# I'm gonna make a Motza today - the Bull is rampaging!



## Realist (30 June 2006)




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## Ageo (30 June 2006)

tell me about it.


Just made over $5000 with WBC and BHP from placing the trades yesterday.


EDIT: hehe just closed BHP for $3200 profit and WBC is @ $2400 unrealised so still some further push i reckon.


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## Sean K (30 June 2006)

Good work guys.

Don't get too cocky!!!


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## Ageo (30 June 2006)

kennas said:
			
		

> Good work guys.
> 
> Don't get too cocky!!!




mate just following my system, if it moves against me trailing stops will be hit etc...


P.S This is on Australian Stock Reports trades so it given me more than double than what i have outlayed so its safe to say it was a wise choice.


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## Realist (30 June 2006)

> Good work guys.
> 
> Don't get too cocky!!!




 

Only red share I have is Bluescope.... that has done me well the past 3 months I can't complain!!


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## Sean K (30 June 2006)

Well, for the record I'm 8K up this am, but still about 50K down from 6 weeks ago.


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## michael_selway (30 June 2006)

kennas said:
			
		

> Well, for the record I'm 8K up this am, but still about 50K down from 6 weeks ago.




Yep i think the strategy this time, is Reduce/Sell as it gets higher

thx

MS


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## wavepicker (30 June 2006)

There seems to be mega optimism on this thread. 

Persoanlly I think this rally will persist until 4th July. The 5195Pt level is critical for the continuation of this rally. A failure to close above this level and my bull horns are going to be mouunted on the wall for a kiss goodbye to this rally. A close above this level and the horns stay on for the time being only.

Cheers


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## Realist (30 June 2006)

> Persoanlly I think this rally will persist until 4th July.




What year   

I reckon 2019..


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## jet-r (30 June 2006)

please elaborate on the 5195pt level?  is that a resistant level or a Moving average of the number of days?




			
				wavepicker said:
			
		

> There seems to be mega optimism on this thread.
> 
> Persoanlly I think this rally will persist until 4th July. The 5195Pt level is critical for the continuation of this rally. A failure to close above this level and my bull horns are going to be mouunted on the wall for a kiss goodbye to this rally. A close above this level and the horns stay on for the time being only.
> 
> Cheers


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## wavepicker (30 June 2006)

No Jet,

It's 3/4 the range of the entire move down. In my experience, statistically  this has acted a key resistance level for countertrends where bull hopes are rekindled. This is just an observation and not trading advice. 

Although this is not good to be used in isolation but with other tools to validate the probability of it occuring. Have attached two instances of late in Gold and AUDUSD where this made good shorts

Cheers


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## mit (30 June 2006)

Wavepicker,

Mr Dow from 100 years ago would agree with you. I have been rereading some of his theory this morning and as they say the more things change ....

I think that Dow theory would be good for all of the fundamental traders out there. Even though it is slightly technical it doesn't predict but tells you when you are in a Bull/Bear market correction etc, and has been proven to add a few percentage points a year to the buy and hold type investors by saying when to go to cash and when to buy in.

My interpretation of what has happened. A secondary movement (correction) goes from 1/3rd to 2/3rds of the last primary movement (The last thrust from 4800 to the last high). As the correction went back to 4800 this means that we are not in a bull market. 

However, we aren't in a bear market either as we haven't broken through 4800 either.

Although like Elliot there are cycles in cycles. If you say the start of the current bull market is 1980 rather than 2003 then this last movement down is not even large enough to be called a secondary movement as the last primary thrust was 3000 points.


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## Realist (30 June 2006)

> Even though it is slightly technical it doesn't predict but tells you when you are in a Bull/Bear market correction etc, and has been proven to add a few percentage points a year to the buy and hold type investors by saying when to go to cash and when to buy in.




I disagree..

Any buy and hold investor who sells because of some old technical theory is a fool.

Tax and Brokerage would reduce any gains (or avoidance of losses), if there were any.

It can't predict war breaking out, a huge uranium find in Olympic Dam, interest rates for home owners, Chinese govt policy, governments compulsory superannuation, or a hurricane taking out US oil.  These things are in the hands of the gods - not in some old theory.


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## mit (30 June 2006)

Realist said:
			
		

> I disagree..
> 
> Any buy and hold investor who sells because of some old technical theory is a fool.
> 
> ...




What people want to believe without investigating is up to themselves *shrug*. It's always warm in our comfort zones.

MIT


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## Realist (30 June 2006)

> What people want to believe without investigating is up to themselves *shrug*. It's always warm in our comfort zones.




Like any stockmarket theory it can not work for the general public because once too many people know about it and use it, it immediately becomes redundant.

The stock market is based on emotion not science.

No-one has ever or will ever consistently pick which way it is going.


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## mit (30 June 2006)

... and Dow theory was first propounded 100 years ago and was originally published in one of the largest papers in America (the NYTimes) so I assume that its time is up   

MIT


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## Realist (30 June 2006)

> and Dow theory was first propounded 100 years ago and was originally published in one of the largest papers in America (the NYTimes) so I assume that its time is up




It is like Astrology - some people will always believe it. No matter what facts are put in front of them.


Please advise what the Dow theory says about now - should I buy or sell BHP next week?


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## professor_frink (30 June 2006)

Realist said:
			
		

> It is like Astrology - some people will always believe it. No matter what facts are put in front of them.
> 
> 
> Please advise what the Dow theory says about now - should I buy or sell BHP next week?




Realist I've heard of dow theory but never really looked at it closely. What facts are you referring to?


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## mit (30 June 2006)

Realist said:
			
		

> It is like Astrology - some people will always believe it. No matter what facts are put in front of them.
> 
> 
> Please advise what the Dow theory says about now - should I buy or sell BHP next week?




... I'll second that, what facts?

Here are some about the use of the Dow theory:

http://viking.som.yale.edu/will/dow/dowpage.html

From Yale,  not a university usually associated with astrology. 


.. The theory would probably say to not buy it, if you don't have it already.

MIT


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## Realist (30 June 2006)

"From 1938 on the Dow theory operated mainly by taking its practicioners out at a pretty good price but then putting them back in again at a higher price. For nearly 30 years thereafter, one would have done appreciably better by just buying and holding the DJIA"

Ben Graham, Intelligent Investor page 191 

However...

He admitted up to 1938 it did infact work. And took people out 1 month before the biggest crash of all in 1929 and kept them out till the bear run was over.

The fact is, as soon as Wall St. recognised and accepted the Dow theory it then did not work. Which is no coincidence.   If everybody worked out petrol was alot cheaper on a Monday - everybody would start buying on a Monday, eventually service stations would cotton on, stop discounting on Mondays to make some money, and discount on other days to get buyers to come to their empty stations. Thus Monday is no longer the cheapest.

To succeed on Wall St you need to do what others aren't.


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## cuttlefish (30 June 2006)

interesting.  so trading systems have fashions and trends as well.  A trading system (e.g. DOW) that worked in the 30's became too popular in the 40's and no longer worked - meaning everybody would have started to move away from it - allowing someone (a countercyclical investor) to start using it again succesfully later on. Thus leading to a new rise in its popularity causing it to not work anymore and people to leave it again.

Similarly a trading system developed in the 70's attracted so much attention it became useless, but maybe reapplying it now in the 2000's when everyone's forgotten about it could work.

In fact the same logic could be applied to value (aka Graham) style investing - which the traders would say is just another trading system - maybe if it becomes too popular it won't work either - people will recognise value situations arising and start to buy before the stock reaches a true value point - until ultimately they are buying when its not actually valuable and the whole thing defeats itself.

So realist - its true what you say - find something of your own that works, and do it and ignore everybody else.

and if it sounds like I'm rambling its probably because I've had a couple of glasses of wine ... (plus the odd beer before that    )


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## wayneL (30 June 2006)

cuttlefish said:
			
		

> In fact the same logic could be applied to value (aka Graham) style investing - which the traders would say is just another trading system - maybe if it becomes too popular it won't work either - people will recognise value situations arising and start to buy before the stock reaches a true value point - until ultimately they are buying when its not actually valuable and the whole thing defeats itself.




Precisely!

In fact, I think that is evident even as we speak. Where is the value? There certainly is no value in the market as messrs, Graham, Buffett, Munger, et al would define it. Today we have mostly spec value, even in the stalwarts.

I think Ducati summed that up rather well with his BHP and RIO valuations over at RC.

Cheers


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## cuttlefish (30 June 2006)

wayneL said:
			
		

> Precisely!
> 
> There certainly is no value in the market as messrs, Graham, Buffett, Munger, et al would define it. Today we have mostly spec value, even in the stalwarts.
> 
> ...




dead right - I don't see any Graham style value around and haven't for a couple of years (not that I've been looking hard though). I'm mainly cash apart from a few smallish holdings and mucking about with options. I've sold some property as well 'cos I don't see value there either.  I missed commodities altogether though (apart from shorting it over the past month or so).  

Be interesting to see if cash comes around.


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## mit (30 June 2006)

Realist said:
			
		

> "From 1938 on the Dow theory operated mainly by taking its practicioners out at a pretty good price but then putting them back in again at a higher price. For nearly 30 years thereafter, one would have done appreciably better by just buying and holding the DJIA"
> 
> Ben Graham, Intelligent Investor page 191
> 
> ...




If you'd read my link



> Over the 70-year period, the Dow theory system outperformed a buy-and-hold strategy by about 2% per year. In addition, the portfolio carried significantly less risk. If compared as risk-adjusted returns, the margin of out-performance would increase.




this study would have been done after Graham's books. Also as a technical indicator it would lag too much, but is good to give signals to long time investors so they could conserve their money to buy bargains near the bottom of the market.

I think a lot of people come to these forums with a single idea and defend it to the death. 

I like to separate myself from my ideas. I have read a lot of t/a books I have also read a lot of books on fundamentals. I have read studies on trading opposite to the usual fundamentals (There was a study that bought p/e stocks which outperformed the market). I have read "A random walk down Wall Street" and read the studies that debunk a lot of what is in there. I've also been skeptical. I look at fibs and think how could they work but after spending some time with charts see that they do work.

I think that to be a superior trader or investor you need to challenge your own ideas honestly and not just read things which bolster your own view and use logical fallicy "Argument from Incredularity".

MIT


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## wavepicker (30 June 2006)

Realist said:
			
		

> I disagree..
> 
> Any buy and hold investor who sells because of some old technical theory is a fool.
> 
> ...




Hey Realist, get real

When does a buy and holder know when to fold them? No entry strategy, no exit strategy, just hold on, and have love affairs with companies!! No plan at all. If I followed your regime I would still be in the doldrums, from 15 years ago. It took a nice bear campaign to wake me up, that this takes work and effort. 

A technical theory does not need to predict war, hurricane or any other event. Only to help with probabilities of price movements.
If you like to hold and wait for the next bad news report to tell you when to get out then good luck


I think both TA and Fundematals have each good and bad points going for them. It's up to us to utilize them


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## shasta (30 June 2006)

wavepicker said:
			
		

> Hey Realist, get real
> 
> When does a buy and holder know when to fold them? No entry strategy, no exit strategy, just hold on, and have love affairs with companies!! No plan at all. If I followed your regime I would still be in the doldrums, from 15 years ago. It took a nice bear campaign to wake me up, that this takes work and effort.
> 
> ...




yep agree wavepicker 

there's nothing wrong with buy and hold investors selling when medium to long term trends change and hence take advantage of the compounding affect of selling close to the peaks and buying again at lower prices close to the next trough 

and I agree with using both TA and FA


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## cuttlefish (30 June 2006)

wavepicker said:
			
		

> When does a buy and holder know when to fold them? No entry strategy, no exit strategy, just hold on, and have love affairs with companies!! No plan at all.




don't know about buy and holders, but a fundamental investor still knows when to fold 'em - and thats when the value isn't there any more - either because profits have fallen or the stock price has risen way too far.


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## wavepicker (30 June 2006)

cuttlefish said:
			
		

> don't know about buy and holders, but a fundamental investor still knows when to fold 'em - and thats when the value isn't there any more - either because profits have fallen or the stock price has risen way too far.




You have some valid points, 

but sometimes if there is even a slight smell of a poor formal announcement about profits, then it may be too late.  

Also about a stock rising, how far is too high a price anyway? How are you measuring price and in relation to what datum?


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## mit (30 June 2006)

cuttlefish said:
			
		

> don't know about buy and holders, but a fundamental investor still knows when to fold 'em - and thats when the value isn't there any more - either because profits have fallen or the stock price has risen way too far.




A technical investor would say before he bought a stock. It's currently going nowhere at the moment so I'll wait for it to start moving before I buy it. I know that I will miss some of the move but I wont get caught if the business goes bad before it moves up.

A technical investor holding a stock would also say if it goes down a certain amount, I'll sell. I'll do something else with my money and wait until it comes back up and buy back in.

So the main difference is that a technical investor will say instead of capturing the entire run, I'll go for 50% of the trend but I'll do it more often not having money tied up in stocks that are going nowhere or going down.


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## cuttlefish (30 June 2006)

wavepicker said:
			
		

> Also about a stock rising, how far is too high a price anyway? How are you measuring price and in relation to what datum?




fundamental investors can apply metrics in the same way as traders.  I'm not about to go into details but suffice to say that if you have a way of valuing a stock then you have a way of saying its over valued.

Any form of investing is the same - a proven system applied with discipline and taking out the emotion.  Removing emotion is always the difficult part to my mind - its what causes people to deviate from their system (thats if they even have a system, I'd bet that the majority don't).



> but sometimes if there is even a slight smell of a poor formal announcement about profits, then it may be too late.




that definitely applies with an overvalued stock. with an undervalued stock it can also apply, but from my experience if you're doing your research you've got a fair idea of the state of play before the black cloud descends, and again as long as you can take the emotion out of it (waiting for things to get better) you can usually manage to get out ok.


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## cuttlefish (30 June 2006)

mit said:
			
		

> A technical investor would say before he bought a stock. It's currently going nowhere at the moment so I'll wait for it to start moving before I buy it. I know that I will miss some of the move but I wont get caught if the business goes bad before it moves up.
> 
> A technical investor holding a stock would also say if it goes down a certain amount, I'll sell. I'll do something else with my money and wait until it comes back up and buy back in.
> 
> So the main difference is that a technical investor will say instead of capturing the entire run, I'll go for 50% of the trend but I'll do it more often not having money tied up in stocks that are going nowhere or going down.




This is my take on tech vs fundamental (lifted from a post I made in the tech vs fundamental thread).  I think a combination of both is the ideal, though I'll always put precedence on fundamentals.


A fundamental investor is trying to pick assets that compare well to other assets that are available (including other stocks, bonds, property, cash etc.)
They do this based on looking at the income that can be received when compared to the cost of the asset (income doesn't have to be dividends - the profitability of the company is income), and the potential growth of that income compared to income growth that can be achieved from other assets. 

Capital gains are not a strong focus for a fundamentals based investor, but often are a by-product of fundamentals based investing. 


A technical trader is trying to pick the current market sentiment/psychology surrounding a particular stock or sector. All people that have bought shares are aware of the power of emotion, and as a result 'crowd' behaviour is to some extent predictable and follows repeatable patterns. These are the patterns that chartists look for. They then try to capitalise on a particular psychology by either backing a trend (e.g. identifying a breakout and running with the herd untill it runs out of steam), or trading against the psychology of a trend (e.g. selling at the top of a range bound stock and buying at the bottom of that range -i.e. against the psychological trend).

There is plenty of room for both techniques - one is a more active process and more akin to running a business. The other is a more passive approach.


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## Realist (30 June 2006)

> A technical trader is trying to pick the current market sentiment/psychology surrounding a particular stock or sector.




A fundamental investor is doing that but doing the opposite.

They are trying to find a good longterm sustainable industry that is very much out of fashion and performing badly at the moment - hence it is cheap.

They then buy and hold, sure enough their stock may become the fashionable stock eventually and possibly become overvalued and they will consider selling then.

A Fundamental investor would now consider the wine industry, telecommunications, maybe steel, property, etc.

All are cheap at the moment and will surely have their time in the sun in the future.  In 30 years time people will drink wine, go to Westfield or rent a building, own property and use phones.

I only get interested in a stock if it goes down - the exact oppoiste of a tech analyst.

Show me a company/industry that is making a profit but the share price is going down and i'm interested.


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## michael_selway (30 June 2006)

wayneL said:
			
		

> I think Ducati summed that up rather well with his BHP and RIO valuations over at RC.
> 
> Cheers




whats RC?

thx

MS


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## Realist (30 June 2006)

cuttlefish said:
			
		

> In fact the same logic could be applied to value (aka Graham) style investing - which the traders would say is just another trading system - maybe if it becomes too popular it won't work either - people will recognise value situations arising and start to buy before the stock reaches a true value point - until ultimately they are buying when its not actually valuable and the whole thing defeats itself.




Value investing has never and will never be in fashion.

Just like eating healthy and regularly exercising will never be the weight loss fashion.

It is too simple and too boring and requires far too much discipline.

People love to make simple things difficult.

People want to make money quickly.  The very idea of buying a share, reinvesting dividends and forgetting about it for 40 years is abhorrid to most people. Why not day trade yourself into an instant millionaire instead? 

The very idea that you have to eat healthy and regularly exercise every day for the rest of your life is unpallatable, people want to just buy an AB-blaster and excercie for 4 minutes a day and be slim forever.

People want and need instant gratification. There is no way most people will ever patiently invest and eat healthy and exercise daily.


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## GreatPig (1 July 2006)

michael_selway said:
			
		

> whats RC?



ReefCap

GP


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## wavepicker (1 July 2006)

Realist said:
			
		

> All are cheap at the moment and will surely have their time in the sun in the future.  In 30 years time people will drink wine, go to Westfield or rent a building, own property and use phones.




Anyone can buy and hold for 30 yrs. Hell!! I will be dead in 30 yrs!! How boring.
After the crash of 29 many folks had to wait 25 yrs to get their $$$$ back. More recently, the in Japan, people are still waiting. So what do most do when they come square, what comes natural, sell. That is when they should keep holding. But who is gonna wait another 25 yrs!!!


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## MichaelD (1 July 2006)

Realist said:
			
		

> People want to make money quickly.  The very idea of buying a share, reinvesting dividends and forgetting about it for 40 years is abhorrid to most people. Why not day trade yourself into an instant millionaire instead?



Sounds good in theory but this is simply not true. The majority of market participants in Australia are buy and hold investors. Unfortunately, a lot of them bought and held Telstra 2.


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## Realist (1 July 2006)

> Sounds good in theory but this is simply not true. The majority of market participants in Australia are buy and hold investors. Unfortunately, a lot of them bought and held Telstra 2.




No they aren't.

The majority are large organisations who buy and sell. Not buy and hold forever.

Yes mums and dads lost on Telstra - who has not lost on a share at least once?

As long as they diversified so that no more than 5 to 8% of their portfolio was in Telstra they were not out of pocket - at least the dividends were ok.  The other 95% of their portfolio probably included winners like BHP, CBA and others somewhere as well.  They'd be well ahead, infact probably doubled their money in the past 3 years alone.

It is simply impossible for a buy and hold investor to lose (inflation indexed) over the longterm (30 years or more) if they buy large successfull companies that have made good profits over the past 10 years. If they buy them when the price is down a bit and they diversify widely across sectors even across countries and hold for as long as possible but sell if the company makes a loss, and reinvest dividends.

Maybe they'd have HIH, Telstra and some other duds, even still it'd be almost impossible to find 20 companies that consistently made profits that went under without making a loss first.

Just like it is impossible not to lose weight if you are overweight and eat healthy and exercise every day.

People wont do it though.




> Anyone can buy and hold for 30 yrs. Hell!!




Actually virtually no-one can. People want to live in the moment.  Warren Buffett is a freak - he drives a boring car, lives in a cheap house, he is not driven by what money offers him - bascially everyone else is.

The thought of being rich in 30 years is not appealing. We want to be rich now!!


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## shasta (1 July 2006)

Realist said:
			
		

> ..........It is simply impossible for a buy and hold investor to lose (inflation indexed) over the longterm (30 years or more) if they buy large successfull companies that have made good profits over the past 10 years. If they buy them when the price is down a bit and they diversify widely across sectors even across countries and hold for as long as possible but sell if the company makes a loss, and reinvest dividends...................




Technically you'd have to be very unlucky or stupid to not be infront after 30 years *but you could still 'lose' if you take 'opportunity loss/cost' into account*.

After 30 years a stock might be only 200% (including divs) up on what you bought which equates to an annual return of only 3.73%pa compound.

What was talked about earlier is the affect of compounding that even long term buy and hold investors can use by selling close to medium/long term peaks and buying again in the subsequent medium/long term troughs and hence increas their returns greatly over the long term over someone who simply buys and holds and never sells.

I use both technical and fundamental analysis to help time these sell/buy points


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## wavepicker (1 July 2006)

Realist said:
			
		

> No they aren't.
> 
> 
> It is simply impossible for a buy and hold investor to lose (inflation indexed) over the longterm (30 years or more) if they buy large successfull companies that have made good profits over the past 10 years.





This is simply not true. In the market ANYTHING is possible. The market will do what it wants. Not what you expect, hope,or want it to do. 
Just look at ENRON and god knows a how many other companies throughout history that have gone belly up. 
What seems logical in the market is usually what does not happen


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## BSD (1 July 2006)

Realist said:
			
		

> A fundamental investor is doing that but doing the opposite.
> 
> They are trying to find a good longterm sustainable industry that is very much out of fashion and performing badly at the moment - hence it is cheap.
> 
> A Fundamental investor would now consider the wine industry, telecommunications, maybe steel, property, etc.




You shouldn't get fundamental analysis mixed up with contrarian investing. 

You probably need to broaden your analysis (more macro top down stuff) to gain a better understanding of the real value you are seeking.

Steel is far from being out of favour. Hot Rolled Coil is trading at multiples of its 10 year averages. Many steel companies are trading at multiples of their prices 5 years ago. 

Demand is very strong, but competition is fierce and input costs are rising. Hence the strength of iron ore and coking coal and BSLs problems.

Property is not cheap, yields continue to fall and are by no means cheap in a historical context when compared to bond yields


Telecommunications and wine have systemic issues and I cannot see a fundamental reason to invest in either industry. 

I would question a fundamentalist buying into companies operating in industries resplendent with low margins, excess capacity and/or declining demand. 

People 'may' increase their wine consumption, but when you can buy a very good bottle for $15 that cost $25 three years ago, someone is missing out.  And who is to say in the future that consumers will choose the commoditised stuff (where FGL have scale and supply chain advantage) and not the more interesting wine from smaller operations.

As for Telstra, a fundamentalist would not buy a company whose earnings are expected to fall by at least 10% (maybe 20%), can't fund divs from cashflow and whos Sol(e) solution is to spend $8bn on capex. 


As for investing trends, value investing becomes very popular in bear markets. As does writing covered calls, property and any other strategy that does well when risk is being shunned or markets are falling. Investors tend to become creatures of their times.


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## Julia (1 July 2006)

BSD

Ah, such sense.

Julia


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## Sean K (1 July 2006)

Good points BSD. Unfortunately, I'm a long suffering TLS and FGL holder and have been holding on for the turn 'around'. I think once TLS has the shackles off you could see some inteesting corporate activity. It has such massive cash flow and reach to the public that it could become a complete one stop media and information provider. Think television, internet, communications, newspapers, magazines etc. Plus, there's also the potential to go global. Wine industry has stood on it's todger by allowing so much grape to be planted by all those retired doctors and pilots. But, it's just a cyclical thing. It'll self regulate and turn around in the next few years. I hope.


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## Sean K (1 July 2006)

Or, we should take our cash out it them and invest in something that will outperform. Sounds a bit smarter.


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## BSD (1 July 2006)

Maybe

I dont buy the Telstra business plan. 

It is hard to find a telco globally that makes good money. They have to spend so much money on technology that becomes redundant in a matter of years. What becomes of this $8bn worth of fibre if in five years wireless gets fast and cheap? Or some other technology prevails?

As for them becoming a content business - I think you only need to have seen the TLS management trumpeting Sensis as the next Google to get a feel for how much these guys know about the internet, content and media. 

It amazes me that for a business so dependent on their clients being luddites (using landline as opposed to VOIP for example) that they think making the net super-fast will increase their business enough to replace their dying fat margin rip-off business of charging $40 a month for the honour of having an expensive phone service.  


Buy News Corp if you want exposure to the pros of content. Note that NWS will more than likely try and sell their delivery businesses. 

Rupet has more skin in the game than Sol - who will quickly flee to the states at the end of his contrct with a bag of money.


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## Realist (1 July 2006)

BSD said:
			
		

> I would question a fundamentalist buying into companies operating in industries resplendent with low margins, excess capacity and/or declining demand.




Like Coke and Gillette?     

A bottle of wine is $10 to $50 usually, a can of Coke maybe 50 cents from a  super market. One razor - 50 cents as well.


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## Realist (1 July 2006)

BSD - you sound like a smart guy.

You want to enter our 1 yearly stock tipping comp??

C'mon please enter your 3 tips


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## professor_frink (1 July 2006)

Realist said:
			
		

> "From 1938 on the Dow theory operated mainly by taking its practicioners out at a pretty good price but then putting them back in again at a higher price. For nearly 30 years thereafter, one would have done appreciably better by just buying and holding the DJIA"
> 
> Ben Graham, Intelligent Investor page 191
> 
> ...




Thanks realist. You may find it slightly funny that as a trader I actually have that book(haven't got around to reading it yet!), so I'll dust it off and have a look.

Enjoy the rest of your weekend


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## Realist (1 July 2006)

Juila and BSD, this is for you. What do you think??



			
				 Benjamin Graham said:
			
		

> I noticed that a great many of the brokerage house advisers were saying that now that the market has ceased to go up continuously, the thing to do is to exercise selectivity in your purchases; and in that way you can still derive benefits from security price changes. Well, it stands to reason that if you define selectivity as picking out a stock which is going to go up a good deal later on -- or more than the rest -- you are going to benefit. But that is too obvious a definition. What the commentators mean, as is evident from their actual arguments, is that if you buy the securities which apparently have good earnings prospects, you will then benefit market-wise; whereas if you buy the others you won't.
> 
> History shows this to be a very plausible idea but an extremely misleading one;
> ...............
> You are not going to get good results in security analysis by doing the simple, obvious thing of picking out the companies that apparently have good prospects -- whether it be the automobile industry, or the building industry, or any such combination of companies which almost everybody can tell you are going to enjoy good business for a number of years to come. That method is just too simple and too obvious -- and the main fact about it is that it does not work well.




I interpret it that infact you are better off buying into industries that have poor prospects than industries with good prospects.

That sounds ridiculous, but it is not, because companies with poor prospects are cheap!!  And prospects are merely predictions, they are wrong as often as they are right.

This was written maybe 50 years ago of course, amusingly the building and automotive industries are not ones with a good outlook at the moment.


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## MichaelD (1 July 2006)

I said: Sounds good in theory but this is simply not true. The majority of market participants in Australia are buy and hold investors. Unfortunately, a lot of them bought and held Telstra 2.

Realist said:No they aren't.

The majority are large organisations who buy and sell. Not buy and hold forever.

------

The ASX Share Ownership Study 2004 can be read here;
http://www.asx.com.au/research/market_info/history/share_ownership.htm

Point 1: 6.4 million Australians directly owned shares in 2004.

Point 2: 35% of these do not monitor their positions on a monthly or better basis. i.e. 2.25 million Australians can be reasonably construed to be buy and hold investors.

Point 3: TLS has 1.6 million shareholders. 58.5% of these (just under 1 million shareholders) have 1,000 or less shares. (See 2005 Annual Report).

Consider what these facts might mean.


Realist, there are four stages of market knowledge;
1. Unconscious incompetence - you don't know what you don't know about the market. Unfortunately, your lack of knowledge does not prevent the market from hurting you.
2. Conscious incompetence - you realize that things aren't as simple as they seem to be on the surface. You know there are things you are ignorant of and realize that you need to learn about them.
3. Conscious competence - you've worked out what's going on and by thinking about this you can get by OK.
4. Unconscious competence - you're now in a very select elite group of traders/investors who are intrinsically in tune with the market.


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## Realist (2 July 2006)

MichaelD said:
			
		

> Point 1: 6.4 million Australians directly owned shares in 2004.
> 
> Point 2: 35% of these do not monitor their positions on a monthly or better basis. i.e. 2.25 million Australians can be reasonably construed to be buy and hold investors.
> 
> ...




Okay, the majority of shreholders are mums and dads - buy and hold - YES.

But the majority of shares are not held by them, they are held by corporations.

So yes, some mums and dads have $2000 worth of Telstra 2 and they've probably forgot about them.

We are both right, just looking at it from different angles.


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## It's Snake Pliskin (2 July 2006)

Realist,



> .. because companies with poor prospects are cheap!




In hindsight a cheap stock can be and is often expensive, if one is to think in such a way by using words such as cheap and expensive.


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## MichaelD (2 July 2006)

Realist said:
			
		

> Okay, the majority of shreholders are mums and dads - buy and hold - YES.
> 
> But the majority of shares are not held by them, they are held by corporations.
> 
> ...



Not at all. You have just conveniently forgot about/totally changed the point you were originally making.

Your ORIGINAL claim was;
"The very idea of buying a share, reinvesting dividends and forgetting about it for 40 years is abhorrid to most people."

I've just pointed out to you that this is false and is in fact the way a very large proportion of the Australian public engages the stock market.


btw, where do you see yourself in the investors/traders journey?
1. Unconscious incompetent
2. Conscious incompetent
3. Conscious competent or
4. Unconscious competent, or
5. Whaddyatalkingabout?

Just curious.


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## Sean K (13 July 2007)

Had to dust this Realist special off for today.

DJIA, up 283 pts
Oil, 11 mth highs
Zn 3 week high, up 3.5%
Pb at record, up 3.5%
Au, up to $667
Ni, up 1%
Cu down 1% (party pooper)
M&A action to drive likely targets
Sub prime what?

ASX should party today. :dance: 

Good day to take some profits perhaps. :


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## CanOz (13 July 2007)

kennas said:


> Had to dust this Realist special off for today.
> 
> DJIA, up 283 pts
> Oil, 11 mth highs
> ...




Interesting times hey Kennas. If you pull up the individual index the majority look weak technically, some are consolidating or pulling back.....will be an interesting day though, Edwood and Prof are saying a big gap up...i think it would be a fade off the gap high down thru the day into the weekend!

Cheers,


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## >Apocalypto< (13 July 2007)

from when this thread was started Wavepicker nailed it on the head on a couple of occasions, funny that realist never came and said hey you were right it did drop twice.


I went long on the xjo again last night before the dow opened as the charts said we are shooting for 6400 on another occasion. I feel this could be another vaild shot and making new highs but we must keep our heads and view it from every angle in a real way!

Realist I see no problem in buying and holding my mother has made a packet form 03 to now, but you got to know when to fold them or you will slowly watch all the time go down the drain with your profits. As i saw in here once dont confuse bull market with genuis. TA is not about knowing what any market will do tomororow its about understanding the mentality of the markets player and what type of market we are in. in every time frame then making plays off that based around your thoughts being confirmed.

Wavepicker, just from your posts, it's easy to see your skill and experience you showed no emotion a true realist!


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