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How useful is Forecasting (fortune-telling)
Thumper
post Posted: Feb 27 2005, 08:57 PM
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Personally I'm bloody bearish on everything. Gold oil stocks. There is still some room to manoevre - ie some time - but most asset classes look doomed to multi year/decade bear markets. Including our own ASX. Most bull runs last 2 and a half, 3 years, and we don't have much time left for ours. Don't talk to me about fundamentals. I don't want to hear about supply and demand. To me it means nothing. You can talk about oil demand until your blue in the face - technical indicators say something different.

From me the message is make your hay while the sun shines, because its rapidly drawing into evening. Don't get caught out as night falls - get into cash at the first sign the sun is dropping behind the hils, and stay there until everyone is saying: "when will this doom and gloom ever end?"

 
fumod
post Posted: Feb 27 2005, 07:18 PM
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Sharescene moderator- how about saving this topic under /discusion topics/ Hall of Fame. for future easy reference.
Best reading I have enjoyed for years.
(not trying to manipulate through suggestion so exclude this post, just forecasting that it would be in the best interests of all to learn about the paradoxical paradigms of relevant reality)

fumod

 
idribble
post Posted: Feb 27 2005, 04:14 PM
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In reply to: marathon on Sunday 27/02/05 03:43pm

I would like to sincerely thank all those who have taken the time to pen some very thoughtful posts. You're very generous, and as they say what goes around comes around.

I have nothing to add smile.gif I ran out of steam many days ago wink.gif

A grateful and more knowledgeable dribble graduated.gif



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To win big you must be prepared to lose the lot.
 
Lizard
post Posted: Feb 27 2005, 04:13 PM
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I've just wrested control of the keyboard back from Spouse and Children, only to find that this thread has exploded since I posted this morning and I've had to print out all the great info to read and refer to. It has to be one of the most interesting discussions and I, personally, am really learning alot from all the posts here!

Anne, could we please have that "dead certs" thread. I would have to say that all the shares I have ever referred to as a "dead cert" have actually turned out to be that. If only I had backed myself with a little more of my portfolio! Unfortunately, I don't have any right now. Also, can I suggest a "How I picked my Best-Ever Stock (honestly)" thread (where I can confess that it was my first-ever pick and I liked the sound of its name...), a "Biggest Mistakes I Ever Made" thread and perhaps a "How I balance my Lifestyle" thread for those of us who are so addicted we are still contributing to SS on a Sunday afternoon...

Thanks to all for a great Sunday read (and the links are going to take me the rest of the week...!)

Cheers,
LizarD

 
marathon
post Posted: Feb 27 2005, 03:43 PM
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In reply to: anne on Saturday 26/02/05 08:58pm

Anne
I attach as a PDF file an article from the January 2005 issue of AAII Journal published by American Association of Individual Investors www.aaii.com which has some interesting presentations on US Stock Market Returns over various periods.
Attached File(s)
Attached File  stockstrategies_b.pdf ( 79.46K ) Number of downloads: 50

 


 
kahuna1
post Posted: Feb 27 2005, 03:43 PM
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In reply to: normc on Sunday 27/02/05 03:46pm

Scorpian,

thanks mate. Blushing. Great discussion by all here.
Logic drives me that way with idividual shares, no other way I can asses the risks since they change with each single company you invest in.


Normc,

Love your work as well.
All on this thread are to be complimented, between us we could solve the answer .... Well it beats going out and doing the gardening.

Like yourself out of the rat race. Traded for banks/ merchant banks for over 15 years. Rose from the bottom as the trainee dealer getting the lunch to the top on the trading side. Chief dealer, head of trading ect ect. Nice but makes me no more able to pick the direction of any single stock better than someone with 1 year behind them. A fact I accept and realize. Been trading for myself for 7 years through the Asian financial crisis, ect ect. The debacle at 9/11 was a new one even for me having traded through the crash in 1987.

About a month ago would be right, just felt we had come a bridge too far with the ASX 200 hitting all time highs of 4070 ish. Around that time cleaned the books out and took some money.
Still has 7% in two small specs and highly risky ones and a chunk in a pet stock. No prizes for which one.

At almost that exact time was at a bit of a loss what to buy. My pet share after hitting TA high was being driven down by nothing other than bullies, being rather large myself decided one good turn deserved another. At the same time oil was most defiantly going up, deals from iron ore prices being paid for the 2005 year were just filtering through and the same for coal. Both were very very good for the prospective 2005 numbers for the big miners. Eventually changed my mind and loaded up again, was given the opportunity handed on a platter when some companies I followed closely did the exact opposite to what the 2005 results would look like. When an iron ore/ coking coal producer gets 35% higher or 45% higher prices for 2005 .... And the price of the share does not reflect it and in fact goes down by 5 % or in one case 15% was too good to be true.

That being said, my own feeling is we are propelled higher and higher by the super prices being paid at least for a while. But with the market looking like breaking all time highs I am very mindful of the chance of a massive pullback from here. So I am trading like a cat on a hot tin roof.
Personally like the outlook much longer term for oil prices. Think coal may fall back from this years overdone levels, have two favorites in either sector longer term. WPL and CEY ...Looking for a good level to buy each. But suspect surely at sometime we have to see some correction.

Last week we saw a mini one but it was rubbish. Had to do with option expiry more than anything else. Saw the market index fall from all time highs by about 100 points in 2 days but this will almost certainly be erased especially if the RBA does raise rates next week.

Short term next week really depends on the RBA but suspect we smash thru to new highs.
Being so nervous I am in and out more active than usual which is saying something.
The perverse may well happen next week, RBA does raise rates, but market steams on ignoring it to vastly higher highs.

The short term sell off gave me the opportunity to go in and out a on a few stocks. Some sold heavily and with little of no logic. ANN down 5% for no good reason only to rebound the next two days to near all time highs. Same for MIG and a lot of others. MIG I suppose they were worried about the results but frankly when they have come out time and time again and said they are OK, the sell off from 390 to 350 was idiotic at least to me. Also at the same time we saw the takeover of HLY by TCL, MIG had a chunk of it and would be booking a massive one off profit from the sale in the 2005 numbers over what they had it listed in their own books. MIG owned 15 million HLY I think and the offer was something like $2.00 above what MIG had it in the books at, if not $3.00, so why the selloff ? Its one of life's little questions that I can never work out.

Another example of my theory ... Why if prior to the announcement MIG is at 380, goes to 390 but then retreats to 346 ......... Makes sense to me ... Not.

Longer term, I am as nervous as hell. Miners I think have a lot more steam to go. Most coalers are way overpriced, some to stupid levels. The rest of the market as a whole I am nervous about.
Feel some very silly prices for individual stocks out there. Suspect the market outside the big miners will hold up for a while and the big miners have a ways to go yet hence, possibly higher and a lot higher from here. Depends on what the funds do, do they sell off banks to jump on board the miners ? That's the question ? If so the index as a whole will go no where. Miners will approach their penultimate high and banks will ease off to more reasonable levels.

Don't know, nervous. If we are in for a bout of rate rises, the effect on bad debts for the banking sector will be massive longer term. Not unusual to have a 300 k mortgage right now. If things slow down and rates go up, the defaults have the potential to explode.

Very very nervous longer term, but suspect the market outside miners stays around here but the mining especially RIO,BHP and WPL have a ways to go. Suspect BHP may even go 10% from last weeks close and that in itself will drive the index roughly 30 points higher. If RIO and WPL plus the rest go there and the rest of the market catches more bull fever, ASX 200 high could be maybe as high as 4,350 short term and even the seemingly ridiculous level of 4,750 or 15% higher. Myself, I suspect something will happen before then to take the wind out and change the direction. Don't like the US economy at all, awful budget numbers along with trade numbers.

My own crystal ball is broken on this one. Favor the upside right now, but have been playing my trades very close to my chest with the market into new territory. Long term view very few stocks as great buys up here. Short term, yep but 3,4 years ..... Even my pet's will be cheaper buying if the market comes a cropper. Hard for one stock in a sector to go in the opposite direction to every other overpriced one when its coming back down to sane levels. Not advised to try and stand in front of this sort of a move, its like picking up pennies in front of a steam roller.

All the best

Cheers



--------------------
All views expressed are my own opinions. While I take every care when posting no guarantee to the absolute veracity of the postings is given or implied. Please do your own reseach and consult a professional investment advisor before investing.

Said 'Thanks' for this post: Lizard  
 


skorpian
post Posted: Feb 27 2005, 03:39 PM
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kahuna1

Brilliant post and commentary once again.

It was good to hear that you are 80%FA 20%TA !

 
normc
post Posted: Feb 27 2005, 02:46 PM
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In reply to: rkch on Sunday 27/02/05 02:12pm

rkch, I recall reading something similar a couple of months ago. If it wasn't by Dent, it was probably someone quoting (or plagiarising) him. Sounds feasible, but I also read the other day (don't remember where) that productivity growth in the US has slowed dramatically, but Europe is on the improve. Perhaps the US is a bit further up the productivity curve and tapering out as a lot of the technology has been developed there and implemented faster? China is probably a lot further down, but has the advantage of skipping whole generations of technology. Subject to the rest of the world maintaining demand for their goods, they have many years of growth left.

The US is still my worry. China is an enormous future consumer market, but they need (perhaps) another decade or more of growth to build sufficient individual wealth for this to really kick in.

This link has reams of opinion on 'big picture' stuff, particularly on US. Takes a while to sort the wheat from the chaff, but easy to spend a couple of hours when you get bored with stock research.
http://www.financialsense.com/



 
kahuna1
post Posted: Feb 27 2005, 02:35 PM
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In reply to: cso1 on Sunday 27/02/05 03:26pm

Excellent posts yet again,

Whilst I have pointed out some of the more questionable book sellers of late, this has been going on for ages.

Thinking back to when I tested some Gann and Elliot and Fibonaci stuff about 5 years ago and when I finally realized they might work for short periods in selected products, I asked myself why ? When I looked at the systems in the hard cold light from the ones 100 years ago to the ones from the last 20 years, the selling techniques were the same. All claimed to contain the holy grail .... that which we are all seeking. To know what the high and low of any move will be for a particular stock any given day or week or year.

When looking at techniques and methods there again was the similarity. Each had a hidden number which was the magic answer. For Fib patrons the mystery number was 1.618 being the naturally occurring ratio throughout nature. Gann I think the number was 252 ... or was it Elliot .... one was the Gann angles, another the lunar cycle.

If their is only one answer to getting the tops and bottoms, it cannot both be 1.618 or 252 or a full moon or when Venus passes Pluto.

In the end, despite all this I agree with Anne. Using technical indicators is your best chance to have a super return of capital. It helps where to buy by looking at past movements.

On the other hand talking stocks and stocks only, we are going into specific risk, as opposed to market risk when say talking about the SPI futures on the ASX 200. The risk of the ASX 200 going down 25% is minimal. But depending on individual stocks is another matter. This is a specific risk that changes with every stock we look at. The chances of a company with 100 million shares and no debt and $150- million in cash at the bank going bust are very slim. But a stock with 670 million shares and 200k in the bank and it costs 1.5 million a year to run has a much greater chance the next announcement could be the appointment of an administrator. In reality the chance I would say is 50 times more likely than the first company or 5,000 % greater.

When someone says they trade individual shares using 100% TA or even 90% TA I scratch my head. With an index futures like the SPI sure, maybe 80% TA and 20% FA, but a share with anything less than equal time devoted to each side, my own view is pretty clear. Personally use 80% FA and 20% TA roughly for shares.

This year past, 2004, has been an exception for our markets, we have seen the index rise by 30% in 12 months, but what happens when we go sideways. Its going to happen. What happens when we go down and capital becomes harder to raise for some companies.

The other great point made about companies fundamentals looking great at the top of a run and when the share is near the bottom they look the opposite is a very valid one.
Its human nature and markets driven by both greed and fear. At the bottom its fear, at the top greed. Fundamental analysis filtering out the rubbish is hard. I mentioned Macquarie back in 2001/2 being hit harder than any other bank, because it was charging more fees and therefore making more profits. It didn't make sense in any logical way. Long term if anything the profit outlook was outstanding. BHP this year, same thing China raises rates to try and slow rampant growth over 10% back to 8%. BHP sold off heavily on sentiment, not logic, next year China was going to demand 8% more raw materials.

HDR recently, sold off partially on dropping oil, partially on failure of exploration wells, and partially on fear thinking maybe more bad news coming regarding tiof. In reality Tiof wells and news as such was better than in reality one could hope for. With the bad news on the recent exploration well was always going to 180, oil falling down some more, but the rest below 160,150,140 .... seemed fear to me. Admittedly I was wrong on my initial vocal support around 180, didn't see oil falling from $54- to $40- .... which added further selling pressure to the market rout. Amazingly HDR still was going down when oil clearly had found support and massive support at the very important USD$40- level. Even when OPEC made it very clear its intention to keep oil above USD$40- still the same selling with HDR.
Conversely when tiof eventually came out, honestly was expecting a number around 30% larger and acted accordingly.

When I say the best weapon you have sits on your shoulders, that's what I mean. Following the crowd might make you some money, especially in a bull market like we have seen, but longer term, my own opinion is to form your own independent views on the real valuation of stocks and where the price should be.

I stress again, I know nothing and make no claims to fame, and sure I have my own share of bad trades or ones in hindsight that have been stupid. My one and only point is that by thinking outside the square and doing your own research and coming to your own conclusions has stood me in good stead. Unfortunately to get to this point in time has cost me a lot in both time and money.

In essence I strongly believe you must march to a different tune to the herd mentality of the market to achieve superior results longer term.

On Friday, I mentioned MXG. Not to get anyone to buy it, just that I disagreed with the poster. The jury is still out on whether I have been foolish to buy here or not. MXG announced a disappointing result with the failure of one of its projects in the UK. It allowed roughly 50 mio as the write-off. The total of the project I believe from memory was GBP 93 mio or AUD 225- mio. Now they have already written off 50 mio as what they estimate the loss in the end will be, so what's the market done, wiped off 25% of the shares value or 1.3 billion when the absolute worst outcome from here will be an added AUD 175 mio loss.
The sentiment at present is bad against the stock, the press is all out attacking it, the share price has wiped off the value of every single deal announced in the last 12 months despite the fact even without this deal the outlook from already booked projects for 2006 and 2007 indicates a vastly different picture in terms of profits going forward. Now I urge you not to buy this share, just an example, its my money and head in the grinder. The initial position given the bad news is under 6% of capital, but since I am marching to a different tune as per normal, should they sell further below $4.50 I would view it as a good opportunity to increase slowly to a 10% weighting. Do I expect it to go back to $6.00 where it was 2 weeks ago ? No, but an initial recovery to $5.20- $5.40 is what I would expect.
If as I suspect the loss will be limited to the amount Multiplex has already announced and the profit targets for 2006 are met, it will go higher.

Who knows ? Just sharing my philosophy when it comes to trading. Nothing to do with right or wrong trades or boasting. Having been around a long time, have had shares in companies that out of the blue went into administration ..... fortunately not too much invested due to diversification, thank god. It still hurt as you can only imagine. Sometimes the bomb comes from a political decision, sometimes a parent goes broke and demands repayment of finances, any number of reasons. Sometimes your analysis of a company is totally wrong.

Does anyone have a method they use to pick companies similar to my own of working out fair value and when it goes way way below that on some news it is time to buy ? Or when an announcement is viewed by the market as bearish, when in fact your view is it in reality is mildly bullish or neutral at worst ? These are my own methods for fortune telling , as opposed to the horse who could talk "Mr Ed'.

Be interested to her your replies.

Thanks again.

Cheers



--------------------
All views expressed are my own opinions. While I take every care when posting no guarantee to the absolute veracity of the postings is given or implied. Please do your own reseach and consult a professional investment advisor before investing.

Said 'Thanks' for this post: skorpian  
 
cso1
post Posted: Feb 27 2005, 02:26 PM
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Anne,

- Jim Rogers rode around Oz, declaring he had bought Pasminco shares. The only thing he got right on that one was his "hope that they don't go bust". He and Soros had some huge losses in their time, but on balance have done very well and had some good insights ahead of the crowds. Capital preservation is usually impossible for the most juicy opportunities (it's hard enough to even get them in the first place) and the bigger the bet the better, for when the really big ones come home, they make up for everything else in spades. Backtest this one for example ... buy one helping of every non-dot-com (the sector in genuine disgrace), Australian stock under $0.02 when the American recession was coming to an end. For options players, try to find any way out the money, ultra-long dated, "worthless" calls (LEAPS?), shortly after another (non-nuclear) bomb goes off like 911 or Iraq.

- My best plays have always been real losers out of left field (in the view of others at the time), getting set near the bottom (my worst plays have been all the experimentation in between and the major problems with service providers at critical times along the way) and selling when the profits were obvious. It's really hard psychologically to go against the clamouring crowd and I've been talked out of and worn down by others for too many to count. One has no friends when it's time to get in and has to say goodbye to new friends when it's time to get out. Breakouts in stocks (not futures), in boom markets are increasingly appealing, but the spotting and getting are two different matters, a bit like the difficulty Comsec and CFD traders in popular stocks have in setting automatic stops.

- If I remember a related radio broadcast correctly, Graham was saying at the time that "herd" techniques worked better in modern markets. Information was more widely available on so called fundamentals, markets moved faster and more members of the public were involved. The full set of conditions he applied in his earlier days, rarely ever apply in the modern era (not even to GTP several years ago - note Macquarie described it as "bullet proof" shortly before it collapsed from on high and several months ago started loudly supporting it again. No brokers supported it near the lows and I forecast this cycle will continue in the wider market).

- Livermore went broke four (?) times before ending his life and is held up by many as the greatest trader of all time.

http://stockcharts.com/def/servlet/SC.web?c=$BPNDX,uu[w,a]djclyymy[d20001001,20020101][pf][vc60] is a "sentiment" chart for the NASDAQ 100, showing a once in a "generation" low shortly after 911. It's a computer generated chart, based on P & F charts, showing that 99 out of 100 stocks were going down at the time. That was the bottom of the market for subsequent 10-baggers like Amazon.Com, whose CEO even advised on T.V. around that time, should not be bought by Mums and Dads investors.

I don't think there are any "sure things" on this volatile planet (taxes are a relatively modern invention and even the current definition of death is becoming less certain), but on a statistical basis, the odds are sometimes really high. The caveat as always is that bombs can go off at any time and nothing will protect from the biggest ones.

 
 


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