Is this the best its ever been?

[brerwallabi]

Wow, what a start to the year.
How are we are all doing so far this year?
Its only three months into the year and I have surpassed last years (calender) accumulated nett trading profit (profit already taken) already. This is certainly the best ever year I have ever had on the market. I have thought long and deep on if I should change my strategy over the last few days seeing the success already enjoyed.I have decided to continue with my same level of capital and to continue with my trading plan as per its original form. I do not wish to discuss trading plans but would rather like to know the impact of success that obviously many of us would be enjoying on our psyche and if our trading plans are being modified as result of that success.

 

[nizar]

PERTH stockbroker Terry Hogan can't remember when share market conditions were so appetising.

After a 45-year career that has seen market booms come and go, Mr Hogan reckons most investors have forgotten what a bear market is.

"The sentiment of investors at the moment is very good," Mr Hogan said. "Quite often when the market is jolted, something has to come from left field that can change people's confidence overnight. But this bull run is the best in terms of length. It is keeping me young."

The market closed yesterday at a record 5087.2, heralding the longest share market boom in Australia's history. Twelve quarters - three years - of uninterrupted gains on the All Ordinaries index makes this one longer than any run seen by Australian investors.

The next best was the 11 straight quarters leading up to the 1987 share market crash.

This one has been longer, stronger and broader in its effects than any previous run because of the breadth of share ownership.

All booms end eventually, but right now no one can see that happening. The China-led economic boom continues to sustain company profits and a wave of takeovers unleashed this weak helped spur the market higher still. Mr Hogan said the sharp rise in the All Ordinaries over the past three years, in which the index had almost doubled, was very different to the head of steam built up in the late 1980s.

After 11 consecutive quarterly rises back then, the share market collapsed dramatically in October 1987, with more than 40 per cent wiped from its value within a few days. The dark period for the share market was best remembered by investors for the exposure of a number of so-called entrepreneurs and an inflated price-earnings ratio.

"The market then ran well ahead of reality," Mr Hogan said.

According to Australian Bureau of Statistics figures out yesterday, Australians are riding a wave of prosperity on the back of the boom.

Households purchased a net $1.7 billion in equities during the December quarter 2005 and household wealth soared by 19 per cent over 2005 - the largest increase in 12 years.

Borrowing to buy shares has also surged, with other figures released this week showing at the end of last year Australians had $19.9 billion of margin loans, up from $15.2 billion the year before. Lenders are adding new accounts at the rate of 1000 a month.

In the past year, increasingly frequent predictions that the market was running out of steam have fallen by the wayside. It seems nothing can stop the record run, not falling house prices, not the high price of petrol or even the threat of bird flu.

The resources sector has led the charge and many believe the boom in mineral commodities can go on much longer.

And despite the strong rise in Australian mining shares, analysts say they are still reasonably priced. JP Morgan equities strategist Martin Duncan says companies like BHP with a price to earnings ratio of 12 and Rio Tinto on 11.5 are still relatively inexpensive historically, and compare with a broader market PE of 15.

The PE ratio of the market is one of the main reasons why the bulls insist that the current boom is nothing like 1987 or other unsustainable peaks. AMP Capital Investors head strategist Shane Oliver says the market PE of 15 is still around the average for the last 10 years, despite the record rise.

Oliver says the average estimate for company profit growth this year is 15 per cent and 9 per cent the following year, hardly the recipe for a sudden devaluation of shares.

Duncan says double-digit profit growth this year is already on track based on company results for the half year to December.

Oliver also notes shares prices have risen an average 21 per cent over the past three years, compared with average annual increases of 51 per cent in a similar period leading up to the 1987 crash.

In 1987, the market was up 80 per cent before it crashed.

Oliver says the share market simply isn't seeing the levels of euphoria among investors that presage a collapse, with the percentage of people nominating the share market as the wisest place to invest still lower than the peak 2000 levels at around 20 per cent.

452 Capital director Peter Morgan agrees the market is not yet in bubble territory but says there are signs of irrational enthusiasm in some sectors of the market. He says while blue-chips generally have strong balance sheets and are not highly geared, the same cannot be said for many at the speculative end of the market.

Some small miners, Morgan says, are being priced too high in the hope of future earnings, a similar phenomenon to the dot.com bubble of the late 90s. "A lot of resource companies today are being priced on the value of what's in the ground, not how much it costs to dig it out," he says. Other sectors flashing warning signs, according to other analysts, are the utilities sector where PE's are as high as 30.

While the bulls say the raw statistics show there is little to be alarmed about yet, the bears point to qualitative problems with the investment climate. They note the billions of dollars pouring into the market from compulsory superannuation contributions and suggest it could push the market to unsustainable levels through sheer momentum.

Longtime share market bear Gerard Minack, an equities strategist at Morgan Stanley, says the stimulatory economic effect of the commodities boom has also postponed the damage to be done by imbalances in the economy that Minack has long been predicting will come back to bite consumers and investors.

He notes demand for credit from the heavily indebted private sector has picked up again and the nation's own balance sheet, the current account, is still in deficit to the tune of 6 per cent of GDP.

He also says it is premature to think we have coped with the end of the housing bubble.

According to Minack and Morgan, investors in Australia and around the world have ceased to fully appreciate such risks when valuing assets. This is partly because after a long period of economic growth the chance of a sudden economic shock seems remote and partly because the huge amount of money chasing limited assets has pushed prices to the peak.

"Markets have a way of building their own momentum like in the late 1990s," Minack says. But unlike the 1990s where high prices were limited largely to one sector - technology stocks - now prices are high everywhere, says Minack, and there are few alternatives investors can put their money in if the tide turns, potentially exacerbating the downturn.

The bulls counter that the most recent signals suggest the domestic economy is getting stronger anyway. Retail sales, which have been sluggish, rose 0.7 per cent in February, according to data released yesterday, after a revised 0.9 per cent rise the previous month.

Oliver also doesn't see further damaging fallout from the housing boom, noting rental vacancy rates are low, presaging a pick-up in residential construction activity.

But Oliver also sees the risk of a bubble developing - but not just yet - suggesting fair value for the ASX 200 index is around 5600.

"There is a risk that a bubble may develop and it is likely to become an increasingly volatile ride for investors," he says.

http://www.theaustralian.news.com.au/common/story_page/0,5744,18671030%5E643,00.html

 

[Prospector]

Wow, what a start to the year.
How are we are all doing so far this year?
Its only three months into the year and I have surpassed last years (calender) accumulated nett trading profit (profit already taken) already. This is certainly the best ever year I have ever had on the market. I have thought long and deep on if I should change my strategy over the last few days seeing the success already enjoyed.I have decided to continue with my same level of capital and to continue with my trading plan as per its original form. I do not wish to discuss trading plans but would rather like to know the impact of success that obviously many of us would be enjoying on our psyche and if our trading plans are being modified as result of that success.

I agree it is almost scary! I am quite leveraged in Resource stocks (GOLD GOLD GOLD and a touch of uranium ) - this is where the profit has been but it does get to the stage where your comfort level is quite stressed! At this time the shares are not giving me 'sell' triggers, but at the same time the portfolio is not balanced, and is sitting on a lot of profit! I dont usually lock in the profit unless I get a trigger to sell.

I got jittery about the high profit when trading in BTA, so I sold half and locked it in. Just as well really because then it traded lower for a while so I topped up. That was pure luck because at the time of me selling it, there were no 'sell triggers', just me getting antsy about all this profit!

So yes, profit has changed my trading plan

 

[It's Snake Pliskin]

Extraordinary Popular Delusions and The Madness of Crowds is a must read.
Who sees similarities with the current market? :alien2:

Gold and uranium, hmmm, I`d be getting antsy myself.

 

[markrmau]

I think a bubble IS developing, but it has another year to run.

In July 2004, Jan 2005, July 2005, everyone was sitting around saying 'gee the stock market has had a good run. I think it may crash now.' Jan-April 2006, people are saying 'gee the stock market has had a good run. I think it has further to go...'

This is the begining of the bubble. Don't sell now though, the mania has another year to run. Look at housing.

 

[It's Snake Pliskin]

Another good article from The Australian:
http://www.theaustralian.news.com.au/common/story_page/0,5744,18671036%5E643,00.html

From the article:

The boom ended when it was shown to be a modest deposit and that most of the other exploration companies that had boomed after the Poseidon strike had little prospect of success.

 

[Prospector]

Of course this is true Pliskin - which is why you need to separate the producers from the 'wannabes'.

Are you saying that BHP is not a good share to have???? I'm betting that those who bought it a few months ago at around the $14 mark have no such thoughts. And at the moment, if you arent investing in the mining sector then your shares as a whole, with a few exceptions, probably arent moving very far!

 

[RichKid]

Another good article from The Australian:
http://www.theaustralian.news.com.au/common/story_page/0,5744,18671036%5E643,00.html

From the article:

Great article Snake, excellent summary of the previous booms, I find The Australian business reporting is generally more detailed than the SMH. I've posted a link to another article on insurance and IAG in the IAG thread, same author as your article (Gottliebsen).

 

[Rafa]

can we please not talk about this incase we jinx it and it all comes crashing down...

:bricks1:

in the mean time... party on... :dance:

 

[It's Snake Pliskin]

Prospector,

Of course this is true Pliskin - which is why you need to separate the producers from the 'wannabes'.

It depends on your timeframe for holding and how much you would like to make. Some wannabe companies are making many people very rich.

Are you saying that BHP is not a good share to have????

No I am not saying that. I don`t belive in good or bad shares.

I'm betting that those who bought it a few months ago at around the $14 mark have no such thoughts.

I bet they don`t either.

And at the moment, if you arent investing in the mining sector then your shares as a whole, with a few exceptions, probably arent moving very far

I`ve traded the mining sector not invested. There inlies the difference.

You would be surprised what else one can make money on.

 

[Prospector]

I`ve traded the mining sector not invested. Therein lies the difference.

OK, we agree then!

 

[It's Snake Pliskin]

An article of interest:
http://www.aireview.com/index.php?act=view&catid=8&id=3798

 

[brerwallabi]

This is quite scary at the moment, three times over the last few years I have gone very light in my holdings only to see the market kick on. I have lightened myself this week of all but zinc and gold. I seem to have developed a nervousness even the sound of a leaf dropping to the ground makes me very jumpy.

 

[It's Snake Pliskin]

This is quite scary at the moment, three times over the last few years I have gone very light in my holdings only to see the market kick on. I have lightened myself this week of all but zinc and gold. I seem to have developed a nervousness even the sound of a leaf dropping to the ground makes me very jumpy.

Brer..,

It`s ok to feel like that. I think it is human nature to get nervous at what is unknown of the future. With mining there are booms and busts that is assured. With that in mind be prepared.

Snake :alien2:

 

[brerwallabi]

Its not miners that worry me.

 

[nizar]

This is quite scary at the moment, three times over the last few years I have gone very light in my holdings only to see the market kick on. I have lightened myself this week of all but zinc and gold. I seem to have developed a nervousness even the sound of a leaf dropping to the ground makes me very jumpy.

Good stuff...

Me personally i think ZINC and URANIUM is the way to go..

Check out OMC, SAU, KZL, CBH

Gold I've heard alot about... maybe best exposure is PNA (unhedged)...

 

[traderdude]

Wow, what a start to the year.
How are we are all doing so far this year?
Its only three months into the year and I have surpassed last years (calender) accumulated nett trading profit (profit already taken) already. This is certainly the best ever year I have ever had on the market. I have thought long and deep on if I should change my strategy over the last few days seeing the success already enjoyed.I have decided to continue with my same level of capital and to continue with my trading plan as per its original form. I do not wish to discuss trading plans but would rather like to know the impact of success that obviously many of us would be enjoying on our psyche and if our trading plans are being modified as result of that success.

Congrats. Sounds like you have done very well. I just joined Aussie Stock Forum today. I'm left feeling like I've missed out after reading your post. I have been mostly in stocks like CSM and HDR which have gone nowhere in the last year. Cant say I wasnt in commodities or oil. Do you know any shares that you think have potential atm. Thinking of getting into this Uranium/ gold run. Thanks for any advice. Rob

 

[brerwallabi]

I got very twitchy around lunchtime just feel that 4900ish is coming. So i exited LHG,OXR,ALK,HIG,BMX,SBM and AUZ today. Its all about timing and MAXIMISING profit and your damn profit is not there unless you exchange. I have further lightened my load. already have a few buys in place. The secret next week is have the finger on the pulse the (sell buton)

 

[wayneL]

I got very twitchy around lunchtime just feel that 4900ish is coming. So i exited LHG,OXR,ALK,HIG,BMX,SBM and AUZ today. Its all about timing and MAXIMISING profit and your damn profit is not there unless you exchange. I have further lightened my load. already have a few buys in place. The secret next week is have the finger on the pulse the (sell buton)

It seems to be turning as a good move brer'. SPI is down 70 points @11:45 perth time. Methinks there will be a lot of red tommorrow.

 

[markrmau]

At least the US yield curve is no longer inverted.

http://www.bondtalk.com/global.cfm?S=charts&SS=treasury_yield_curve

PS. Tomorrow is Saturday - I'll open a bottle of red too Wayne.