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Trading XAO: Market herd crazy?

Discussion in 'Shares' started by wdongli, 19th Jun, 2011.

  1. wdongli

    wdongli Well-Known Member

    31st Mar, 2010
    Market herd crazy?

    It is always true if anything worse or better than normal lucks or unlucks! Everyone knows that but unfortunately most of market players are part of the market herd and could not use this observation in their market playing when the best time come in to use it.

    Too many market think all of us would drop into hell again but herd psychology and Australia economies show the evidence to the contrary. In recent weeks the overall focus of market crowd has become so much on the global negatives that all of things have been excessively discounted. That's how herd psychology has always worked and the best time to buy has historically been when the mood is like this.

    At the very beginning, the pessimists are only talking about the non-mining sector in Australia. There's no worthwhile evidence of weakness in the near record prices of our two biggest exports, coal and iron ore. The market herd worried the Euro, Middle East, China, Australia, US, and the Global economy blow up second time. If you go through the trading forums, you would hear the curse, the complain, the worries, and nothing else.

    RBA and Biggest Miners are very confident

    Me too!

    Our economies are so good that Glenn Stevens noted that "a good part of the change in our terms of trade is a manifestation of a large and persistent change in global relative prices" and emphasized the last five words. "Let me be clear here: there is a cyclical dimension to the China story, but there is also a structural dimension," he said, which is as close as a central banker will get to saying that this time it's different.

    BHP and Rio, are the two biggest miners in the world. Although both have seen their prices pulled down in recent weeks, they will be investing more in Australia in the next few years than they have ever invested over a similar period before. BHP is set to invest $80 billion over the next five years, most of that in Australia, while Rio plans to spend more than $15bn in the Pilbara alone in the next four years.

    It is the time to make the bad news but...

    Yes, there's bad news around wherever you want to look. There's what The Economist is calling a "soft patch" in the global recovery: the growing possibility of a Greek debt default and a US economy that's wrestling with staggeringly high government debt levels, stubbornly high unemployment and a housing market that's still falling almost four years after the subprime meltdown.

    Worse! Most of local stocks underperformed for nearly 20 months. Just knowing the news of the floods and cyclone Yasi in Queensland, the Japanese tsunami on March 11 hit the market, and much worst that a second-half earnings bounce is looking improbable. Why? We have high Australian dollars too.

    So what's the hopes and where is the value in this market? Do you know under any conditions the hope, the value, and the discounts are what you should look after. The market lurch so far has had one clear benefit: the Australian sharemarket is now classified as undervalued on a historic price-earnings ratio.

    How to get discount?

    It was said our market is trading on a multiple 11 times of 2012 PE. It's definitely a value bargain market. The market has sold off, but not on earnings surprises. It sold off on sentiment." There has been a significant repatriation of profits out of Australia courtesy of our strong dollar.

    When the tide goes out, all boats go down together, and it is the time everyone's looking for an excuse to sell, and sell on the fire. How many are seriously worrying about the debt problems in Europe. Clearly there are serious issues over there, but it is hard to say the contagion would spread from Greece to Australia.

    I am ready to see the Sun at the horizon soon and would enjoy to run under the rising Sun. I like the storm which could deflate all of the bubbles and make the new chances ready for the brave, wise, and intelligent market players.