# An excellent story for investors



## basilio

Hi,,

I was following up a story on an investor blog site and came across a particularly brilliant insight into investing and in particular the mental processes most of us go through as we research, buy, sell and pontificate...

I found myself nodding madly as I read this self analysis and suggest other forum members might get similar insights. It's not short but well worth the trouble.

Look forward to hearing your thoughts

Cheers

http://brokermandaniel.com/a-must-read-for-every-serious-private-investor/

_______________________________________________________________________________________
_
What did I find most useful ?

1) Recognizing that there is no way anyone can properly pick top and bottoms in market.  Don't stress about it.
2) Being patient with shares. If the original reason for buying the shares still holds then inevitably there will be commercial success ( hopefully...) and this will be reflected in the SP
3) Take a broader perspective. Spending ones life glued to screens and being mesmerized by the minute by minutes swings in share prices is a waste of a good life. _


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## Knobby22

Great find Basilio.

The writer is eloquent and really hits the truth.

I try to do what he is doing now, but I always seem to leasrn something new.

The latest thing is when you get what seems to be bad news.  Make a decision on the reasons you bought it! But make a decision, don't wait till the market has made up its mind.


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## robusta

That is excellent. The main thing for me is patience, make your decision and if nothing fundamental changes stick to it.


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## Wysiwyg

If I was "investing" in the stock market that "traders" personal experience would not be what I read for guidance.


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## robusta

Wysiwyg said:


> If I was "investing" in the stock market that "traders" personal experience would not be what I read for guidance.




What!!! sorry maybe I am slow but I don't get your point. Would love to hear what you objected to.


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## Garpal Gumnut

basilio said:


> Hi,,
> 
> I was following up a story on an investor blog site and came across a particularly brilliant insight into investing and in particular the mental processes most of us go through as we research, buy, sell and pontificate...
> 
> I found myself nodding madly as I read this self analysis and suggest other forum members might get similar insights. It's not short but well worth the trouble.
> 
> Look forward to hearing your thoughts
> 
> Cheers
> 
> http://brokermandaniel.com/a-must-read-for-every-serious-private-investor/
> 
> _______________________________________________________________________________________
> _
> What did I find most useful ?
> 
> 1) Recognizing that there is no way anyone can properly pick top and bottoms in market.  Don't stress about it.
> 2) Being patient with shares. If the original reason for buying the shares still holds then inevitably there will be commercial success ( hopefully...) and this will be reflected in the SP
> 3) Take a broader perspective. Spending ones life glued to screens and being mesmerized by the minute by minutes swings in share prices is a waste of a good life. _




Mate, this is such a load of bad advice, I am seriously thinking of reporting this as an offensive post.

This is wrong, wrong, wrong.

It's called falling in love with a share.

It's bollox.

gg


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## Wysiwyg

robusta said:


> What!!! sorry maybe I am slow but I don't get your point. Would love to hear what you objected to.



Well the title lead me to the story as being related to investing and it isn't. It is a traders story about what they have experienced and what they believe is a good strategy.

One belief is this, after a lead in mentioning Warren Buffet ... 



> Warren Buffet never bought a share at the bottom. And he never sold at the top.
> So don’t beat yourself up for not calling the bottom. *In such volatile times, if you can **stay within a 30% deficit on a share that you expect to deliver 100%+ profit at some point, then you are doing fine. *




To me that is not investing, that is buy and hold in hope of your share turning around to double in price +. So within 30% down is okay but anymore then sell.


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## Julia

Garpal Gumnut said:


> Mate, this is such a load of bad advice, I am seriously thinking of reporting this as an offensive post.
> 
> This is wrong, wrong, wrong.
> 
> It's called falling in love with a share.
> 
> It's bollox.
> 
> gg







Wysiwyg said:


> Well the title lead me to the story as being related to investing and it isn't. It is a traders story about what they have experienced and what they believe is a good strategy.
> 
> One belief is this, after a lead in mentioning Warren Buffet ...
> 
> 
> 
> To me that is not investing, that is buy and hold in hope of your share turning around to double in price +. So within 30% down is okay but anymore then sell.



Agree.  I wouldn't be holding to within anything like 30% down.


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## Sean K

I saw the Che photo at the top of the site and thought it was a scam so bailed.


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## Wysiwyg

Yes there are thousands of traders blogs on the internet sharing their experiences.


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## So_Cynical

Garpal Gumnut said:


> This is wrong, wrong, wrong.
> 
> It's called falling in love with a share.
> 
> It's bollox.
> 
> gg




It's called backing your judgement and having belief in your fundamental assessment....although ill admit that for some its falling in love and getting swept away in the crap.

Everything in that story applied to me and my experience...great advise for value investors and low cost averaging fundamentalists like me.


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## robusta

Garpal Gumnut said:


> Mate, this is such a load of bad advice, I am seriously thinking of reporting this as an offensive post.
> 
> This is wrong, wrong, wrong.
> 
> It's called falling in love with a share.
> 
> It's bollox.
> 
> gg




Did you miss the bit about researching the company first and having a good criteria for investing?

This from the blog:


"If I’ve learned one thing over this last year, it’s that Holding is an underrated strategy. But it’s not easy. The only way to do it successfully, is to do your research and stick firmly to the reasons you bought in the first place. It also helps to remind yourself of a few core realities when markets turn sour:

1. Accept that you have invested directly in a company at a volatile time on the stockmarket.

2. Recognise that all stocks will go up and down, and that some will experience wild swings on certain days in either direction. Nothing goes up in a straight line.

3. Take heart that lot of these swings will be precipitated by factors that are not within the control of the company: e.g. low or high volumes / sector slumps and boosts / wider market gloom or optimism / ii buying or selling / MM games etc. etc.

So really, your only hope of beating the market is to do your research, and buy or sell on the basis of that research … and the known news/facts. And, provided the fundamentals and news do not change, there is little point in selling out. Certainly, you would be foolish to take a loss on a share if the fundamental reasons you bought in remain unchanged.

How many times have people got spooked by a short-term slide, then sold up, only to see the share kick back up as quickly."

I have trouble disagreeing with any of the above.


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## Garpal Gumnut

robusta said:


> That is excellent. The main thing for me is patience, make your decision and if nothing fundamental changes stick to it.






robusta said:


> Did you miss the bit about researching the company first and having a good criteria for investing?




Its muppet theory, that all information is available simultaneously to all investors.

gg


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## robusta

Garpal Gumnut said:


> Its muppet theory, that all information is available simultaneously to all investors.
> 
> gg




So you think markets are efficent? All the time? 

Or are we playing a bent game against inside traders with no chance of beating the house?


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## Garpal Gumnut

robusta said:


> So you think markets are efficent? All the time?
> 
> Or are we playing a bent game against inside traders with no chance of beating the house?




A Chartist has no fear or no need to justify.

gg


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## robusta

Garpal Gumnut said:


> A Chartist has no fear or no need to justify.
> 
> gg




OK fair enough my reply is a A fundamental investor has no fear or no need to justify.

Life would be boring if we were all the same.

Me I would prefer to buy and hold a bit more as that would mean I made more correct decisions.

Good luck GG.


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## burglar

Garpal Gumnut said:


> Its muppet theory, that all information is available simultaneously to all investors.
> 
> gg




Where can I view this "Muppet theory" ?

Like the OP I was nodding furiously.
If its falling in love with your share, so be it!
Can't be worse than other forms of romance.


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## Garpal Gumnut

burglar said:


> Where can I view this "Muppet theory" ?
> 
> Like the OP I was nodding furiously.
> If its falling in love with your share, so be it!
> Can't be worse than other forms of romance.




So be it for you.

When I play texas holdem at a casino, I go in expecting to win, not just spending weeks in front of a camera.

Romance is fine, but similar to texas holdem.

Get real mate.

gg


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## burglar

Garpal Gumnut said:


> So be it for you.
> 
> When I play texas holdem at a casino, I go in expecting to win, not just spending weeks in front of a camera.
> 
> Romance is fine, but similar to texas holdem.
> 
> Get real mate.
> 
> gg




I am told that shares don't love ya back!!
Ok! So the only animal that love you back is a dog!

Sorry to offend any cat lovers, I am just not a cat-burglar


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## Garpal Gumnut

burglar said:


> I am told that shares don't love ya back!!
> Ok! So the only animal that love you back is a dog!
> 
> Sorry to offend any cat lovers, I am just not a cat-burglar




However with shares when you fall out of love, with a mouse click you can terminate the relationship.

I don't like cats neither but would never do them any harm. I believe they do not like the mouse.

gg


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## burglar

Garpal Gumnut said:


> However with shares when you fall out of love, with a mouse click you can terminate the relationship.
> 
> I don't like cats neither but would never do them any harm. I believe they do not like the mouse.
> 
> gg




lots of chuckles :
cheers


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## Julia

robusta said:


> Or are we playing a bent game against inside traders with no chance of beating the house?



 Have a listen to this, robusta.  It will answer your question.

http://www.abc.net.au/rn/nationalinterest/stories/2011/3155329.htm


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## Wysiwyg

Julia said:


> Have a listen to this, robusta.  It will answer your question.
> 
> http://www.abc.net.au/rn/nationalinterest/stories/2011/3155329.htm




For *evidence of random share price transactions* then the OGC Course of Sales reveals daily large off market random price transactions that swing the opening price dramatically. That being gaps up or down on market open.

I listened to the story on dark pools too thanks Julia.


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## tommymac

Wysiwyg said:


> One belief is this, after a lead in mentioning Warren Buffet ...
> 
> 
> To me that is not investing, that is buy and hold in hope of your share turning around to double in price +. So within 30% down is okay but anymore then sell.




I totally agree. There are going to be very few times that a company can fall by 30% and the fundamentals not changed.  The company may be able to come back and make a profit, but generally the does not like this company for a reason that may have been missed. 

And don't forget, that if you make a 30% loss, from that day the sp needs to increase by 43%, just to break even.


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## burglar

tommymac said:


> ... And don't forget, that if you make a 30% loss, from that day the sp needs to increase by 43%, just to break even.




And don't forget, that if price drops 3 cents, from that day the sp needs to increase by 3 cents, just to break even.


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## againsthegrain

burglar said:


> And don't forget, that if price drops 3 cents, from that day the sp needs to increase by 3 cents, just to break even.




I started investing pre-gfc, when the gfc hit my portfolio got ripped, probably 80% lost. from 20k the worst was down to about 3 - 4k I waited for it to recover until I saw about 7k and it was time to move on. Now around 60 - 70 trades later I broke even and have made profit which is still all invested. Dumped the original stocks and never looked back at them again.

However most of the shares I had bought pre-gfc have never fully recovered, I did not hold any blue chips but had a few companies around $ 1 - 2 value and a few around 50c mark.

I don't think any of them have even close come to being at the sp that they were when I bought, one of the $1 shares is trading at 22c mark now but it was all the way down to 4c at the very bottom.

I could still be holding them .. and holding and holding. Too many wasted opportunities and time! 

You might as well buy property if you are just going to hold like that and watch the garden grow.


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## Slipperz

I was playing with the market a bit before the GFC.

After I got my super return for that year I decided to take matters into my own hands and started to manage my super myself.

In about three weeks I will have been managing my SMSF for two years and the return in that time has been 600%. 

It has been a life changing experience for me. In a couple of years I plan to buy a nice place outright with my SMSF and rent it out for a few years until I have reestablished my trading capital to a level whereby I can trade the markets for a living in "retirement".

My goal is to be independantly wealthy and in comfortable home ownership and completely in control of my own destiny by age 50.


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## robusta

Julia said:


> Have a listen to this, robusta.  It will answer your question.
> 
> http://www.abc.net.au/rn/nationalinterest/stories/2011/3155329.htm




Funny how we look at things dark pools are very interesting.

First of all a disclaimer:

*I am not interested in getting into a fundamental investing versus trend following debate. I know a fundamental approach produces satisfactory results and assume trend following, technical analysis or any combination will also produce satisfactory results*

From my point of view point of view when I first read about dark pools a few months ago I could see opportunities for me.

I invest in very few companies and when I do I want to take advantage of any market inefficiency. 

The same with the emergence of ETF's any broad based buying selling of indexes or sectors is sure to leave some individual companies under or over priced compared to their IV.



againsthegrain said:


> I started investing pre-gfc, when the gfc hit my portfolio got ripped, probably 80% lost. from 20k the worst was down to about 3 - 4k I waited for it to recover until I saw about 7k and it was time to move on. Now around 60 - 70 trades later I broke even and have made profit which is still all invested. Dumped the original stocks and never looked back at them again.
> 
> However most of the shares I had bought pre-gfc have never fully recovered, I did not hold any blue chips but had a few companies around $ 1 - 2 value and a few around 50c mark.




Blue chip whatever that means does not have anything to do with the sp IMO.



againsthegrain said:


> I don't think any of them have even close come to being at the sp that they were when I bought, one of the $1 shares is trading at 22c mark now but it was all the way down to 4c at the very bottom.
> 
> I could still be holding them .. and holding and holding. Too many wasted opportunities and time!
> 
> You might as well buy property if you are just going to hold like that and watch the garden grow.




Here we get back to the individuals investment philosophy, many companies with good fundamentals have thrived through this period.


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## againsthegrain

robusta said:


> Here we get back to the individuals investment philosophy, many companies with good fundamentals have thrived through this period.




Well thats exactly what im trying to say, going by the investment philosophy of the article I would still be at least 50% down holding and being in love on fundamentals. Alot of companies had great fundamentals before the gfc then things changed, then like you say many thrived.


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## Wysiwyg

againsthegrain said:


> Alot of companies had great fundamentals before the gfc then things changed, then like you say many thrived.




But only in hindsight.


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## robusta

againsthegrain said:


> Well thats exactly what im trying to say, going by the investment philosophy of the article I would still be at least 50% down holding and being in love on fundamentals. Alot of companies had great fundamentals before the gfc then things changed, then like you say many thrived.




By definition the ones that do not thrive do not have *GREAT* fundamentals.  



Wysiwyg said:


> But only in hindsight.




Sorry but that is a load of nonsense.


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## Wysiwyg

robusta said:


> Sorry but that is a load of nonsense.



No need to be sorry simply tell us how you knew the share prices would be where they are now.


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## robusta

Wysiwyg said:


> No need to be sorry simply tell us how you knew the share prices would be where they are now.




OK I should clarify. I have no way of predicting share prices but I can spot a extraordinary business that will outperform the market in the long term.
They all have in common; competitive advantage, little or no debt and a high ROE.
Some examples are COH, MND, FGE, MCE, CBA, ORL, ARP, FWD.

If you could buy any of the above at a reasonable price I think a buy and hold strategy would work out OK.


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## againsthegrain

Wysiwyg said:


> By definition the ones that do not thrive do not have GREAT fundamentals.




I don't understand that comment, no company on asx is 100% guaranteed success, you can have great fundamentals, everything excellent on paper, have a unlucky streak drill a few dusters and you are done for, suddenly GREAT fundamentals turn to butter. 

Take MEO as a example, some poor guys were buying in at $1.00 back over a year ago when they hit great gas shows, everybody was screaming great fundamentals! Dust settled back at 50c, more projects to come future wells - great fundamentals was still on the books.

Few months ago DUSTER! bang down to under 20c, fundamentals suddenly not so good, will it ever even get close to $1.00 for those that might of bought at the top and are patiently waiting for their return?

I can't agree that great fundamentals will always remain great and those with not so great will always remain in bad position.


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## Wysiwyg

againsthegrain said:


> I don't understand that comment



Neither do I since I can't recall nor find typing that quote in this thread. 


> Take MEO as a example



Not for fundamentals. Most if not all "investors" see MEO as a "speculative" trading stock.  



> Few months ago DUSTER! bang down to under 20c, fundamentals suddenly not so good, will it ever even get close to $1.00 for those that might of bought at the top and are patiently waiting for their return?



The nature of "speculative trading" stocks.



> I can't agree that great fundamentals will always remain great and those with not so great will always remain in bad position.



So true. Nothing stays the same and every dog has its day.


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## Wysiwyg

robusta said:


> OK I should clarify. I have no way of predicting share prices but I can spot a extraordinary business that will outperform the market in the long term.
> They all have in common; competitive advantage, little or no debt and a high ROE.
> Some examples are COH, MND, FGE, MCE, CBA, ORL, ARP, FWD.
> 
> If you could buy any of the above at a reasonable price I think a buy and hold strategy would work out OK.



Good reply and you obviously believe in a continuing bull run (demand for goods, services, rocks etc.) but for the record could you briefly define a "reasonable price" please.


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## robusta

Wysiwyg said:


> Good reply and you obviously believe in a continuing bull run (demand for goods, services, rocks etc.)




No I believe most things are cyclical; economies, sectors and individual businesses. Some businesses however have the ability to outperform throughout the cycle, these businesses are extremely valuable and normally trade at a premium to their intrinsic value



Wysiwyg said:


> but for the record could you briefly define a "reasonable price" please.




When the share price is at a discount to my calculation of intrinsic value. Normally 20% plus.

I mainly use Roger Montgomery's method to calculate IV.


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## Wysiwyg

Okay, all the best with your investment strategy for the future.


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## burglar

againsthegrain said:


> I started investing pre-gfc, when the gfc hit my portfolio got ripped, probably 80% lost. ...




I too, was ripped by the GFC. 
When it bounced back, I got mangled by Kevin Rudd's Great Big New Mining Tax.


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## Julia

burglar said:


> I too, was ripped by the GFC.
> When it bounced back, I got mangled by Kevin Rudd's Great Big New Mining Tax.



Um, how?  Considering the Great Big New mining tax isn't even in place yet?


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## nunthewiser

burglar said:


> I too, was ripped by the GFC.
> When it bounced back, I got mangled by Kevin Rudd's Great Big New Mining Tax.




No buddy. YOU got ripped by yourself....... You could of sold for a smaller loss , could have walked away .......but no .ya sat there like a bunny in a spotlight like 80% of the other bunnys out there......

i keep reading all these excuses for failure on a daily basis and its always someone elses fault or conditions out of your control........ bollox i say ..... 

YOU bought it.
YOU could have sold it.
YOU at fault for the losses
YOU will probably not accept this tho and continue to donate for the rest of your trading days.

but hey thats just fine.......just blame it on the next headline


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## burglar

nunthewiser said:


> No buddy. YOU got ripped by yourself.......




OK! I get that you're angry with me!


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## nunthewiser

burglar said:


> OK! I get that your angry with me!




lol far from it.

i do think you talk crap however.

no offence intended


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## burglar

nunthewiser said:


> lol far from it.
> 
> i do think you talk crap however.
> 
> no offence intended




None taken ... I think?


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## burglar

Julia said:


> Um, how?  Considering the Great Big New mining tax isn't even in place yet?




I will not write more crap about the above!
Not to ignore your question, ...
but to hide my inability to hold an eloquent political debate.


Sheesh!
Another post I would pull if I could.


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## tommymac

burglar said:


> And don't forget, that if price drops 3 cents, from that day the sp needs to increase by 3 cents, just to break even.




Very mature.


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## burglar

tommymac said:


> Very mature.




I stand rebuked!
You deserved a better response than that!


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## Julia

burglar said:


> I will not write more crap about the above!
> Not to ignore your question, ...
> but to hide my inability to hold an eloquent political debate.
> 
> 
> Sheesh!
> Another post I would pull if I could.






burglar said:


> I stand rebuked!
> You deserved a better response than that!



burglar, your candour and honesty is refreshing, jeez, it's almost endearing


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## againsthegrain

I was one of the biggest ones around the easter bunny of the GFC hehe

Lesson learned!


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## skc

What's being debated here? Holding is a good strategy if you have the fundamentals correct? How can anyone even argue against that?

Throwing examples like MEO to support why fundamental investing / holding doesn't work is probably as silly as they come.  

There is also so much myth and mis-understanding about fundamental investing...
I believe in fundamental analysis, but I also believe the term 'intrinsic value' is intrinsically incorrect. Value of a stock will always be relative.



tommymac said:


> I totally agree. There are going to be very few times that a company can fall by 30% and the fundamentals not changed.




MMS


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## burglar

nunthewiser said:


> lol far from it.
> 
> i do think you talk crap however.
> 
> no offence intended




How can I word it better?
I do not take responsibility for the GFC
I was not in the U.S. on that day.
However, I am responsible for my position before, during and after.
I am slow to react (and I don't have a problem with that).
I do not read newspapers.
I do not believe so called experts.

Unlike your good self, I have not yet reached the nineteenth hole.
I do take responsibility for the slice into the water hazard.
I do take responsibility for the wicked hook into the sand bunker.
They are reflected on my score card!!

See you later!

P.S. How do you like your eggs?


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## burglar

tommymac said:


> I totally agree. There are going to be very few times that a company can fall by 30% and the fundamentals not changed.  The company may be able to come back and make a profit, but generally the does not like this company for a reason that may have been missed.
> 
> And don't forget, that if you make a 30% loss, from that day the sp needs to increase by 43%, just to break even.




There would be many reasons why an SP would drop 30%
The Market may drop.
The Sector may drop.
A prominent newspaper/magazine/broker/forum may recommend a sell.
These are outside influences which will probably not adversely affect the fundamentals.
In many such cases, bargain hunters will come out of the woodwork.


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## tommymac

burglar said:


> There would be many reasons why an SP would drop 30%
> The Market may drop.
> The Sector may drop.
> A prominent newspaper/magazine/broker/forum may recommend a sell.
> These are outside influences which will probably not adversely affect the fundamentals.
> In many such cases, bargain hunters will come out of the woodwork.




Below are my observations in the market. At the end of the day neither of us are wrong if we consider each trade on its own merits.

The market may drop - Agree
The sector may drop - Possibly
Recommendation - Disagree

If he market falls in general, then an individual share may fall aswell as the irrational herd mentality kicks in.

This too can also happen with individual sectors but if the fall is localised to the sector, then more often than not there would have been a change to the market that the company operates in thus affecting the fundamentals.   From this challenges or opportunities could arise. So this could be good or bad for the company.

If a reputable broker etc. recommended a sell, they must be able to back up their recommendation. Assuming the market/sector hasn't taken a hit, then chances are something has changed.  Whether the broker is right or wrong is another matter.


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