Traders in the gutter, but looking at the stars

IF THERE is a silver lining to this market slump, it is that 2008 is a fresh memory and investors know share prices will eventually recover.

By InvestSMART · 6 Aug 2011

By InvestSMART ·
6 Aug 2011

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IF THERE is a silver lining to this market slump, it is that 2008 is a fresh memory and investors know share prices will eventually recover.

Whereas the last crash came suddenly and after five years of continuous growth, traders are wiser and calmer in 2011, thanks to recent experience.

"This is a big opportunity. The [market] is not going to stay down forever. I sort of anticipated it would happen because of [what is going on in] Europe and America," Alan Wootton told The Saturday Age while watching a screen of red figures at the Australian Securities Exchange (ASX) board in the Rialto Tower in Melbourne.

The S&P/ASX 200 dropped 4 per cent yesterday and 7.2 per cent over the week, the worst weekly fall since November 2008. It closed at 4105.6 points, a level not seen since mid-2009.

Mr Wootton said he had been buying shares in companies that usually did well in tough economic conditions, such as food manufacturers Wesfarmers, Warrnambool Cheese and Butter Factory and Select Harvest.

David Shapiro of Blackburn said he thought the decline would continue for some months, noting the crash caused by the subprime mortgage crisis and global financial crisis started in late 2007 but did not hit bottom until March 2009 "I don't think this is the bottom."

Many traders go online to discuss their concerns and ideas.

On Hot Copper's ASX discussion forum, traders were asking for advice on safe havens where to store wealth without it losing value and how to trade in a downturn. Most participants said Australia could not escape the global economy.

"We are a tiny drop in the ocean. When the US sneezes, we get the flu . . . when uncertainty surrounds the EU and some EU countries are looking at possible although unlikely bankruptcy status, then of course that sends shudders through world financial markets," user roygbiv wrote. One user with the name Rogue Trader reminded people that "if you survived the GFC, you can survive this".

"You have to also remember what took place after the GFC," he wrote.

"One of the biggest rallies we have ever seen. All [of] those who sold in panic sat back and watched their stocks soar back to reasonable levels once common sense came back to the market. Worst thing you can do is panic sell on days [like] this."

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Frequently Asked Questions about this Article…

What happened to the S&P/ASX 200 and why is this drop significant for ASX investors?

The S&P/ASX 200 fell about 4% in a single session and 7.2% over the week — its worst weekly fall since November 2008 — closing at 4,105.6 points, a level not seen since mid‑2009. That scale of decline highlights heightened market volatility and reminds investors that Australian shares are influenced by global events.

Is this 2011 market slump like the 2008 global financial crisis (GFC)?

The article notes 2008 is fresh in investors' minds, but traders in 2011 are described as wiser and calmer. While some commentators point out similarities — global pressures from Europe and the US — others warn the decline could continue for months and that it may not be the final bottom, referencing the GFC’s drawn‑out timeline from late 2007 to a low in March 2009.

Should everyday investors panic sell during this kind of market downturn?

According to traders quoted in the article, panic selling is ill‑advised. Forum contributors and experienced market participants cautioned that those who sold in panic during prior crises later saw their stocks recover, and urged investors to stay calm rather than sell impulsively on volatile days.

Could this market slump be seen as a buying opportunity?

Some investors in the article view the slump as a buying opportunity. For example, Alan Wootton said he anticipated the pullback because of international concerns and was buying shares in companies that tend to perform well in tough economic conditions.

Which companies or sectors did investors target as defensive or resilient in the downturn?

The article mentions investors buying defensive, consumer‑oriented companies such as Wesfarmers, Warrnambool Cheese and Butter Factory, and Select Harvest — businesses that often fare better in tougher economic environments.

How long might this market decline continue according to the article’s sources?

A market commentator in the article, David Shapiro, suggested the decline could continue for some months and cautioned that this may not be the market bottom. The piece contrasts this with the GFC timeline, which took well over a year to reach its lowest point.

Where are traders looking for 'safe havens' and how are they discussing them?

Traders were using forums such as Hot Copper to ask about safe havens — ways to preserve wealth without losing value — and to share ideas on trading during the downturn. The discussions show people are actively seeking lower‑risk options amid uncertainty.

How much do global events (US and Europe) affect Australian shares, and what should investors keep in mind?

Forum users and commentators in the article stressed that Australia cannot escape global economic forces: when the US or Europe stumbles, it often ripples through global markets. Investors should be aware of international risks, consider defensive strategies, and avoid emotional decisions driven by short‑term headlines.