Archive through April 30, 2008

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sway

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Post Number: 247
Registered: 12-2005

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Votes: 0


Friday, April 25, 2008 - 08:28 pm:

Ody
The other problem with all that "information" out there is that you tend to only take notice of the bits that agree with your view. Eventually, you may notice that a trend has developed and you are left behind

Sway

This is not a recommendation or advice. As they say .... DYOR.

sway

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Post Number: 248
Registered: 12-2005

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Votes: 0


Friday, April 25, 2008 - 08:39 pm:

Lafee
Not quite sure what you mean? Would you please elaborate?
Sway

This is not a recommendation or advice. As they say .... DYOR.

lafee

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Post Number: 855
Registered: 04-2003

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Votes: 0


Friday, April 25, 2008 - 08:49 pm:

Sway,

Share price growth = increased opportunities for the company. The more opportunities the more likely they will stumble upon a big earner. Can't get much simpler than that!

Cheers Lafee

An OTM Option is nearly always undervalued

sway

Member

Post Number: 249
Registered: 12-2005

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Votes: 0


Friday, April 25, 2008 - 08:56 pm:

Thanks Lafee. I'm with you now.
Sway

This is not a recommendation or advice. As they say .... DYOR.

eblode

Member

Post Number: 756
Registered: 11-2002

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Votes: 0


Friday, April 25, 2008 - 10:20 pm:

Sway,
Many thanks for your opinion. One has to wonder how so many prominent brokers can be so wrong. I must admit I too study the charts and did notice a strong reversal of CTX shares a few days ago and felt that perhaps this could be a new north bound start, especially with so many strong recommendations. However I do feel that if the DOW is really up tomorrow then Monday I will bail out without a great loss.

Eugenio

ody

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Post Number: 2411
Registered: 10-2006

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Votes: 0


Saturday, April 26, 2008 - 12:44 am:

Lafee:

"Share price growth = increased opportunities for the company. The more opportunities the more likely they will stumble upon a big earner. Can't get much simpler than that!"

What do you make of all those American (and indeed non-American) banks whose share prices had grown enormously and have now been deflated? I should have thought that a company will only "stumble upon a big earner" if it has the inherent intellectual capacity to do so. A market throwing money at a company cannot guarantee that that company will perform well, as a company. Here, again, one has to make a distinction between a market's appraisal of a company (which is often very airily or ignorantly arrived at) and the company's actual competence.

If price simply equalled competence or vice versa it would all be a very simple matter, whereas in fact it is not. At some point what the company actually intrinsically does will get either rewarded or punished.

Sway, I suggest that also is quite consistent with the developments of trends. At certain times the market "picks" the quality of companies appropriately, as has happened in the case of Australian resources and energy stocks. At other times (or even at the same time, but for a different sector) it gets it wrong, as has happened in the case of financials, particularly but not exclusively in the US. When I say that the market "gets it wrong" I mean that obviously US financials were grossly misjudged by the US market, before one company after another took a tumble.

That this was bound to happen was clear from about July 2007 to anyone looking at matters economically: the subprime problem could do nothing else than create significant financial havoc, which is what it has done.

It does not require a great deal of effort to understand, from an economic as distinct from T/A view, why the one category (resources) has gone in the one direction and the other (US financials) in another. You don't need to read masses of stuff for that.

What IS difficult is to assess quite to what extent the isolated rise of resources can continue to persist on its own, or whether the bearish overhang of the market in general, which economically certainly has not gone, will keep down not only most of the other sectors but also impose a limit on the extent to which resources can go up. The present situation seems to be that resources ARE succeeding in "going it alone", but that is perhaps also partly due to a market which in general is no longer clearly going down as a whole.

The issue then becomes to what extent the remainder of the market, which does not have the good fundamentals of resources stocks, can sustain a recovery or will once again be subject to correction. In previous bear markets it has usually corrected under conditions nowhere near as bad as today's, but maybe that is not on the cards for the time being.

I don't think that that uncertainty can easily be answered either in T/A or F/A terms. Personally I still don't trust the market as a whole either way: fundamentally it is certainly unreliable, while the T/A is not so strong as to point convincingly in the direction of a sustainable rise.

Resources, however, are so strong fundamentally (and the T/A confirms it) that probably even a correction in the market as a whole would not have a big or lasting impact. I mean particularly resources which are essential for the economies of the world - not so much gold, which is used speculatively.

I have already previously admitted that my purchase of BHP, RIO and WPL when I made that - making an exception for resources - was actually right, at the time, and that I was wrong to sell those stocks again. I'd be the last person to talk myself into thinking the opposite, as that would be sheer folly: the share market is only suited to those who can admit their mistakes to themselves, not to those who cling to erroneous beliefs, as the market will show that that does not pay.

I have no regrets about not buying in other sectors. But I am looking to buy resources stocks on any dip.

Actually, the number of people out of the market is and remains very large, but there of course aren't that many writing about themselves here! It is a statistical fact, however, that money on deposit has risen hugely. I would agree, though, that that is no reason for staying out of the market simply so as to follow others.

ody

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Post Number: 2412
Registered: 10-2006

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Votes: 0


Saturday, April 26, 2008 - 07:23 am:

RECOVERY DOES SEEM TO BE OCCURRING

Going through all the indices, I would now agree with those who feel that the market - even as a whole (not just resources and energy) - is lifting itself from its bottom. Financials, for example, even if in a hesitant way, have improved in recent weeks, and as I read the graphs, people have concluded that probably banks, notably, have been oversold, are now good value, and probably no longer high-risk. I still do have doubt about their soundness, but I must admit that the flow of REALLY bad news has been diminishing, and the prices do look attractive, with the graphs more reassuring than before.

This matters, for if the financial sector did not show some solidity in recovery, then it could easily threaten just about every other sector. And to make at all sure that this is unlikely to happen, one needs something more than just a week or so of decent prices. I think that we have had that, and that a new, more positive trend now seems to be evident.

Several other sectors seem to have got off their lows too, so inspire more confidence than at any time since the November/December fall.

These are the kinds of signs I have been waiting for, and although I think there is still much bad news in the offing, it is increasingly likely that that will be less bad than what we have seen and of such a nature that the market will reasonably cope. In a way, it is encouraging that we do have inflation: it goes together with real growth, in our economy. Yet the high costs are such that one would expect the RB to hold rather than rise. That is one factor worth watching, for if it does rise we would see some real trouble.

NOTE: I am talking about Australian shares, not American ones. The American market shows a similar pattern to our own, but I trust American companies and not least investors and the central bank etc. far less than I do here. Teh "recovery" there seems to me largely phoney, and likely to be laying the foundations for the next asset bubble. Matters like the housing market, consumer sentiment etc. are far more negative than here, yet simply ignored. While Wall Street may well go up further, it is operating on a very poor foundation. Hence it is the things I am observing about the Australian market that I am interested in, as an investor - not the US.

I was previously talking about a "toe in the water", and that is pretty much the psychological level I am at, now.

The resources and energy sectors have really proved themselves a class apart: one just hopes that they can in essence sustain their lofty levels. But again one would not now expect a big fall, as - and that is why I checked them - the other indices do not seem to be too bad, often actually half-way decent.

Obviously there is a good deal that is not healthy, even here in Australia, and risk remains - but I think that, for us at least, it probably has diminished.

eblode

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Post Number: 757
Registered: 11-2002

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Votes: 0


Saturday, April 26, 2008 - 09:11 am:

Ody,
In this mornings (SAT) The AGE is a very interesting article entitled "Something Fishy In Subprime Crisis". It describes how the Bush administration with the help of the Attorney General generated and made millions in sub-prime loans. It goes further by declaring that former New York State Governor Elliot Spitzer (now defamed) was creating a legal action against the Bush administration. Spitzer wrote " The President is a fugitive from justice" "When history tells the story of the subprime lending crisis and recounts the devastating effects on the lives of so many innocent home owners, the Bush administration will not be judged favourably" From this article it appears that this was a giant scam on the American people. Finally when the bottom fell out it was transferred over to the European banks. A very interesting read.

Eugenio
Eugenio

ohkoolnutz

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Post Number: 743
Registered: 10-2005

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Votes: 0


Saturday, April 26, 2008 - 09:28 am:

eblode said:

"What is your opinion why CTX was recommended a BUY by so many various analysts as I mentioned in my Post 751?"

They have to recommend something to make sure they have a job or they wish to sell their positions into your buying or they guess because it fell 60% it must go up.

---
ohk

Lies, Damn Lies and Technical Analysis

lafee

Member

Post Number: 856
Registered: 04-2003

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Votes: 0


Saturday, April 26, 2008 - 10:41 am:

Ody,

A rare event is generally very bad for banks. The returns are not as asymmetric as there potential losses are. Compare to biotech - a rare event can provide a huge asymmetric payoff.

The classic idea is that a bank sells OTM naked options. Taleb would say 'picking up pennies in from of a steam roller'. It has happen too. I think it was the Mexican default that caused US banks to loss more than a hundred years of profits in the early 90's.

So there is an argument for not buying banks - ever!

Cheers Lafee

An OTM Option is nearly always undervalued

rdumas

Member

Post Number: 1366
Registered: 11-2006

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Votes: 0


Saturday, April 26, 2008 - 11:38 am:

Hi Sway,

Let me say at the outset that I enjoy the mental sparring on this subject so I don't feel that you are being argumentative for its own sake. Keep putting forward your views as we need to be challenged at all times. I hope that you also see my opposing views in the same spirit.

Re the crux of your argument as stated in your previous posting: The market heavyweights know more about fundamental analysis than me and their sentiments show up in the charts.

I would suggest that the tech boom (where the prices were driven up by the very people that you hold in such high esteem) and the subsequent bust completely refutes the correctness of your position based on pure logic.

I feel like a broken record sometimes because I have to keep repeating things but I do it so that people see the context in which I'm writing. Most disagreements on this forum occur when people mix their investment time frames and risk profiles with those of other posters. I repeat again that my time frame probably averages around 6 months. I would like it to be longer but the natural market cycles tend to take me out of the market in order to avoid reasonably significant down turns.

Now the other factor in my investment strategies has always been safety first. As a successful ex professional punter I don't put my money down unless there are a lot of factors working in my favour. I don't need massive portfolio value growth......I need reasonable portfolio value growth with no or minimal draw down on my capital. This as I have said on many occasions is because my original capital whilst adequate, is not huge and I can't afford large draw downs on it or my life style (or more importantly my wife's life style

) would be affected.

So, whilst I am a great believer in the practice of TA and Weinstein principles my investment strategies require that both TA and FA are moving in the same direction. A tech boom would never impact on me because I would not be part of it due to the above requirement. In the tech boom case the FA never at any time supported the TA !!!!!

The strategy relates both on a stock level and on a market level. As Ody has clearly stated in his post, there are many organisations that provide us with the real facts that can allow us to make decisions on what the real economy is doing. It is these facts that I pay most attention to.

Your point about making money out of rising stock prices is absolutely correct. But when the stock prices are rising (and therefore the market is rising) hence providing a positive TA signal I am more than happy to take part in making money in the rise but only if those rises are supported by real fundamental facts. At this point in time most sectors other than the materials sector are going up on factors other than fundamental factors.

In Laffee's words, I can't put it simpler than that. If you still can't see my point then I'm afraid that we are going to have to agree to disagree.

ody

Member

Post Number: 2413
Registered: 10-2006

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Votes: 0


Saturday, April 26, 2008 - 12:23 pm:

LAFEE: BANKS

I think you are making a very good point, and one well worth heeding. I must say that I am not personally particularly "sold" on banks, and indeed for such reasons as you mention. There scope for earnings is very limited, so it is difficult for them to cope with abnormally bad events. But, even so, it does seem that the market has probably very adequately allowed for that, so I am not altogether banishing them from my view either. Australians tend to be very forgiving towards their banks so long as they remain reasonably sound, and pretty well chronically bid them up beyond the level where they ought to be, so one would expect some recovery in the share prices unless new bad news emerged (that WOULD be a calamity, and they might not then be forgiven). And, also, there are some differences between them in terms of quality.

But I must confess they are not a priority with me, as they have been past bear markets, because all in all it is exactly financials (not mainly those here, though) which have CAUSED the bear crisis. Or rather, one should see, financials supported by authorities that dared not tackle them at any point and in fact have aided and abetted them in their bad practices.

So my interest is really more in other sectors. It's not easy right now, for the one sector that TRULY interests me is not quite so cheap any more. On the other hand, given that a large sum in coal and iron ore is about to be earned, it is not unreasonable either that prices are higher than before those facts became known.

I read with concern this morning, however, in The Australian, that the coal industry will urgently have to do something about the Newcastle bottle necks or else will by the end of this year lose approval for their current capacity-sharing arrangements (promise from Graeme Samuel). Newcastle is the world's biggest coal terminal, but a shambles.

sway

Member

Post Number: 252
Registered: 12-2005

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Votes: 0


Saturday, April 26, 2008 - 01:31 pm:

That's OK Rudy. It's good to have a healthy range of views.

I come from an engineering background, so I like to have opinions supported by objective data. eg I can look at a pump curve and know that it will do the job. Someone else might Google for pumps, or go to a pump shop and take whatever they have on special. Probably a bad analogy, but you get my drift.

As a Weinstein follower, you will know that his premise is that all known FA is reflected in the TA, to use your terms. This includes the FA only known by company insiders who have good reason to be quietly accumulating stock. I wasn't actively investing during the tech boom so I can't directly comment. I am pretty confident however that there would have been opportunities to make profits, and warning signs well before it all came to an end.

Sway

This is not a recommendation or advice. As they say .... DYOR.