Do you expect a market correction soon?

[KIWIKARLOS]

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

 

[dubiousinfo]

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

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.

 

[Fool]

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.

 

[steven1234]

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.

 

[bean]

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

 

[steven1234]

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

 

[Kauri]

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

Small stocks skyrocket to net millions

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

 

[reece55]

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

 

[nizar]

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

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.

 

[reece55]

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

 

[chops_a_must]

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...

 

[hacheln_mice]

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

 

[reece55]

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

 

[chops_a_must]

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:

 

[Smurf1976]

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.

 

[son of baglimit]

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

 

[kgee]

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???

 

[insider]

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...

 

[nizar]

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.............

 

[wayneL]

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.