# Following the herd



## Synergy (22 January 2008)

So today seems to be the day of the herd. The 'smart' people are out of the market already (i'm assuming) and it seems as though there is going to be a bit of a mass bail out on open. Surely when public sentiment it at its lowest a turnaround is in sight? What are peoples thoughts? If the herd jumps out today does the smart money jump in tomorrow? Or does the slide look set to continue? I just question that if you aren't already out of the market, and aren't getting out today, are you going to sell in the near future?


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## shaunm (22 January 2008)

I'm probably gritting my teeth and holding for now.
My logic is that if I sell now I lose 10k and the way I look at it, the interest I'm paying on the money I have in the market will cost me far less than $10,000 in 12 months; actually it would probably need to be at this level for 2 years to cost me more. So my hope and belief is that bottom must be near and things will get back on track (perhaps to a lesser extent) during 2008.
But hey, I am a mug punter who has done a little research on the stocks I hold.


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## Nyden (22 January 2008)

Synergy said:


> So today seems to be the day of the herd. The 'smart' people are out of the market already (i'm assuming) and it seems as though there is going to be a bit of a mass bail out on open. Surely when public sentiment it at its lowest a turnaround is in sight? What are peoples thoughts? If the herd jumps out today does the smart money jump in tomorrow? Or does the slide look set to continue? I just question that if you aren't already out of the market, and aren't getting out today, are you going to sell in the near future?




I think people are still holding out for some miraculous recovery, which just isn't going to happen. I don't think today is the 'day of reckoning', that might come tomorrow after the US actually closes deep in the red .

(The fact that many people are still clinging / waiting for this recovery, tells me that.)

If the problems of the world remain unchanged, then the fundamentals of our market will have changed. Lower demand, lower prices; and nothing in the market will be undervalued per se, just re-valued.

I think it's pretty clear now to say this isn't just some run of the mill correction, followed up by massive gains by all the "clever" people buying these "bargains". If you had bought just 2 sessions ago, you'd probably be down already a years worth of bank interest.

I keep posing the question of, *why* would anyone buy? For what reason? The US is only going to keep reporting bad data, Aus is going to continue to follow their sentiment, so; why would anyone buy when it's painfully obvious it's just going to continue dropping?


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## chops_a_must (22 January 2008)

Nyden said:


> I keep posing the question of, *why* would anyone buy? For what reason? The US is only going to keep reporting bad data, Aus is going to continue to follow their sentiment, so; why would anyone buy when it's painfully obvious it's just going to continue dropping?




Because there is no one left to sell? 

Personally, if ASIA doesn't step up, I think the SPI will close down about 100 points from the open. It's running a bit at the moment. Going to be tricky picking times to sell though. We shall see how truly liquid these ramped pennies really are...


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## Junior (22 January 2008)

Nyden said:


> I think people are still holding out for some miraculous recovery, which just isn't going to happen. I don't think today is the 'day of reckoning', that might come tomorrow after the US actually closes deep in the red .
> 
> (The fact that many people are still clinging / waiting for this recovery, tells me that.)
> 
> ...




There hasn't been any figures from Australia's big companies that show weakening fundamentals.  You can buy shares in one of the big 4 and receive divs of 8% grossed up.


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## tronic72 (22 January 2008)

Nyden;

"I think it's pretty clear now to say this isn't just some run of the mill correction, followed up by massive gains by all the "clever" people buying these "bargains". If you had bought just 2 sessions ago, you'd probably be down already a years worth of bank interest."

I agree. For the last few weeks I've been selling and buying down, hoping that the correction was just that and it would rebound. I'd be able to claim back some of my losses and be in the market at the reduced cost.

I've sold all my position and am going to take a step back and regroup. I think this is just the tip of the iceberg. The Aussie market has been tumbling for weeks but the US and European markets have only just started their decline.


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## megla (22 January 2008)

Well, I decided to get out from my dog stocks and cut the losses which were very large, so that I would be cashed up to get some excellent bargains.

Had to pull away from the emotional attachment to some shares that I have in order to do it, but by hell I feel better now!

So, where is my shopping list


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## chops_a_must (22 January 2008)

tronic72 said:


> I've sold all my position and am going to take a step back and regroup. I think this is just the tip of the iceberg. The Aussie market has been tumbling for weeks but the US and European markets have only just started their decline.




That's just not true.

Europe broke key support just last week.

Riddle me this... if all of you guys are selling out completely, how come the XAO/ SPI is not continuing to go down? What's going to happen when all like minded people such as yourselves finish?


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## skating101 (22 January 2008)

HA im going long on this bad boy, im not geared at all its just cash in hand baby so holding out and trusting strong fundamentals is the game plan, maybe even buying up the oversold yet good stocks


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## Nyden (22 January 2008)

chops_a_must said:


> That's just not true.
> 
> Europe broke key support just last week.
> 
> Riddle me this... if all of you guys are selling out completely, how come the XAO/ SPI is not continuing to go down? What's going to happen when all like minded people such as yourselves finish?





Err...it is.
Time you said that was 180, now it's 240...

It isn't just "muppets" & lemmings selling out. Selling is an important part of protecting capital, & I have no intent of holding a stock at risk just to make *back* losses, that's just foolishness.


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## chops_a_must (22 January 2008)

Nyden said:


> Err...it is.
> Time you said that was 180, now it's 240...
> 
> It isn't just "muppets" & lemmings selling out. Selling is an important part of protecting capital, & I have no intent of holding a stock at risk just to make *back* losses, that's just foolishness.




Yep, hahahaha.

Still nett short. Until there is evidence of a turn around, that will be the case. Only keeping some longs purely as a hedge.

I think at the time instos and the like were buying up the SPI, and selling stocks. Hence the massively high volume. But I did expect that to hold until about an hours time. Just goes to show the strength in the drive down. Beyond all expectations.

At the moment it clearly isn't muppets selling out anymore. I'd say it is the financial sector who have a lot of equities, preparing their balance sheets for the half, and preparing for the need to have extra cash reserves in this market. It's kind of the elephant in the room I think. The downward strength is more than what lemmings could do I'd reckon.


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## Nyden (22 January 2008)

chops_a_must said:


> Yep, hahahaha.
> 
> Still nett short. Until there is evidence of a turn around, that will be the case. Only keeping some longs purely as a hedge.
> 
> ...




Yep, agreed.

Best choice I made selling out remaining stocks this morning, already saved over 6%!


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## heads up (22 January 2008)

"maybe even buying up the oversold yet good stocks"

which ones, mate?

OXR 2.60
BHP 31.72
WBC 24.83
ZFX 8.44

plenty liquidity- go for it! myself i sold. 7.3% for cash on deposit versus global uncertainty and market sentiment.

good luck


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## stockwhizben (22 January 2008)

i didnt want to follow the herd but the index keeps getting worse. i was out too at the open today.  only keeping 100 Rio's for the takeover factor. 

anyone think the herd will make the asx and all ords lose 300 by close? i say yes


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## Nyden (22 January 2008)

stockwhizben said:


> i didnt want to follow the herd but the index keeps getting worse. i was out too at the open today.  only keeping 100 Rio's for the takeover factor.
> 
> anyone think the herd will make the asx and all ords lose 300 by close? i say yes




It's practically already at 300!
Sorry, 299.9 lol


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## stockwhizben (22 January 2008)

lol. yeah i dont have whiz bang share software so just going off asx and nab online trading. 
okay since that last one was a bit easy, what do you think about 330 down? 
i say yes


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## chops_a_must (22 January 2008)

I'll have a punt and say 5225 will be the low.


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## Nyden (22 January 2008)

stockwhizben said:


> lol. yeah i dont have whiz bang share software so just going off asx and nab online trading.
> okay since that last one was a bit easy, what do you think about 330 down?
> i say yes




It could definitely recover. But will it? I wouldn't bet 5 dollars on it


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## ta2693 (22 January 2008)

I bought a lot MLX, LYC, BHP, TZL.ASX,WOR today.

I bet on RBA will cut the interest rate 75bps at the end of the month.
It is very unwise to sell in market like today.


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## Nyden (22 January 2008)

ta2693 said:


> I bought a lot MLX, LYC, BHP, TZL.ASX,WOR today.
> 
> I bet on RBA will cut the interest rate 75bps at the end of the month.
> It is very unwise to sell in market like today.




Why is it unwise? It's a fair certainty that tomorrow will be bad as well.
I've already saved 6% by selling out this morning, I could buy in now if I wanted to, which I don't.


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## numbercruncher (22 January 2008)

ta2693 said:


> I bet on RBA will cut the interest rate 75bps at the end of the month.
> .




You mean the US fed dont you ? no way will the RBA do that and especially not in one hit.


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## Sean K (22 January 2008)

numbercruncher said:


> You mean the US fed dont you ? no way will the RBA do that and especially not in one hit.



RBA's going to raise rates aren't they?


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## Nyden (22 January 2008)

kennas said:


> RBA's going to raise rates aren't they?




Indeed.


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## numbercruncher (22 January 2008)

To stick with the Inflation 2 to 3pc mandate they should raise rates, but I wouldnt be surprised that at this next meeting they hold because of turmoil in markets, personally I think they should rise, Inflation is clearly to high.


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## Nyden (22 January 2008)

numbercruncher said:


> To stick with the Inflation 2 to 3pc mandate they should raise rates, but I wouldnt be surprised that at this next meeting they hold because of turmoil in markets, personally I think they should rise, Inflation is clearly to high.




Interest rates aren't designed to calm the stock markets. The markets are a gamble. Bear markets, recessions, & crashes are all a part of the game, & it's the RBA's job to curb inflation, *not* soothe the markets.


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## Gundini (22 January 2008)

kennas said:


> RBA's going to raise rates aren't they?




Personally, I think they will pause...

When you see the banks raising rates without the RBA's official direction, I smell a Rat! Coupled with the fact they refuse to raise the investors cash rate, I think the banks are just looking after their own margins.

A rate rise will definately styme the economy, and send the AUD through the roof. While inflation is highish, I don't believe they will desire the repercussions of a rate rise.


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## chewy (22 January 2008)

I agree - i think the RBA will hold off on a rate rise now. No one at work believes me though


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## ta2693 (22 January 2008)

RBA or any other central bank has the responsibility for overall stability financial system as a whole. I think they will play this role as lender of last resort tomorrow. 
I am so confident that they will do something which makes me spend my last cents into the market today. Rich or broke is a question to be or not to be.


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## trillionaire#1 (22 January 2008)

i dipped my first toe in to the markets yesterday thinking we were as low as we'd go...wrong!
however im not selling for a loss on long trading companys ,history shows after a big fall, the market eventualy rises higher than ever before,besides 
my scottish ancestry tells me never to loose money

could the over reaction to selling be predominently fuelled by too many people margin lending and being called?


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## MR. (22 January 2008)

ta2693 said:


> I bought a lot MLX, LYC, BHP, TZL.ASX,WOR today.




Well that's one person who bought. A lot of people did. 

I didn't.... Hope you all do well.


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## nioka (22 January 2008)

MR. said:


> Well that's one person who bought. A lot of people did.
> 
> I didn't.... Hope you all do well.



 A lot of people bought today. Funny thing that . There were exactly the same number of shares bought as there were sold.
 I did my share of buying and I'm happy with the outcome.


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## agro (22 January 2008)

You just have to stick through it.

No intelligent investor looks at the day to day volitility of the markets and frets over it. The way in which an average person who has done their research and studied the markets can make money guaranteed is in long-term value/quality investments.

Trying to make money in short-term speculation is 100% no different than gambling, it's impossible to consitently guess right.

But, through all the history of stock markets, a diversified portfolio invested in equities on a long term time scale will make solid gains and just blow guaranteed investments out of the water. The ups and downs people worry about now are almost invisible when you stand back and look at the charts over years which is what you ought to be doing if you're a smart investor.

Right now is all based in hysteria over fears of recession, but it's not reflected in value and the markets will correct themselves over the coming weeks. Now, whoever picks bottom is able to make themselves some good gains, even presently there are tons of solid long-term values out there - but everyone is waiting for the issues to work themselves out. The economy is slowed up right now, but it's not so horrible that people should be worried to the degree that the numbers have shown lately. It certainly isn't logic that drives the markets in times like these.


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## MR. (22 January 2008)

nioka said:


> A lot of people bought today. Funny thing that . There were exactly the same number of shares bought as there were sold.
> I did my share of buying and I'm happy with the outcome.




As long as your happy with the outcome... So, how much did you make?

It takes guts to buy when everyone is being negative. 

TA2693 I remember reading once claimed (not in these words) "he was waiting for the crash". And above are some of his buys. I thought he might have waited some more. 

So I missed the boat.


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## Julia (22 January 2008)

agro said:


> You just have to stick through it.
> 
> No intelligent investor looks at the day to day volitility of the markets and frets over it. The way in which an average person who has done their research and studied the markets can make money guaranteed is in long-term value/quality investments.
> 
> ...




We'll see if you are right about "the markets will correct themselves over the coming weeks".  Personally, I disagree and feel it will take a lot longer than a few weeks.  You are right in saying it isn't logic which is currently driving the market.

However, no one approach is right for everyone.  e.g. people nearing retirement who will need to draw an income from their capital are probably going to be less anxious if their capital is earning a comparatively unimpressive 7% than seeing it eroded at the rate of 5% per day!

And never underestimate the strength of pure fear.  I doubt that all the people (and fund managers) who included Centro in their "Balanced Portfolios" are feeling too damn chipper right now.  No one wants to be holding the next 'safe company' which goes the same way.


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