Baby Boomer $$$

From: Simon and Julie M

Where will the baby boomer money go?

With the US stockmarket falling and other world markets following suit, big and small players are taking their money out - but the BIG QUESTION is where will they put their money. It is obvious that Australians are still putting their money into real estate but will the tide turn with lower and lower returns and a tightening rental market.

Some of the big mutual funds in the US have taken money out of the stock market and are holding it in cash. Individuals are also pulling out, fearing losing retirement funds.

Markets have had big downturns before but this screnario is interesting because there is a lot of baby boomer money out there.

Where will the baby boomers and mutual funds put the money now???

Julie M
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Reply: 1
From: Alan Hill

Great question Julie. I was just wondering the same thing myself.

Just thinking allowed here......but I wonder if this Crash/Correction in Australia will produce some 'different' outcomes than in previous times?

Why? We now have a couple of interesting situations. Firstly, because of Superannuation, there is now MASSIVELY larger amounts of money under investment than there was previously. Secondly, while property was always the obvious choice to transfer your money, currently being somewhere near the top of an already significant property boom(with record vacancy rates), the choice is less obvious.

Certainly not clear cut choices here!

My 2 cents worth is that:

1. Some will move from Equities to Property and hence property will at least maintain it's present value for much longer than could have been expected and will probably even go higher. It would still bother me throwing my money where everyone else is throwing theirs though. May well prove to be sensible but just goes against the grain.

2. A fair proportion of Share 'panic sellers' will indeed sell out Monday morning and park their money in cash.

3. Within the Sharemarket, there will be a big move in Share Ownership from 'speculative' stocks to those that:
a) Actually pay a decent dividend
b) Have decent franking
c) Have reasonable P/E ratios.

In other words, the Sharemarket will show a big move to decent companies that consistently produce decent profits and are well priced.

Buying into such shares in the coming period may well even prove to be a good decision in the medium term.

But then again.....if I knew what I was talking about I guess I wouldn't be heading off to work tomorrow, would I Julie? :)

One thing is for certain though, I will be keeping a VERY close eye on the Stockmarket in the coming weeks! investment over this weekend was probably to own a bottleshop that also sold razorblades....

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Reply: 1.1
From: See Change

Maybe the direction of the market indices on this morning ( monday 22/07 ) gives us a clue.

All of the indices are down except one...

Property Trusts.

My thoughts are that money will go into property but like the share market it will go in different areas. Some investors in the share market buy managed funds, some leave their decisions to a trusted advisor or the latest guru. Some buy Blue chips in a buy and hold strategy and the more adventurous trade or dabble in " penny dreadfuls ".

see change

it's better to be guided by your dreams than your fears
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Reply: 1.1.1
From: Glenn Mott

Funny someone should mention that money may in fact flow into companies that show strong dividend yields during these uncertain times. The banks would have to be king when it comes to dividend. A few years ago I was talking about the big 4 banks in Australia and how it was my opinion that for the foreseeable future, they would be the cornerstone of Australia's financial markets and as such would always perform fairly strongly due to their economic and political influence. Any technological changes that could diminish their market share will be either adopted (internet) or copied (low cost lending). What a great way to make money we thought...just gear to the eye balls to buy as many shares in equal dollar amounts in our banks as possible, put them in the draw for 20 years and then open the draw for a look...but we thought naaahh, they are too expensive at the moment, ANZ is definitely not worth the $9.80 it is now and CBA is over $20 now, their is just no more value for the next 5 years!!!....BUP BOW

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From: Alan Hill


A few 'commentators' on the weekend were hoping our market would only drop about 2-3% compared with many o/s markets that dropped around 5%.

The market dropped fairly quickly by 50 points this morning but then started CLIMBING again. Down about 30-odd points or around 1% in early afternoon trading.

Now I know a loss is a loss but it would certainly seem to indicate that the Australian Economy/Market is comparably in GREAT shape......

Now let's see what happens tonight. :)

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From: See Change

The fact that the market dropped and then rose again is not surprising or unusual at all and is certainly not reassuring. In fact it probably means nothing. If the market had continued to fall after a down opening it probably would be worse, but as has been seen several times in the last weeks , what was looking like a pretty bad day has been rescued by fairly dramatic last minute rallies.

The biggest moves of the day typically come in the first hour after opening or in the last half an hour of trading. The middle of the day will often move in the opposite direction to the opening as traders either seek to profit from the initial move , or position them selves for future trades.

The reality is that most people will be waiting for the direction of Wall street tonight, and even then one day's trading rarely makes a difference. A big down day ,like 87 , can obvious cause major panic , but another 1-2 percent down or a rise won't make much impact on the overall trend.

see change

it's better to be guided by your dreams than your fears
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From: Tibor Bode

I just got my regular email from a broker.
He produced some figures according to

"The S&P500 (US index) has returned 3 consecutive negative years in a row -44% from its peak, the only other time this century it has done that was the great depression of the early 1930s, 52% fall!!.

The DOW Jones Industrial Index (US) has had the worst month since the crash of '87, and there are still 8 working days left. Given that this comes off the back of 2 years of negative momentum, it is the second largest bear market in history, worse than 87' 74' 40' and only just better than, you guessed it, the great depression of the 1930s."

He also notes

"Our market is undervalued currently. Look at earnings multiples.
Current valuations of the ASX values 0% growth for this year. Again, 0% growth.

Given our economy is still growing, enough so that the RBA has raised interest rates twice in the last 6 months, I believe you would agree this is a bit overdone. For comparison the US markets are still trading
on PE higher than the historical average. ie,

The S&P 500 trading on 21.4 x earnings, historical average of 17.8x The DOW trading on 20.5 x earnings, historical average of 17x

What does that all mean. ?

The US is still expensive to some degree, if you look at historic earnings multiples. We are not.

What will happen?

Dusting off the crystal ball, (my term for researching every peice of information I can find), it is my feeling that our market has
disassociated itself from the US, we dont fall as much as they do, because we know we are already oversold. The US will fall another 600 points (8%) in the next few days, we we fall another 2%, and then the
markets will bounce, get into recovery mode and hopefully return to normal.

Look at what happened today..... AXA NRMA (IAG) QBE and AMP were all
UP????!!. WHY?

These stocks make 80% of their earnings from the sharemarket.Why are they up?


Is he correct or not? I don't know, but thought to share his views with other people.

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From: Sim' Hampel

On 7/22/02 5:04:00 PM, Tibor Bode wrote:
>Is he correct or not?

Don't know if he is correct, but I do know that he really really does not want people to leave the market and park their funds in cash or *shock* *horror*... property !

He needs people to remain active in the market... that much is obvious.

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From: Mark Laszczuk

How's this for a shocka macca.
I was reading the Money Manager section of Monday's Age and read some article with a financial planner that, get this: actually believes in AND INVESTS No kidding. For those that are interested (in Melbourne) his name is: Shane Bond and he works at Australian Financial Services. For those looking for a property savvy financial planner, he might be worth a look.

'no hat, some cattle'
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