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- 22 August 2008
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Dazza I know it says all your questions answered, but it doesn't mention the word.."Timely", I've been avoiding answering your novella until I could spare the time I needed to respond properly.
How is a rate rise "awesome for our economy?" When interest rates are increased the Reserve Bank is attempting to slow our economy down. By increasing interest rates, it is now more expensive for companies to borrow money, how is this a good thing? Householders now have to put more money on the mortgage, so they have less to spend, less expenditure is a slowing mechanism.
So do you know the reason then why the shares had a little movement? (To quote the Matrix movies "This is how you come to me, without why, without power." [insert bad french accent])
The reason for that movement was that we are the first western economies to initiate such a slowing mechanism, so there is some sentiment attached to that. It also means that those economies that currently have a very low interest rate like 0% for example can move that money into Australia and get a higher rate of interest. Capice?
So knowing this do you think another rate rise will have the same effect and do you think everyone agrees with you? (because only the aggregate opinion matters).
Define "Knows". The word you are searching for here is "anticipates". The market (with a higher or lower degree of certainty) anticipates that there will be a rate increase. Depending upon a) the degree of certainty, and b) the time period to the event; it will adjust according to the aggregate whim of the market participants. When the event occurs, those market participants who did not anticipate correctly (or misread the degree of change, or who try and take a larger position when proved right etc etc etc), move in line with the actual occurrence. It's the difference between Forecast and Actual when you look at company accounts. The forecast is someone's opinion, the actual is what really happens.
Don't get confused Dazza - this is media, not reporting. Even consensus numbers can be wrong (and frequently are - after all the consensus numbers would have you believe in July 07 that the market would be strong for years to come). Reporters and some paid information providers collate the opinion of analysts together, as if the sum of the parts is greater than the whole and the media refer to it as "the market". It's very much like taking a poll of 1000 people and correctly determining the actions of a billion people. It's frequently inaccurate and wrong - but to understand why it's wrong, you need to read the analyst reports - and I have better things to do with my time than reads other people's opinion.
Investigate RSI's or relative strength indicatorsI've just been delving around other beginners threads and keep reading, RESEARCH RESEARCH RESEARCH. like thats all well and good for someone who knows what they're talking about but as a beginner i have no idea what that means(maybe im a little behind the 8 ball). Does it mean boot up google and type in the asx code and see the shares performance against an index such as the all ords,
investigate value investing
Dazza go to the investing resources section of this forum and read up on what books others have read to start them on their way. You need to have a good grounding before you know what questions to ask. Many here will also tell you not to bother with the questions you are asking because all the information you need will be in the share chart. This question is a bit broad for me to answer concisely so all I can do is wish you good luck on your Journey towards enlightenment.
Dazza Take my advice. Give up daytrading for a while and run a practice account. It will save you money in the short-term and make you a better trader. You don't know what it is you don't know, and have no way of knowing what it is you don't know. But that lack of knowledge has the potential to HURT you. Go read the Brisconnection thread on this forum for a little eye-opener on how bad your lack of knowledge could hurt you. Or alternatively go read the Storm Financial thread on what happens when you leave it some advisers hands. Go to the Uni library and take out lots of books, ask the finance students for their textbooks. Learn to walk before you try and run. Currently it sounds like you are gambling, not trading, not investing and the rule about gambling is... the house always wins.
Cheers
Sir O
