away, either.

    • Ronin8317MEMBER

      Retails have ScoMo to thank for his completely mixed message about shutting down all ‘non-essential services’. What good is shutting down pubs and restaurants going to do when you have 100+ people queuing up at the entrance of the supermarket?

      • It’s not about avoiding it at a personal level, the Govt doesn’t GAF about individuals. It is about slowing down the rate of transmission in the general community/state/nation. Simply by reducing the avenues to do so, the rate will slow down. Expect more to come, we are approaching the pointy end where someone has to make some tough calls on what people really need and how often they need it/can have it.

        • You’ve almost got it, mate. It’s all about, and only about, saving the housing market. If you realise that, then everything will make sense. Everything.

          • Jumping jack flash

            This!
            Prime directive is saving the banks.
            The banks are pretty much the housing market, so yes, saving the housing market goes without saying.

          • It won’t matter what they do mate 20%to30% down by this time next year that’s no prediction that’s reality

      • Part of the issue with most policy is that it comes into being because the Govt needs to be seen to be ‘doing something’ to address the issue of the day. Unintended consequences of said policy rarely factor into the latest brain fart. As the saying goes the cure is often worse than the disease.

        While people are certainly at liberty to consider the advice of Govt most would be better off relying on their own good sense. In fact, we (collectively) are way too reliant on Gubmint to save us — personal responsibility has long since been abrogated, which is incredibly dangerous.

    • 8AM Lismore. Dead quiet Coles. Got everything I wanted bar nappies for the 17 month old, but had a new box from weeks ago anyway.

      2 min noodles, pasta, TP/tissues, passata down to the last few packs/jars

      No firm tofu, spew.

      Plenty frozen veg, bread, fruit/veg, soy/nut milks.

      • You’re obviously living in the right part of the world – it’s idiotsville every day where I am. Yesterday in Coles a fellow lost his mind when he wasn’t allowed to buy the number of milks he wanted to. The Coles manager handled him very well but he threw a few cartons around like a spoilt kid.

        “I don’t care about the farcken rules – why don’t you change the farcken rules!” Etc etc.

  2. James RossMEMBER

    As commented here at MB on 24th February 2020. The largest managed investment fun in WA, The Investigator Trust, finished 2019 with 1.1% cash, but by 22nd Feb had gone to 48% cash. As I commented at the time Willie Packer has been around the block a few times over the years and this was on the same day or weekend that Hamish from Magellan was spouting on about how everything in equity land was fine, just a wobble.. I said then that I knew who I would back, and as a clue it wasn’t Hamish!!!!

    • To be fair to Hamish – he didn’t want to spark a run on his funds. It’s a bit like a bank manager announcing that depositors’ money isn’t safe in the banking system.

      One of the great weaknesses in a lot of these retail funds is that they have significant constraints on how much cash they can hold (as a % of total assets) at any one time. And many funds don’t have the flexibility to run and hide in other assets i.e. if you’re styled as an equity fund you’re obliged to remain invested equities / sectors etc and constrained by limits on cash. Absolute disaster. It means, when the tsunami hits you’ve got to take the full force on the chin — and then the redemption wave hits and things snowball.

      A large chunk of the funds management sector is a total farce – because all they do is collect assets, not manage risk. And they charge fees that are not commensurate with the actual service they offer.

      MB to its credit is part of a smaller group of outfits that actually understands where and how to add value.

  3. Hi can we get a vulture tip sheet going to try and make the most of this? I am in the market for a new (2nd hand- new to me) work van and also keen to make most of this bust (recovery?), wife and I have some cash reserves, excellent credit, 12 months mortgage payments in cash, vege patch + 2-3 months pantry food, modest home loan in regional centre near Sydney, my job 18 months left to run (fed gov contract funded, fairly essential) partner in essential state gov services 2yr contract left to run, both set up to work from home, no other loans or credit accts… what are the signs/signals/triggers to fill boots? I would be open to borrowing to invest if the opportunities look good enough, sold my IP 18 months back, cleared all loans, renovated PPOR, added to super, moved about a third of super to cash & cons options late last year (rest left to ride in diverse splits- I am 40yrs old) in anticipation of rough weather/ DC averaging in back in after a fall… didn’t think it would be this big though! What do us nerds who stayed out of debt, got our house in order ahead of time and got laughed at by our families and all the beautiful people for years do now?

    • Brand new van gets BOTH the immediate write off AND bonus 50% depreciation (investment allowance), I’m pretty sure.

      Second hand can will only get the immediate write off.

      So probably better get a new van.

      • food for thought, thank you- it will be private use but may be possible to own through shelf co, with new cars sales crashed maybe worth some serious haggling? Wondering when is the time to target auctions/busted builders too, or will the market move as whole to buying used cars at cheaper end of spectrum, increasing demand and cancelling out any bargaining power? experiences from prior recession survivors welcome, I was 9yrs old last time!

    • How about giving the bragging a rest for a start. You could do nothing Einstein. Just be. As in ‘human BEing’. And give your ego a tweak while you’re doing zip.

  4. Fishing72MEMBER

    Bell Direct site seems to be unresponsive after a few days of alerting people that calls are delayed to high volumes.

    Thank Christ I’m out of that sheet fight.

  5. syncpointMEMBER

    I am 57. My Super is 50% Gold (PMGOLD:AX) and 25% USD:AX and 25% USD futures contract (YANK:AX) which gives me double the return. My personal saving is 95% USD:AX and 5% Gold (PMGOLD:AX) and is enough to buy a median capital city house outright. I sleep well 👍. In awe of the speed of this crash, especially the banks. Thank you Macrobusiness. Your analysis saved my retirement.

  6. even ALK who just announced spectacular assays from BODA barely moved up. This is amazing.. under normal market conditions ALK would have been trading at >$2 now.

  7. Jumping jack flash

    Retail up, inflation up, due to panic buying.
    $15 bags of potatoes, $7 lettuces.

    Debt is the cheapest its ever been. Everyone will be able to borrow up big to panic buy. The debt will grow and save the economy.

    Wages? Unemployment? Well, they’re able to be safely ignored now but I wouldn’t be surprised if wages get an uptick from the panic buying debt splurge. Additional shelf-stackers and food delivery gigs reducing the unemployment

    I just want to know where everyone is finding the money to use to hoard toilet paper. I’ve had to draw from my life’s savings to get my garage full. I guess everyone is getting an additional credit card and maxing it out.

    Its a coronavirus led recovery!
    RBA is going to be very happy once the new stats come in.

    • Jumping jack flash

      Now Bunnings.

      Good times roll on.
      All this money to boost retail is somehow just materialising. Is it new debt? Whatever it is its uncanny. Its magical.
      Retail was collapsing just weeks ago because nobody was spending.

    • I’ve liquidated the part of my house deposit that was sitting in AUD in the bank. Some went to pandemic prep (12 month supply of as much of meds as I could get and a 12 months supply of my very expensive activated vitamins and minerals) But it was only $1750 in total. I’m now not pulling in an income as I burned through all my paid leave over the past 3 weeks due to a broken toe and not being ‘fit for work’. I live rent free in the family home happily parasiting off the olds. But I got us all basically prepped (plus a bit more but not everything we wanted as they had to go visit rellies for a few weeks) for SARS Cov2 nearly a month ago so I figure I’ve paid for my enforced parasitic nature. Plus I’m doing most of the cooking and I am by far the best cook in the house so no one is complaining.

  8. My mates a copper in north NSW, he rang me saying people starting to get worried, including him, i suggested he pull a large chunk of cash out of the bank and store it somewhere safe….the is a big possibility that if one of these building societies or banks start to have credit issues, there will be a run….when u see a line its too late…

    • because oil has been double wow for days. now that all western countries will be shutting oil is poised to fall even more.

      What I am asking is when gold will shine.. it seems inevitable now – since everyone will be printing like there is no tomorrow. US preparing $2tn stimulus… frk me.

      • Patience Niko. Gold will shine eventually but there are things that need to be worked through in other markets first, so probably a bit more liquidation in the paper markets before there is a snap break between physical and paper markets (I think that will come during this crisis at some stage, possibly when miners shut down temporarily due to the virus?). I have no idea how to pick the bottom and I’m not going to try.

        • I think QE Infinity will do it. It started and last night’s gold price jump is just the beginning. Eventually all commodities will jump but gold will now fly.

          • I agree, PMs will go up first and then other resources but that will be significantly later I think. Though I’m not sure about the mining stocks atm. Have they bottomed? I haven’t sold any of my resource stocks even though I’m down on most of them because I am horrible at trading; they’re investments. I know that eventually the good ones will go back up and I can’t pick the bottom so grit my teeth and hold it is. The difficulty is dollar cost averaging in the ones that are good and should do well in future (cos I don’t have lots of dollars to do that with).

        • mining stocks could fall lot lower if we have to shut down mines. Those that have strong balance sheets will be fine as eventually will reopen and start making money again.
          Stick to low cost, low or no debt stocks and safe jurisdictions.
          I still hold NCM, ALK, WSA and AMI. Sold RRL to collect some profit.
          My theory around food is not working and am down on AAC and CSS. Thought these two will fly.

          • Agree on all the above. Have also been thinking the time to start buying will be when the mines shut down (knowing that it could be a 6 month shut down). I’ve only bought one new stock (TTT) in addition to BBOZ, since this started. I had been eyeing it for a while and I know I pulled the trigger too early (I actually forgot I had the buy order in the market). But it is cashed up and is still making sales so whatever, I may top up at a lower price. But I will only buy gold/silver miners or extremely good quality juniors from here on in. I may top up on a couple of gold miners I have which are about to go into production cheaply because I’m pretty certain with the gold price going up they will either get the cash required to go into production or they will be bought out by a cashed up major. I’ve only been buying stocks in Tier 1 jurisdictions for a few years now other locations are too risky. Good luck!

      • Depends how much exposure you already have — if you don’t have much (or indeed any) dip your toe in now. Don’t be greedy and try to pick the bottom. Dollar cost averaging from here is perfectly acceptable – just take it steady. But if you go for the miners leave the small speccy stuff – a lot of it will end up bankrupt before this crisis is over.

        • no time for steady mate. when BoE says they will print unlimited amount of money and the FED started QE Infinity which is printing unlimited amount of money means it’s on like donkey kong.

    • A Director of the company recently acquired $50k worth of shares in the business. But the announcement was back on the 17th, so, who knows – probably some fund managers taking a cheeky nibble

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