# Do you expect a market correction soon?



## YOUNG_TRADER (11 November 2006)

Mkt has run hard of late, do you expect a mkt correction?


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## Kauri (11 November 2006)

*Re: Do you expect a mkt correction soon?*

I expect one every trading day, haven't been right since May, but I'm allways ready.....  :frosty:


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## stevo (11 November 2006)

As well as "Undecided" you could have something like "No Opinion" or "Irrelevant". 

What I think about the market direction is irrelevant since it has very little impact (I would like to think no impact) on my trading approach or where the market will go.

Stevo


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## sleeper88 (11 November 2006)

if a significant amount of traders/investors "expect" there's going to be a correction, it will cause some panic selling which makes an "expected correction" a "reality"


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## Sean K (12 November 2006)

A pullback is inevitable. The longer it keeps running the harder the fall, eg, May/June. 

Market has moved away from the long term average as shown, again indicating that it will pull back.

Blue line is how the market usually goes, red line is abnormal. Expect some examples of what has gone on in the glue circle shortly. 

Perhaps the past few days are the start of a short pull back? I'm on 75% chance of that occuring. But I don't think it will last long with the lead up to Christmas/New Year. 

My best guess anyway.


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## ice (12 November 2006)

sleeper88 said:
			
		

> if a significant amount of traders/investors "expect" there's going to be a correction, it will cause some panic selling which makes an "expected correction" a "reality"




Actually I always bias my trades the other way. 
If a sgnificant number of traders expect a correction,  they will have already sold and/or gone short. That substantially reduces the number left to sell/short which should reduce the pressure on the downside. 

Works for me.....well sometimes.   


ice


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## professor_frink (12 November 2006)

I reckon we have another 50-75 points or so to go before there is a chance for another rally. Until that happens, I probably wouldn't be buying*





*I'm usually wrong about these things, and most of my predictions of a top are good buying opportunities!


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## Sean K (12 November 2006)

professor_frink said:
			
		

> I reckon we have another 50-75 points or so to go before there is a chance for another rally. Until that happens, I probably wouldn't be buying*
> 
> *I'm usually wrong about these things, and most of my predictions of a top are good buying opportunities!




Thanks frinky, I'll be maxing out the margin loan Monday.


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## professor_frink (12 November 2006)

kennas said:
			
		

> Thanks frinky, I'll be maxing out the margin loan Monday.



wise man  
I was about 4 1/2 weeks early calling shenanigans on the rally leading up to the May correction, so you should have a month or so before you have to worry bout selling


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## nizar (13 November 2006)

the markets holding up pretty well today.
banks showing strength.


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## Sean K (13 November 2006)

I'm on bread and water tonight.   

Would have been rummaging through the bins with the possums tonight if I hadn't sold down the past few weeks.


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## ezyTrader (13 November 2006)

> the markets holding up pretty well today.




That's a good sign!


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## YOUNG_TRADER (13 November 2006)

Looks like its started, 

ZFX down 7-8% 

BHP down 4-5%

XMJ materials Index down 300 points!

Parachutes anyone? I'll be waiting for you on the ground


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## Rafa (13 November 2006)

sold all my zinc shares... (CBH, INL, etc)
hope zfx falls to around 14 so i can buy back in.

Most U stocks are still looking good.

maybe i shoudl transfer it all into PDN!


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## YOUNG_TRADER (13 November 2006)

Rafa if there's a proper swing of sentiment ie correction nothing will be safe, so exercise caution


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## moses (13 November 2006)

Well...it hasn't been a nice day, but the market seems to be struggling back up this afternoon like it half believes tommorrow will be better. Fingers crossed!


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## Rafa (13 November 2006)

YOUNG_TRADER said:
			
		

> Rafa if there's a proper swing of sentiment ie correction nothing will be safe, so exercise caution




Yes, you are right....
The market decides the price, regardless of fundamentals.


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## CanOz (13 November 2006)

moses said:
			
		

> Well...it hasn't been a nice day, but the market seems to be struggling back up this afternoon like it half believes tommorrow will be better. Fingers crossed!




Well i'm out, got stopped out on one and took profits on the rest, time to look for some new opportunities.


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## YOUNG_TRADER (16 November 2006)

Very interesting article


http://www.aireview.com.au/index.php?act=view&catid=8&id=4690


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## YOUNG_TRADER (16 November 2006)

And this is from Mining News.net commenting on that Citic group 87 crash report

*
Market bears resemblance to '87 crash: Citigroup*
(Thursday, 16 November 2006)

 THE current investment environment is becoming increasingly characterised by moral hazards, greed, exuberant deal making and the rise of private equity, according to analysts from major US investment bank Citigroup, who have made a bold and decidedly gloomy comparison between the present and the great stock market crash of 1987.


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## noirua (16 November 2006)

YOUNG_TRADER said:
			
		

> And this is from Mining News.net commenting on that Citic group 87 crash report
> 
> *
> Market bears resemblance to '87 crash: Citigroup*
> ...





Calling a crash is always difficult and it may be best to look closely at the constituents of an index. How many resource stocks are now in the index that were not there 4 years ago, or indeed, those stocks, mining boutique banks etc., that rely on a booming resource sector.

For instance, the US DOW 30 or ASX 20 has had few changes, but look closely at the ASX 200, 300 and 400, they tell a different story. 

If the mining and resource sector slip - look around the mining sectors, there are many that have slipped 20% to 50% already - then reduced inflation pressures and costs will help many other sectors.

Mining and Resource companies with lots of cash, and assets that will still be profitable in a downturn are far safer than those that have floated on a cash bubble, on hopes and dreams. The latter, in a collapse, will see their best tenements taken for nothing, as they go under by the hundred. 

My record of forecasting has not been any better than guessing in the past, so don't worry, and being over 80% in cash I have few fears if a collapse comes anyway - Good luck, may you all make a fortune.


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## professor_frink (16 November 2006)

here's one saying a pretty similar thing, but this one was written back in May  

markets are like 87 crash 



> “We are very uncomfortable about predicting financial crises, but we cannot help but see a certain similarity between the current economic and market conditions and the environment that led to the stock-market crash of October 1987,” said David Woo, head of global foreign-exchange strategy at Barclays Capital.


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## marc1 (16 November 2006)

Afternoon guys,
Re 87 crash talk , just want to add that our market just prior to oct 87 was up 96% in year 86/87. And a lot of that growth was based on debt ridden companys run by the likes of bond,skase etc.That is certainly not the case at the moment.
But like anything in life always watch out for the curve ball !
Regards long memory.


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## YOUNG_TRADER (16 November 2006)

Another interesting article

I don't believe a crash is on the cards, but a correction, definately so, I reckon the US mkts have just run way too hard on nothing but fumes and the harder and longer it continues to run, the harder and longer the correction will be,

Inevitably that will flow through to Aus, its the speccie/small to mid-cap resource stocks that I think will get hit the hardest


http://www.fnarena.com/index2.cfm?type=dsp_newsitem&n=EB3D7EB8-17A4-1130-F54DB49C85F1237F


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## Rafa (16 November 2006)

in your previous article YT, the last para stood out...



> "Back in 1986, the market continued to rise with liquidity, fraud, LBOs in one of the worst examples of greed driving deals and market participants convincing themselves that it was all ok.
> 
> "Fund managers who became too cautious too soon missed out on 18 months of stellar returns. By September 1987, the market got to 2281, versus our fair value of 1299; i.e. some 75% overvalued."





When playing the market, go with the trend, not on fundamentals....
But keep your finger on the sell button!


But if your looking at fundamentals, most resource stocks are majorly undervalued... that is because whats at risk is the price of the resource itself... The market as a whole is not yet convinced that the commodoties can hold their prices.


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## Out Too Soon (16 November 2006)

The market doesn't normally crash in Nov, Dec & we are prob due for a decent correction or crash. As always the longer it takes to happen the worse it will be. The survey clearly shows UMMMM! we don't know.    My guess is early next year.


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## nizar (16 November 2006)

YOUNG_TRADER said:
			
		

> Another interesting article
> 
> I don't believe a crash is on the cards, but a correction, definately so, I reckon the US mkts have just run way too hard on nothing but fumes and the harder and longer it continues to run, the harder and longer the correction will be,




I dont know about "nothing but fumes"
Quarterly earnings a few weeksa go were mostly above analyst consensus.
Inflation has somewhat eased.
Housing downturn isnt as bad as first thought.
And last nights data showing strength in regional manufacturing so the economy is riding along sweetly.
CPI data out tonight could be another one for the bulls.


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## Sean K (16 November 2006)

nizar said:
			
		

> I dont know about "nothing but fumes"
> Quarterly earnings a few weeksa go were mostly above analyst consensus.
> Inflation has somewhat eased.
> Housing downturn isnt as bad as first thought.
> ...




Note: I think I remember housing prices eased by 9% in the Sep qtr. A record drop in the value of houses in the US. It's building up I think. If interest rates go up again, and again, people will be foreclosing loans and won't be able to sell them to get their money back = bankrupcy. My worry atm.


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## KIWIKARLOS (16 November 2006)

I agree with you Nizar, i think all this alarmist news is a crock of crap. Just like over ambitious announcements can make a stock sky rocket i think bad news will make everyone wet their pants. Things are actually pretty good at the moment, aren't they?

Here's food for thought. Big investment company gives out warning to investors of potential crash, every panicks, stocks plunge. Big investment company buys up at stock at cut price rates, then everyone relises the sky isn't actually falling it's just a little rain  

For my two cents im thinkin a minor correction or downturn not a 1987 or 1930's.


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## chops_a_must (16 November 2006)

kennas said:
			
		

> Note: I think I remember housing prices eased by 9% in the Sep qtr. A record drop in the value of houses in the US. It's building up I think. If interest rates go up again, and again, people will be foreclosing loans and won't be able to sell them to get their money back = bankrupcy. My worry atm.



With enormous amounts of debt, our economy could become like Japan's, I suppose. That wouldn't be much fun.


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## Sean K (16 November 2006)

chops_a_must said:
			
		

> With enormous amounts of debt, our economy could become like Japan's, I suppose. That wouldn't be much fun.



I don't think we're in the same boat as the US as our housing has slid off nicely. Although I think WA is going to be in grave danger when resources go over the supply demand hump. It will be ugly. Very ugly.


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## chops_a_must (16 November 2006)

Not for those who don't own homes but would love to cash in on idiots.


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## tech/a (16 November 2006)

Elliot theorists called 5400 ish as the turn.

They got the last low spot on so could be!


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## scsl (16 November 2006)

kennas said:
			
		

> I don't think we're in the same boat as the US as our housing has slid off nicely. Although I think WA is going to be in grave danger when resources go over the supply demand hump. It will be ugly. Very ugly.



Is there a way you can short-sell houses??


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## YOUNG_TRADER (17 November 2006)

Some good news out of the US, sent DJIA soaring


http://www.aireview.com.au/index.php?act=view&catid=8&id=4693


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## scsl (20 November 2006)

The last 1.5 hours has seen both the All Ords and ASX200 fallen close to 1%! I think this is one of the biggest falls we've had since September maybe? ...Definately more to come I think.

I'm expecting the Dow to fall quite substantially some time this week and this will ultimately wipe any early gains the FTSE may make and ultimately, our market might see more of what happened today.

Btw, does anyone trade the Aussie200 with CMC Markets? Since close of trade, it's still continued to fall  ... I'm not complaining though as I short sold a few on Friday night.


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## Fab (20 November 2006)

T3 must have something to do with this as TLS fall over 4% today as funds moved from TLS to T3 instalment. Banks had a bad day too.
If the DOW continues it move upward this correction could be a bad memory very quickly.


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## CanOz (20 November 2006)

XAO down 1.5 and the XJO 1.7% if i got my math right! Biggest one day drop for a while on those two. I agree this could be mostly TLS, it has re weighted the index, but is that into account already?

The XMJ was down nearly 1.8% too.

Sentiment not great at the moment.


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## wayneL (20 November 2006)

Fab said:
			
		

> T3 must have something to do with this as TLS fall over 4% today as funds moved from TLS to T3 instalment. Banks had a bad day too.
> If the DOW continues it move upward this correction could be a bad memory very quickly.



US futures are down a bit already (23 pts DOW)

Doesn't mean a hell of a lot this early, but then again, it could.


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## Sean K (20 November 2006)

BHP off a little too, added to TLS and banks creates a fall. I was mostly green today strangely.   

Might find some support at 5300, then 5200 and we could have set up a major support tline at 5100.


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## CanOz (20 November 2006)

I can't post a chart of the XMJ, but if i could you would see its sitting on support at the moment,support from an old double top formed back in August and September at the 10400 level. It will be interesting if it can bounce off this.

Cheers,


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## professor_frink (20 November 2006)

wayneL said:
			
		

> US futures are down a bit already (23 pts DOW)
> 
> Doesn't mean a hell of a lot this early, but then again, it could.



I've been wondering who leads who during the asian day session, still no real idea on that one. It wasn't just us, nikkei futs were off over 2% today as well.

Probably one of those chicken/egg kind of questions  

Or maybe another May/June style train wreck coming


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## wayneL (20 November 2006)

professor_frink said:
			
		

> Or maybe another May/June style train wreck coming




Well...

The markets today certainly reminded me of Harry Chapin's "30,000 pounds of Bananas" LOL (sorry no Youtube 2020  )



			
				Harry Chapin said:
			
		

> It was just after dark when the truck started down
> the hill that leads into Scranton Pennsylvania.
> Carrying thirty thousand pounds of bananas.
> Carrying thirty thousand pounds (hit it Big John) of bananas.
> ...


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## nizar (20 November 2006)

What are every1s thoughts of the correction if it happens?

Will it be like:

1/ October 2005 where we had 3 downweeks of about 300-400pts and then up and away again. In mid-november we were in new highs.
2/ May 2006 style which was not a sharp correction but almost rather the beginning of a 4 month bearmarket.

Id personally like to see number 1.


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## MichaelD (20 November 2006)

nizar said:
			
		

> What are every1s thoughts of the correction if it happens?



A gentle philosophical question to ponder on - why do you (or anyone else for that matter) need to ask this question?


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## YOUNG_TRADER (20 November 2006)

Michael, 

In answer to your question, To profit from it of course, 

IMO the stock market is merely one of the most liquid wealth transfer systems available, ponder this, the other day I tried to explain to my 13 year old sister what stock markets are all about and stock speculation etc etc, 

After a lengthy explanation she looked at me puzzled and said, "so its kinda like trading/buying basketball cards" not exactly, but kinda I said, 

When you melt it all down we're all trying to buy something and sell it on to someone else for more (obviously a wee bit more complicated as we must consider dividends, tax, costs etc) 



Anyway back on topic,

Niz I reckon the May correction was severe and sudden, look how much most Resource Stocks lost in the first few days, its was carnage,

I think/hope we get a option 1 too, but the signals coming out of the US hint at somethign a wee bit more severe


http://www.aireview.com.au/index.php?act=view&catid=8&id=4701

http://www.aireview.com.au/index.php?act=view&catid=8&id=4702


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## Julia (20 November 2006)

Wayne,

I haven't quoted the Bananas "song", but thanks, it's one of my favourites.  Loses quite a lot in just the quoted words in comparison to the accelerating and finally frenzied pace of the recording.  Great fun.

Julia


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## MichaelD (20 November 2006)

YOUNG_TRADER said:
			
		

> Michael,
> 
> In answer to your question, To profit from it of course



Unfortunately, that's not how you make money from the markets, and neither is it the reason for people wanting to "know" what the stock market will do tomorrow or what the next correction will be like or when the next crash is coming.

People want to know what other people think the stockmarket will do because;

1. They can't handle the truth of the fact that markets are essentially unpredictable.
2. They can't handle the truth of the fact that you do not need to form an opinion of when the market will turn or which way the market will go to be profitable - you merely need to follow what it does.
3. They need external confirmation of their own biases in order to continue to apply these biases to the market.


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## nizar (20 November 2006)

MichaelD said:
			
		

> A gentle philosophical question to ponder on - why do you (or anyone else for that matter) need to ask this question?




I dont.

What the market will do tomorrow or the next week or month doesnt matter to me. Its just for interests sake. Its like when i ask someone how their day has been. Most of the time, i couldnt give a fu#@, its just to make conversation.

As to your 3 points, I dont invest according to others peoples opinion. I only make money when the sp of my stocks go up. Its much harder than people think to try and predict which factors will move the shareprice. So dont try to predict it, just react to it, and be prepared for all possible scenarios.

Whether or not there is or will be a correction doesnt matter to me. If there are stocks going up, there is opportunity (for the time being i only go long). If the stocks i hold go down, then i exit the position as per my strategy. I they go up, then i do whatever my plan tells me to do.

Seriously i only held paladin for today (bought on friday) and for most of the session i didnt even know what the market was doing, all that matters to me are the movements of my stock.

As for YT not being profitable, this man, for all we know, could probably buy you many times over. Such arrogance.


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## Freeballinginawetsuit (20 November 2006)

(Nizar Quote)
Seriously i only held paladin for today (bought on friday) and for most of the session i didnt even know what the market was doing, all that matters to me are the movements of my stock.


Nice one Nizar, 10 percent turnaround in a couple of days, MRE did it from open to mid arvo on Friday, PDN was just a bit slow .


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## nizar (21 November 2006)

Wow, i dont think iv ever seen XJO up by 50pts when BHP is down.
Interesting.


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## 2020hindsight (21 November 2006)

Dont know about anyone else, but I would give a different answer to this poll every day - based mainly on what happened in the recent day or two - and to my portfolio and noone elses lol. ....
I must learn to think further ahead    
(PS the bloke down the road still refuses to go near the ASX whilst it's at these highs - I think he remembers "the last time" - and starts mumbling under his breath - something about "those who don't learn from history are bound to repeat it")


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## kgee (8 June 2007)

Quick answer yes, when-now


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## drillinto (8 June 2007)

"Any indigestion should be viewed as a buying opportunity"
Brian Wesbury, Chief Economist, First Trust Advisors(USA)

http://www.ftportfolios.com/Common/research/economicresearch-343.pdf


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## UMike (8 June 2007)

It's all looking a bit shaky overseas.

DOW down over 3% for the week.
DAX down 1.5% today.
Not even touching the Chinese .....

Ozzie mtk down about 1% for the week till today. ray:


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## Fool (8 June 2007)

fundamentals don't change.

if you have stock in a company that you beleive is undervalued.... despite a market correction, the SP ----WILL---- go up.

companies that are over valued, well you should have sold already and waited for them to correct.

I am not going to sell anything that I currently hold, it will bounce back within a week like it did in Feburary.

Today is the perfect opportunity to buy stock cheap - I will be looking for bargains


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## wayneL (8 June 2007)

Fool said:


> fundamentals don't change.
> 
> if you have stock in a company that you beleive is undervalued.... despite a market correction, the SP ----WILL---- go up.



Now, where have I heard that before?


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## Fool (8 June 2007)

wayneL said:


> Now, where have I heard that before?




I don't know, where have you read it before?


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## wayneL (8 June 2007)

Fool said:


> I don't know, where have you read it before?



Uhhhmmmmm... let's see, it must have been sometime before reality was suspended.


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## CanOz (8 June 2007)

Out of the dozen or so i hold now, two hit stops yesterday, and i suspect another with hit today....there are fewer showing up on my nightly scans though.

Should be looking for more shorts....where's that thread???

Cheers,


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## KIWIKARLOS (8 June 2007)

Mate its just jitters at the moment. Interest rates going up around the world, looks like the US is doing a good job of exporting its inflation aye:

I suspect we will see more highs this earnings season as companies post good profits. The crap will hit the fan if FED raises rates in the US though.
Could be the straw that breaks the camels back so to speak, but i cant see that happening till Sept/oct?

I'm hoping this is the case cause all my current stocks are close to hopefully big annoncements. Then im selling up taking my profits and going snowboarding in the homeland


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## dubiousinfo (8 June 2007)

Fool said:


> fundamentals don't change.
> 
> if you have stock in a company that you beleive is undervalued.... despite a market correction, the SP ----WILL---- go up.
> 
> ...




So as long as I believe, the SP of my holdings will go up ?.....

Alas, my faith is weak. 
Have lightened holdings and have shorts in place.
May the great market god forgive us faithless wretches.


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## Fool (8 June 2007)

dubiousinfo said:


> So as long as I believe, the SP of my holdings will go up ?.....
> 
> Alas, my faith is weak.
> Have lightened holdings and have shorts in place.
> May the great market god forgive us faithless wretches.




well a lot of the stocks I am in could breakout at any second, so for me, it's riskier being OUT of the market, then it is being in.

I will wear any losses based on my speculation that they will be dwarfed by the SP going up on breakout.

each to their own.


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## steven1234 (8 June 2007)

I am predicting a rise late in the afternoon.  Plenty buying opportunities out there and market will be closed on Monday.  Others may be of the view that the long weekend will have a negative impact on the market, but i expect foreign markets to rise by our open on Tuesday.


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## bean (8 June 2007)

steven1234 said:


> I am predicting a rise late in the afternoon.  Plenty buying opportunities out there and market will be closed on Monday.  Others may be of the view that the long weekend will have a negative impact on the market, but i expect foreign markets to rise by our open on Tuesday.




Interesting two nights. of trading on US markets before tuesday.
US market was overbought so that may have accounted for the drop tuesday and wednesday night.  Last night however the Bears gained control.

Yes a bounce maybe tonight but monday...
I have just finished selling my gold stocks as the US gold indexes appear to be breaking down as well (false breakout).

 As shown the US markets have more effect on world markets than China


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## steven1234 (9 June 2007)

Its good to see we had the us bounce last night.  If Monday is up or steady we should play catch up on open on tuesday


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## Kauri (9 June 2007)

Definitely not....  ...In todays West Australian.....



*



Small stocks skyrocket to net millions 

Click to expand...






9th June 2007, 8:45 WST

As the sharemarket plunged another 80 points yesterday, fuelling more talk about the prospect of a Shanghai stock exchange collapse and an end to the resources boom, investors at the roaring speculative end of the market marched on their merry way. 

While blue-chip stocks such as Commonwealth Bank, Alinta and Rio Tinto fell around them, the unwavering band of Perth punters threw caution to the wind to produce some of the most astounding sharemarket debuts in years. 

Mamba Minerals, a small West Perth explorer hoping to strike it big in gold, nickel and copper in Mozambique, raised $2.25 million by issuing shares at 20¢ each. By the time sharemarket trading finished yesterday, they were worth 54¢ and the many mums and dads who backed Mamba were sitting on a 170 per cent profit. 

As Mamba showed, all the talk of resources booms and labour shortages may be focusing on the big end of town, but it is among the so-called penny dreadfuls where the brave are making the fast bucks — and plenty of them. 

“At the end of the day, a couple of the projects that the guys (at Mamba) have got look promising,” said Gary Castledine, from investment bank Indian Ocean Capital, which arranged Mamba’s sharemarket float. 

And Mamba was keeping some good company, even on a day that should have produced only red ink across the bourse. Finders Resources, which raised $4.5 million at 55¢ to help fund its gold and copper projects in Indonesia, ended its first day of trading at 70¢ — a 27 per cent profit for its backers. 

But the most spectacular performance came from RMA Energy, whose 25¢ shares listed on Thursday and finished their first day at 85¢. Yesterday, they soared another 76 per cent to $1.50. It values the company, which owns coal, tin and uranium tenements in Queensland, at $91.5 million. 

Not bad for a company that only on Wednesday was worth $15.3 million. 

“Well, we have seen it before,” a disbelieving John Featherby, a 20-year stockbroking veteran with Perth firm Hartleys, said. “I remember before the October 1987 crash and I saw the market that really didn’t price in the risk, and that’s what the market is doing today, it is not pricing in the risk. I don’t want to sound like the guy who pours cold water on it, but the reality is that some of these market capitalisations are just obscene.” 

Far from obscene is the insatiable appetite displayed by the Chinese and Indian economies for iron ore, coal, copper, nickel and other raw materials, most of which are found in abundance in WA. It has created a race among company promoters to find the next big minerals deposit that can feed China and India amid widespread expectations that high metal prices are here to stay. 

Mr Featherby agreed that the outlook for Australia’s resources industry remained positive. “There’s still plenty of life left in this dog yet,” he said, but he warned that many of the speculative mining companies were not likely to ever join the ranks of “real” producing miners. 

But it is these speculative miners that have the potential to produce overnight fortunes for their backers. Whereas giants like Rio Tinto can generate only incremental share price rises, small stocks like RMA can more than double on the spot. And, say the supporters of the speculative mining boom, even BHP Billiton began life as an exploration hopeful. 

As James Ivanoff, a North Perth real estate agent by trade but a share trader by passion, said: “We are looking for the next blue-chip stock.” 

Mr Ivanoff and his family and associates are sitting on about $10 million worth of Niagara Mining shares, having backed the nickel hopeful since its inception about three years ago. Since then, the value of their shares has increased more than 12-fold, justifying his decision at the time to mortgage the house to pay for the stock. 

“Every day we look at things (the sharemarket), obviously we follow our fortune in Niagara as well as other things (investments),” Mr Ivanoff, 43, said. 

Instead of relying on stockbroker advice, he prefers to do his own research, quizzing company officials before deciding whether to invest. 

So far, he has backed more winners than losers, citing early successes with Orbital Corp and Bell Resources as more than offsetting the $50,000 he dropped on Tuart Resources during the dotcom boom-and-bust earlier this decade. 

And he is not worried about market falls like those this week. “Even if there is a market correction or crash, it will hold up and it will recover and it will be a healthy opportunity to get into stocks at a lower price,” he said. 
PETER KLINGER 


Click to expand...


*


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## reece55 (9 June 2007)

Kauri
That article about sums it up.....

The large blue chips may be overvalued, but it's nothing compared to the rampant speculation in small cap mining stocks. At the moment, no matter what the float, they seem to open at a premium of 50% without trouble. People have to remember that 90% or above will just spend all your money and come up with nothing! 

If you can trade them comfortably, then I take my hat off to you (Kennas I know has done very well in this department, check his blog out - however, he actually has some quantitative logic behind his purchase i.e. based on resource estimates, etc). But there will come a day when the liquidity will run out and those traders that believe they are making lots o dough out of the market will be left with some very expensive paper..... Understandably, I have been saying this for a long time, but the further we go up, the harder the fall in the small cap sector when it finally comes.

I work in the industry and at the moment, the deal makers are laughing all the way to the bank - we have run out of tenements to float because quite literally in Australia there just isn't any ground left, companies are now simply JV in and out to create the new companies and god knows how many stupid spin outs we have had. And trust me the logic wasn't to create value for shareholders, it was to get another pot of money for the consultants, directors, deal makers, etc, etc.

I'm not predicting a crash, all I am saying is that those small caps are just obscenely overvalued, there is just no doubt about it.......

Cheers
Reece


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## nizar (9 June 2007)

reece55 said:


> Kauri
> That article about sums it up.....
> 
> The large blue chips may be overvalued, but it's nothing compared to the rampant speculation in small cap mining stocks. At the moment, no matter what the float, they seem to open at a premium of 50% without trouble. People have to remember that 90% or above will just spend all your money and come up with nothing!
> ...




I dont look at value when buying stocks.
Maybe its the wrong way to do it, but for me, ill let the market determine the value.
When it comes down, well, thats what trailing stops are for.


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## reece55 (9 June 2007)

nizar said:


> I dont look at value when buying stocks.
> Maybe its the wrong way to do it, but for me, ill let the market determine the value.
> When it comes down, well, thats what trailing stops are for.




I'm with you here Nizar (much easier to leave the market to decide on value), but with these smaller cap mining stocks, the shocks can be devastating when there isn't sufficient liquidity to hold them up and there is no way of using a derivative to limit your capital loss (i.e. guaranteed stop loss if a CFD, etc.). What I was trying to do was put it into perspective. If you have huge profits, then perhaps it's not an issue to expose your capital to more than a 10% loss in a day. But it is important to have a view of the "heat" on the stocks you are actively trading......... And the small caps are on fire!!!!

By the way, I don't expect a crash in the near term at the moment, just illustrating what's actually going on from a business perspective.

Cheers


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## chops_a_must (9 June 2007)

reece55 said:


> I'm not predicting a crash, all I am saying is that those small caps are just obscenely overvalued, there is just no doubt about it.......
> 
> Cheers
> Reece



But even that is a bit of an overstatement I think. There are heaps of stocks out there that have recently become producers, or are incredibly close to becoming so, that on any sort of analysis are trading on huge discounts to their exploration peers. 

But that's just my outlook I guess. I don't touch U explorers, and only look at companies that are producing, or are definitely going to be producing. To me that's where the bargains are. One needs to keep in mind that companies like MCR and SMY were small caps not so long ago. I agree that a lot of these exploration companies are going to be pounded at some stage, but a distinction needs to be made between small caps with cash flow/ imminent cash flow and small caps with none in the foreseeable future. Some gems can be found amongst the former in my opinion...


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## hacheln_mice (9 June 2007)

Just realised that I probably should have posted this in this thread.


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## reece55 (9 June 2007)

chops_a_must said:


> But even that is a bit of an overstatement I think. There are heaps of stocks out there that have recently become producers, or are incredibly close to becoming so, that on any sort of analysis are trading on huge discounts to their exploration peers.
> 
> But that's just my outlook I guess. I don't touch U explorers, and only look at companies that are producing, or are definitely going to be producing. To me that's where the bargains are. One needs to keep in mind that companies like MCR and SMY were small caps not so long ago. I agree that a lot of these exploration companies are going to be pounded at some stage, but a distinction needs to be made between small caps with cash flow/ imminent cash flow and small caps with none in the foreseeable future. Some gems can be found amongst the former in my opinion...




Chops, perhaps I should have qualified this statement...... I was referring to those companies that DO NOT have a JORC compliant resource or the potential for one, are explorers and have a market value of huge multiples to their cash backing just because they have a land holding, irrespective of whether there are any good results etc. And there are more of these than ever before. The article Kauri put up was about companies floating on the exchange at huge premiums for little or no reason. I'm sure there are bargains where the company is close to or is producing at the moment, but the explorers with no identifiable economic resource are overvalued by any valuation methodology, because really their only true value is their cash and perhaps a little bit of value on their tenement holdings based on prior drill results.

It's all relative anyway, as I say, all I was saying was that many of these tightly held nothing stocks are being fueled by retail investors that don't know the first thing about what a mining company is worth. And whilst the liquidity is there, it will be fine, but eventually if there is nothing there, people will cash out......

Cheers


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## chops_a_must (9 June 2007)

reece55 said:


> Chops, perhaps I should have qualified this statement...... I was referring to those companies that DO NOT have a JORC compliant resource or the potential for one, are explorers and have a market value of huge multiples to their cash backing just because they have a land holding, irrespective of whether there are any good results etc. And there are more of these than ever before. The article Kauri put up was about companies floating on the exchange at huge premiums for little or no reason. I'm sure there are bargains where the company is close to or is producing at the moment, but the explorers with no identifiable economic resource are overvalued by any valuation methodology, because really their only true value is their cash and perhaps a little bit of value on their tenement holdings based on prior drill results.
> 
> It's all relative anyway, as I say, all I was saying was that many of these tightly held nothing stocks are being fueled by retail investors that don't know the first thing about what a mining company is worth. And whilst the liquidity is there, it will be fine, but eventually if there is nothing there, people will cash out......
> 
> Cheers




:iagree:


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## Smurf1976 (9 June 2007)

My investment strategy is based on _industry_ fundamentals not short term stock price movements. 

Suppose that, for example, my fundamental research lead me to decide to invest in banks (this is a hypothetical example).

OK, so it's banks... Now need to find out what the banking stocks are and check out their fundamentals. Next need to check the _monthly_ charts to see if they have historically performed as expected in line with or better than the overall industry - if not then, unless somthing fundamental has changed with that bank, they don't go in the portfolio.

Now all I need to do is buy banking stocks and hold them until either a mania occurs or the fundamentals say it's time to sell.

Long term - absolutely. And short term losses could be rather big if the entire market tanks. But if banking (for example) is set to make a fortune then at some point the odds are strongly in favour of those stocks rising in price and/or paying good dividends along the way. I'm quite happy to wait although I wouldn't be investing if I didn't have reason to believe that the boom was imminent.

Hence I don't worry too much about the short term and generally check my portfolio once a week or so just to check that nothing "unexpected" is going on. Unexpected as in, for example, the price of oil went up but one of my oil stocks went significantly down.

I should point out that I tend to hold quite a few stocks in any given industry that I choose to invest in so individual stock risk is pretty low. For example, I've got 15 stocks in one industry at the moment - it's the market and industry fundamentals that are going to determine portfolio performance not what happens to one individual stock.

From a market fundamental perspective, I've been expecting a "financial incident" to occur sometime this year simply due to the previous interest rate rises having, thus far, not resulted in one. "The Fed raises until something breaks...". So a serious worldwide correction wouldn't surprise me in the slightest. Actually, if it DOESN'T happen then that's when I'll worry since sooner or later some market somewhere is due a correction.


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## son of baglimit (11 June 2007)

http://www.smh.com.au/news/business...1181089337058.html?page=fullpage#contentSwap1


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## kgee (11 June 2007)

In regard to the SMH article if that bloke was any good and been heavily trading since 87 don't you think he'd be kicking back in some island paradise rather than writing articles for some newspaper???


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## insider (11 June 2007)

kgee said:


> In regard to the SMH article if that bloke was any good and been heavily trading since 87 don't you think he'd be kicking back in some island paradise rather than writing articles for some newspaper???




Well if that's the case... then I guess some of us shouldn't volunteer information and experience to ASF... I personally would love to write an Article in a magazine... Imagine telling a chick that...


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## nizar (11 June 2007)

insider said:


> I personally would love to write an Article in a magazine... Imagine telling a chick that...




Yeh LOL but who are you? :
THis guy is a top trader, or so he says.

Dont worry, All you need to tell chicks is about your 5k to 50k.............


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## wayneL (11 June 2007)

kgee said:


> In regard to the SMH article if that bloke was any good and been heavily trading since 87 don't you think he'd be kicking back in some island paradise rather than writing articles for some newspaper???



Straw Man Argument.


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## insider (11 June 2007)

nizar said:


> Yeh LOL but who are you? :
> THis guy is a top trader, or so he says.
> 
> Dont worry, All you need to tell chicks is about your 5k to 50k.............




Dam Straight  I wanna get into the Herald sun Stocktipping comp that they do... you know the one with I think there's 5 different people and an imaginary $10,000 cash each... That would be sweet


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## kgee (11 June 2007)

wayneL said:


> Straw Man Argument.




forgive my ignorance but whats a straw man arguement.... or should I just wikipaedia it?


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## kgee (11 June 2007)

A straw mans arguement .I like it.
But maybe not strictly correct. As I wasn't really refuting his arguement...I just thought it was a c##p article with just a lot of blah blah blah and little substance.So I was merely refuting the person...a bit harsh without knowing the guy but I had had a couple of wines...
As for market correction I had my finger on the sell button after the 2nd consecutive night that the dow lost 80 points (see post on the 8th) .Was friday a dead cats bounce?Well I spose tonights trading will tell.
Any bets?


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## drillinto (12 June 2007)

[Note: Brian Wesbury is the foremost inflation hawk]

One on One with Brian Wesbury, Chief Economist of First Trust Advisors
NBR-PBS/USA
Monday, June 11, 2007  


SUSIE GHARIB: Our guest tonight says the U.S. economy is in good shape and that any sell off in the markets is a buying opportunity for investors. Joining us now to explain, Brian Wesbury, chief economist of First Trust Advisors. Hi, Brian. 

BRIAN WESBURY, CHIEF ECONOMIST, FIRST TRUST ADVISORS: Hi, Susie. 

GHARIB: So you're saying the economy is strong. Give us your analysis. 

WESBURY: Well, I think that the housing sector has dragged down the economy. It kind of came at a time when people were waiting for the economy in a sense to roll over. I don't think many people had bought into the rally that we've seen in the last few years in the strong economy. If you take out housing from GDP, we continue to grow over 3 percent and housing is about 5 percent of the economy. So the rest of the economy was very strong. Now that housing is diminishing in terms of its negative impact, that growth is beginning to reassert itself and economic profits are rising. The economy is going to grow much faster in the second quarter. That's why all of a sudden last week people realized that the Fed wasn't going to cut rates any time soon. 

GHARIB: As you know, there are a number of key economic reports that are coming out this week. The producer price index, inflation on the wholesale level, the consumer price index and retail sales. What will these reports tell us about the economy? 

WESBURY: I think the retail sales report will be a nice, strong report after last month's weak report. And clearly energy prices are going to lift the overall levels of inflation that we see. Once we take out energy, we're going to have some subdued inflation, but we're still over 2 percent. With the economy coming back and inflation staying elevated at least above the Fed's comfort zone, I think it's only a matter of time before the Fed does come in and hike interest rates. Lots of people worry about that, Susie, but with discount models that I use, I've already incorporated higher interest rates and I still show the stock market 20 percent undervalued today. That means it's a great buying opportunity. 

GHARIB: We'll come back to that in a minute. I want to follow up on what you're saying about what the Federal Reserve will do because the meeting is coming up at the end of this month, a two-day meeting that wraps up on June 28. With the economy doing as well as you're talking about, does that mean that the Fed will raise rates at that June meeting or perhaps at the August meeting? 

WESBURY: I think the Fed still is on hold. They're data dependent. That's an old phrase that we used about six months ago but it's still true today and they're going to have to see six months or so, four months or so of really strong economic data and some rising inflation before they come back and raise interest rates. The battle on the Fed right now is whether to stand pat or potentially raise rates. There's very few members of the Fed making an argument for rate cuts and that's what's really been interesting about this market. The Fed's been very clear in my view we're holding or we're raising and yet the market has continually expected a raise cut. It's kind of fascinating when the data finally turned, all of a sudden the market said oops and that was the correction that we saw last week. 

GHARIB: So how high do you think that the Fed will go on the rates? 

WESBURY: Right. I would argue that a perfect or a neutral real Federal funds rate is probably somewhere around 3 percent. With inflation now running in the 2.5-3 percent area, I think that puts us about 6 percent Federal funds rate. Today we're at 5.25. So if they were to raise a quarter of a point at a time that would be three more rate hikes. Our models right now show a rate hike in the fourth quarter of this year and then two more next year. Then the Fed can stop. That's a perfect monetary policy. It's not too hot. It's not too cold. It won't hurt the economy and it won't cause inflation to pick up. So that's a good place to be. 

GHARIB: That's not how investors see it. As you said a moment ago that investors get very concerned when interest rates go up and they think the market rally is over. Why do you think that that's not the case? 

WESBURY: Well, there's a couple of things. Number one the Fed started hiking rates in June of 2004. They raised them 17 times between then and June of 2006. The stock market, the S&P 500 had a 16 percent gain during that period. So the market went up while the Fed was hiking rates. The other point is that in the late 1990s, interest rates were a lot higher than they are today. The 10-year Treasury, for example, between 1995 and 1999 averaged 6 percent. Today it's only 5.15 percent. So these are very low interest rates today. We've had much stronger stock markets with higher interest rates and I think this will prove to be the same thing. 

GHARIB: Unfortunately we're going to have to leave it there. Brian, a lot of good information. Thank you so much for coming on the program. 

WESBURY: Thank you, Susie.


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