Hello Tom,
I read Nassim's first book which did make me think about things in a different light.
It was written in a way that did not spoon feed you but just had stories in that were based on probabilities.
Just been reading a story on the Bloomberg website that said that apparently 2/3 of millionaires in the U.S. thought that their investment advisors had failed them because they had lost during the crisis.
One would wonder if they would have taken their advisors advice if 18 months ago their advisors had told them to sell all their shares and hedge funds and stick their money in cash.
I bet the reaction would have been "are you some kind of idiot? this is the boom we've been waiting for!'
It is funny how prudence goes out of the window during a boom, there is no conserving of funds for the lean times that must surely follow.
The lean times are what Lichello built AIM for but we still add our own tweaks so that we don't miss the stock market leap up and then bang, it collapses in a heap and we all wish we had followed the strict rules.
Our company started laying more people off today, thought I'd seen the last of it before Christmas but it seems like they are preparing for the worst.

Regards

Neil

Hi Tom,

I hope you had a very good New Year and didn't get covered in too much snow.
Thanks for all your help and advice over the years.
I have tried to teach people how to use the AIM method over the years and show them how it can help but I always find it is a case of, as the saying goes "You can lead a horse to water..... etc.

From this whole episode I have recognised my weakness in that despite using AIM I still got sucked into the market hype.
Here the catch cry of the brokers and advisors when it came to the Mining stocks and the commodities was "Stronger for longer" and Supercycle. This mining boom would last 20 years and was only just starting.
Instead of recognising it as a contrarian indicator I got sucked in, although, I didn't have much in the way of speculative mining stocks by that time, I'd already sold out of them, I did have some gold stocks though, these have held up better.
Well, it is now a case of waiting for the stocks we have bought at cheap prices to get to their first sell points.

Regards

Neil

Hi Clive,

As an old punk rocker now,heading to my 50's (that is frightening). I didn't see the Stranglers but saw The Clash, Joy Division, Damned, Siouxie among others.
Just read the Strummer biography 'Redemption Song', it brought tears to my eyes at the end.
I play acoustic guitar and do a few Clash songs to entertain people.
I've just ordered a Breedlove retro acoustic from the US as a reward to myself for sticking to my system for one of the worst years in financial history, hey maybe I'll have to earn money busking if the downturn continues.

Regards

Neil

PS I remember when U2 played at the Manchester Poly (Cavendish house as I remember) and it was 50p to see them.

Happy New Year everyone.

I am hoping we can look back on 2008 in ten years time as market veterans and say we survived while others crashed around us, all because we used a logical system that contains good risk management.

Isn't it amazing how we thing that the wealthy out there have secret knowledge on how to make money then along comes the Madoff scandal and you realise it's not true.
The irony is that you and I would not have been wealthy enough to hang around in those exclusive circles where you had to be invited to place money with him.
So, that air of exclusivity became the Madoffs selling point and the wealthy would have been falling over themselves to give him money, all now up in smoke.

So I guess the moral to the story is that you have to be your own financial advisor as only you have your best interests at heart. Don't believe in so called experts as they are illusions.

This reminds me of my days as a punk rocker where our philosophy was that we had no heroes, what are heroes except romanticised ideals wrapped around some individual.

Have a very happy new year everyone and lets hope we are still around in a years time to talk about it.

Regards

Neil

Hi Extelecom,
just reading through the posts and catching up and hoping to post a bit more frequently.
Yes, there certainly is a lot of tweaking going on.
I still believe in the maxim 'keep it simple stupid'.
It's funny how a couple of years ago I was mainly setting up micro LD AIM accounts in speculative stocks where I'd put only $1000-$2000 as an opening amount then squeeze it for all it was worth, sometimes getting three times my initial amount from it.

That was a very low risk activity but also the reward is also curtailed if the price moves up immediately.
Now the environment has changed radically it seems to be the ideal time to be setting up micro LD-AIM accounts.

I think I have been lulled into thinking because the market is down 50% that I can set up larger AIM accounts, but who is to say that the market will not fall another 50%.

I missed out on a BHP buy as I placed my order too low down, this was a week or so ago when BHP closed on a Friday at about A$21, the US market got pummelled on the Friday and BHP was down about 12%. I did the calculation to see where it would open if hit by the same amount and placed an order in about $2-3 less than the close.
I was actually disappointed when it only moved down a small amount. I missed out.
Then when it called off the RIO takeover, BHP shot up.
Oh well maybe next time.

Regards

Neil

Down Under report.
Well, I've been away from the board for quite a few months now. I think the market must have been affecting my psyche so I have been playing a lot more guitar and doing a music reading course recently.
I've still been AIMing stocks but at the moment it is a thankless task.
The strange thing is that although all these problems emanated from Wall Street it seems that Australia has been whacked quite severely in the financial area.
We still have near record employment levels but this is starting to change, the company I work for made 10% of the workforce redundant and I have heard similar tales from others.

The Australian stock market hit a high point of 6873 back on 1st Nov 2007, it is now sitting at 3483 which is close to a fall of 50% which makes this 12 months worse than the 1987 crash probably worse than 1974.

My AIM cash was depleted at about the 30% fall level so the basic strategy then was to sell off over valued stock and plough this back into undervalued companies using buy SAFE values at about 30%, this has now been upped to 50%.
All buy signals in the speculative end have been stopped except for some green energy related stocks such as the geothermal company Geodynamics who will be generating their first power in about 3 months.

I did actually manage to sell off some gold holdings when the gold price was still high but the A$ began to slide but that is the only AIM sale I have had in about 6 months.

Investment bank Macquarie Group have been beaten up. They traded as high as $98 last year. I purchased a small amount at $67 initially and made a last purchase of $20 earlier in the week.
It came out with a report to crush speculation about it's financial position which is still very strong. I am looking forward to the dividend that now is at 15% tax free!

The mining stocks have been battered by fears of recession and commodity prices falling, BHP and RIO are at half the levels they were a year ago.
I began buying BHP at a point at some 40% below it's peak and am due to buy some more at around $20.

Gee, I would feel sorry for anyone AIMing any of the automobile stocks over there, they look pretty sick.

Funny thing about all this debacle is that it was just over a year ago when I was reading the book Liars Poker about a graduate who began working at Salomon Brothers at the time they invented securitisation of mortgages, little did I know that just after finishing that book the meltdown would begin.

Regards

Neil

Hi Aimster,

Huge reply!
I read a book about 6 months ago called Liars Poker which was about the start of the mortgage securitisation back in the late '70 by Salomon Brothers.
Initially it was done in a responsible way (relatively) it's only when they (not Salomon) discovered that they could offset the loan risks by spreading them bonds around and mixing and chopping that figured that even the riskiest loans could be de-risked, big mistake.
I think that countries go in cycles when it comes to extreme politics, swinging one way or another.
Just watched the Goodnight and Goodluck again and that was a very good reminder of the extremism that was forced upon the country by one little known senator Joe McCarthy.
You are either with us or against us, what rubbish.
The thing about living in 'free' society is that you should have no fear of voicing your opinion.
I think George Orwell wrote the blueprint for a lot of the current governments way of managing the populace in 1984, if you re read it it's predictive powers are incredible. The one thing he failed to see in his book is that it is not necessarily the totalitarian governments that practice the control of populations by fear but the so called democratic governments.
Apologies for going of subject but you put such a lot into your reply.

Regards

Neil

Hi Adam,

It is hard to keep up with a lot of the discussions, especially when tired after a day working on a PC when you just don't want to see another one when you get home.
It seems to me that there are so many different pathways that AIM can be taken down, the hard part is working out which ones are becoming too specialised and so will work only with a certain pattern of stock movement.
You know the old saying about not being able to see the wood for the trees, that can sometimes apply.

I recently tried to plot out all my buy and sell days onto an index chart to see if there was a pattern, ie selling occurring only towards the tops of the market and buying at the bottom.
I determined that there was not much of a pattern due to the sector cycling that goes on underneath the blanket of the main index, so selling and buying goes on all the way up and down.
Interesting exercise though.

Regards

Neil

Hi Grabber,

If I am going to use any TA Tools, which I do, I must admit, the one I find useful is the On Balance Volume, it a cumulative total of the down day volume subtracted from the up day volume.
It can give an indication that even though prices are still rising, the volume is tapering off and any large volumes on negative days ensure that the direction of the indicator shows which way the prices are expected to head.
I use a smoothed version of the OBV to allow the indicator to fall below so I can see when the trend is changing.

Regards


Neil

American economy,

So how are you folks feeling about the economy over there?
From what I read in the financial papers they seem to feel that a real recovery is a long way off.
They have also pointed out that the Fed has destroyed the 'Moral hazard' theory by rescuing the very people who caused the problems thus giving them more incentive to create more financial problems in the future at a much grander scale as they know the government will not let them fail.
The Aussie banks are feeling the downdraft from Wall Street, despite them saying that they had no links with Sub prime.
That should have been corrected to read no direct links but many many indirect ones.
One of my AIM candidates ANZ Bank got belted when it revealed it has made provisions to cope with losses in a monoline bond insurer, and of course links with over leverages brokerages that have imploded.
Looks like the foundations are crumbling.

Regards

Neil

Winter arrives,
Just as you northerners are heading into your warm spring/summer weather we are heading into the darker colder nights.
From a hot and dry summer that I just love (even though we nearly ran out of water) we are getting the winter rains and the cold.
The only good thing about the Australian winter is that the trees and flowers come out. Seems odd I know but everything springs into life when rain comes, the grass grows furiously and the flowers bloom. And of course the leaves stay on the trees all year around, except of course for the introduced deciduous ones.
Have to spend more time on the PC (when I fix the fan on my graphics card which is buzzing in a most irritating way) once I begin my hibernation

Regards

Neil

Hi Grabber,

I lost my faith in all these technical analysis indicators when I began testing them and found that they are no better at predicting price than a simple toss of a coin.
What I found when it came to talking to others that were into TA was that their objectivity went out of the window.
In all the testing I did over the years I found that as all the indicators are based on a derivative of some part of the price and volume that they can have no predictive power whatsoever, it only appears so in certain well chosen cases.

I am now leaning to a more fundamental analysis side of the fence after all, one of Buffets sayings about stocks " In the short term they are a voting machine, in the long term they are a weighing machine" applies.
So, you can AIM a stock that has no income and is burning through cash but the stock price is rising on expectation and speculation.
The money collects in your account as you sell out, but when expectations are not met and the price slides you end up giving all your profits back to a stock that essentially has no value.
I have done that very thing on several occasions. I must be a slow learner.

Regards

Neil

Hi Al,
I am beginning to forget what a sale feels like myself.
My last one was a month or more ago. No end of buying though, so much in fact that I have to be selective about what I buy to conserve funds.
As with all market downturns, the small stocks are the first to get dumped and the last to recover so for now I'm limiting my buys to the larger companies.
I've not started any new AIM programs off although I am keeping an eye on what stocks my valuation software throws up.
The only problem being that the valuations are being revised down on a daily basis.
The only way to tackle them is to just dip the old toe in the water with a small buy rather than a full program.

Regards

Neil

Hi Tom,

And another has fallen over just yesterday, this time Lift Capital has gone belly up.

It is amazing what these companies get up to in their quest to wring every last dollar out of their transactions.

Lift Capital were another margin lender, what I didn't realise is that the stock that the margin loan is held over, as well as it being the security for the loan the company also lends out the shares to others to short sell (for more fees).
So they are making money from the interest on the margin loan, brokerage plus money for renting the shares to the shorters, wow that is definitely stretching your dollar out!

Regards

Neil

Sub Prime Aussie stylee

Despite all the commentators saying that the sub prime debacle was an American issue and our financial institutions were far more conservative that that has turned out to be a load of tosh as one would expect from financial commentators.

Not sure if the news of Opes Prime has filtered through to your side of the pond yet but it is sure rattling things over here.

Opes Prime was a broker to the moneyed set and now it has imploded which just shows that rich people are no more skilled in making money from the financial markets than your average homeless person, they just have more money to lose.

Opes Prime had huge margin positions in tiny speculative stocks. Many company directors had bought their own stock on margin from Opes, and as the market fell they had to stump up more $$ or get sold out.
The only problem was that the liquidity of these speculative stocks was thin and so as the selling began the price plunged and caused more selling.
One client of the firm had a margin position of 140 million dollars and was day trading would you believe. The company hid the margin problems by transferring stock from other peoples accounts to this clients account.

Now the bank that funded Opes, ANZ Bank wanted to get their money back so seized all the stock in the accounts and is now in the process of selling it.
So, if you were a client of Opes, your stock has been taken and sold as the bank had first call on the collapsed company.
They reckon that about 2 billion has gone up in smoke.

Its now coming out that the banks have made many dodgy loans both to companies and mortgage holders, so much for risk management, more like vacant management.

Regards

Neil

Hi Grabber,

Just got back after a bit of a break over Easter, the markets are falling apart gain!
Wow you have almost deployed all your cash by the looks of your table. Is that your absolute limit or can you add more cash if the market heads south again?

I had one auto purchase last week of Specialty Fashion Group (SFH.AX). This is a real slow mover, I've had the stock for about 4 years now and most of the activity has been on the purchase side with only 1 sale about a year ago.

It seems like the only stocks holding the market up at the moment are the mining companies, everything else is flat to down.

Regards

Neil

Hi Clive,
It's been bout 17 years since I left the UK although I do go over to visit family every 3 or 4 years.
One of the big contrasting things that I notice is that in the UK people drive small economic cars that probably do about 40-50mpg so the high price is not felt as much as countries where people drive inappropriate vehicles.
Australia is one of those places. I have still not had an adequate explanation of why people who drive around mainly in the city & suburbs need to drive an 8 cylinder 5 litre car, then have the nerve to whine about the price of fuel.
I drive a small 1.5l Civic and never complain about the petrol price as I fill the tank up every 2 weeks or so.
When I was in the UK many years ago my last car was a Cortina with a 2 litre engine, that was regarded as BIG and had higher insurance and road tax as I remember.

Regards

Neil

Hi Tom,
We have passed our 10th day above 35C, a new record after the 9 day record that was set back in the 1930's was broken.
Big fire danger day as the humidity drops to single digits and the north wind picks up.
It's going to be tough walking back from work on Friday in 41C temperatures and blowing wind, have to be careful.
Each week in my effort to use less environmental resources I walk the 14km from work back home, the hottest I have walked back in has been 37C so this will get just that bit more uncomfortable.

I guess the hard commodity prices are still running because the story around is that China will continue growing on it's own whether or not the USA goes into recession.
I've not got much in the way of resource stocks myself apart from gold, just because it was too hard to predict where prices were heading.

Regards

Neil

Hi Grabber,
You've got it lucky over there with your prices.
Our fuel price is hovering around A$1.45/litre, it's been trying to punch through A$1.50 but no one has dared sell it at that price yet.

Then again I think how lucky we are here that we are paying half the price that they do in the UK.

Travel to these countries and you will rejoice at the prices when you get back

Regards

Neil

Heatwave.

We are into Autumn(Fall for you folks) and in the middle of a heatwave with no end in sight. The temperatures are up above 40C (over 100F) again as they have been for about 8 days now and we are in for another 6 or more days of hot weather. Never had these temperatures at this time of year before.

In contrast the All Ordinaries is decidedly icy for anyone dipping their toes in the water.
Two more stocks were added to the warehouse shelves more Suncorp-Metway (SUN.AX) one of the large Queensland banks was added at $11.25 a better deal that I expected, my order was for $11.48, a nice opening gap down and reverse.
The other was for more Technology One (TNE.AX) which has dropped another 14.5% from the spot I bought it a week ago.

The market is definitely spooked over here despite the reporting season being generally good.
I think everyone is pinning their hopes on the resource sector as everyone is piling in there and as we all know, to make money you have to do what the majority are not!

regards

Neil

Spend or save.

One of the things I looked at while deciding what to do with some cash buildup in my personal account was what returns I was getting on funds.
Reserve Bank interest rates have risen again last week to 7.25%, my bank is probably giving me 6.25% on my online account.
I have a margin account that I'd prepaid interest on at 8.8% last year and the variable rate is now over 10% so it made sense to shift funds from the savings side to the loan side of the books to boost returns by another 4%.
Now I should have no interest payments due until June of this year when I may reduce the loan again.
If you can't guarantee a return on your stocks at least you can on you once area of the portfolio.

Regards

Neil

Dive dive dive!

You guys are giving me lots of buying work to do over this side of the world, I've not had this much activity since August last year and all while I was out on the ocean catching some fish on a bloody hot 39C (probably around 100F in old currency) temperatures.
It wasn't 39C on the water, more like 30C but once back on land wow.

I picked up some shares in ANZ Bank on Friday as the bank shares have been beaten quite badly due to the sub prime problems.
Once again the problem occurs more from the blind side in that ANZ had no direct exposure to Sub-prime but they have exposure to companies that do, so they have second hand exposure so to speak.
I have placed a second buy order in for more ANZ at around $18 for monday and I think we may see some wild markets that day.
So far this week, most of my buying has been in the large cap banks along with ANZ I picked up SUN & MQG.

Regards


Neil

Option Volatility,

I have been scanning the option implied volatility charts over here and it is very interesting.
The volatility is the highest its been in the recorded data I have, now that is only 4 years admittedly but it shows an interesting story that would be applicable at your end.

If you want to purchase shares for your accounts and want to get better prices then selling Put options is a good way, but, you have to pick the time to do it.
That time is when volatility is high as when IV is high so are premiums. I am very tempted I must admit.
Stocks here such as QBE Insurance are selling below valuation and the options are hitting 44% IV where the average over the preceding 4 years has been half that.
The only problem I have is that the contracts are for 1000 shares and so I can't use it as an AIM trade but it could be a way of setting up a new account.

So if you write the Puts you either be assigned or not depending upon the end price but pocketing good premium income on a good blue chip that is well under valued would be a good (but risky due to position size) way of picking up discounted shares.

Regards

Neil

Sea of Red Ink.

3% got sliced off the Aussie market today and not many sectors were spared.
This meant I had some activity in my preset orders.
I had my first sell in Gold Bullion Securities (GOLD.AX), I'd purchased these back in July when the A$ was strong & the gold price had been hammered. It's nice looking back to see where you've come from at the time of a sale.

This sale was almost immediately pumped into a buy of Queensland bank Suncorp-Metway (SUN.AX), this is my second top up this year, the first was at $14.85 & these were picked up at $13.24. The P/E ratio is getting down to a comfortable 10 & that is going off recently released half yearly reports.
I've got a few other buys pending so if you guys go on a selling spree tonight (AIMers will be on a buying spree of course) then I may add a bit more inventory.

Regards

Neil

Hi Clive,

I tend to agree.
I like the higher volatility of individual stocks but as a loss avoidance measure I think you need an upper limit to the amount of funds committed to any one position in the assumption that it could be a total loss.
When I did more of the tech analysis/system trading the rule of thumb was to keep the losses at no more than 5% of a position, preferably less.
If you assume that we are going to hold this stock without stops as we are AIMing it that would mean committing no more than 5% of the portfolio to any individual stock.
So if you have a 100k portfolio max input into a stock would be 5k.
That is more a rule with speculative companies where LDAIM would be the method used.
So if you have a theoretical 10k to play with a stock in a 60/40 equity/cash balance I would start of putting 2k in (LDAIM 1/3 of full AIM) the adding a further 3 buys of $1000 if the price falls, no more purchases after that.
I've so far got 4 out of my 20+ stocks that have hit limits (some failed) AUV,AZZ,NAL,WHN (all with .AX sufffix in Yahoo)

regards

Neil

Hi Undertakr
I am a contrarian, buying the unloved but it can be dangerous and they can be down for a reason, despite what the balance sheet says and the director pronouncements.
I seem to be swaying back to the Technical Analysis reasoning that all the collective knowledge is in the share price (as well as fear and greed) and also the saying that irrationality can more often than not outlast your solvency so being right is no good if you get wiped out.
It would be interesting to see how the accounts at Enron were presented to see if the clues were clear that the company was heading for the cliff of if they had been disguised so that only the really savvy could have picked up what was going on..
After the recent Credit Corp performance my trust in management is diminished.

regards

Neil

Hi Toofuzzy

I have tried to balance my portfolio with more large blue chip shares & I'll place more money int them than the small cap shares.
Typically I'll AIM the blue chips and LD-AIM the Small caps.
The small caps demonstrate more volatility (although that seems to have change and the large companies are showing large swings now).
As always the question is how much do you throw into a falling share.
I think I may add another rule to The Book.
1.As well as increasing the Buy Safe on subsequent buys,
2.The thirty day buy spacing rule,
3.I'll add the no more than 3 buys into the falling price
4.A cap on total funds into an individual share.

Wow is that too many rules.
These will be the ones applied fully to small cap shares and with discretion on the Blue chips.

Regards

Neil

PS hey guys, were you feeling depressed overnight!

While I was out enjoying Meow Meow (strange burlesque cabaret) at the Adelaide Fringe festival you guys were jumping from the high buildings.
If you ever get the chance to see Meow she is great, superb voice & strange habit of wanting the audience to undress her (not totally mind you)

ABC Collapse.

Not sure if it's made the news over there but Aussie child care company ABC Learning (ABS.AX) has become the latest victim of the sub prime fallout.
It had huge borrowings that had been used to buy up childcare centres over here (where it had about 30% of the market) and also in the U.S.
They were obviously paying big prices for under-performing assets and now it has all gone horribly wrong.
The directors were having their share sold to cover margin calls this forced the price down more and caused more selling.
The stock has been suspended now while potential rescue is looked into.
Wow there are land mines going off all over the place, step carefully.

Regards

Neil

Silver line.
There was some good news this week. A sale of some Equigold NL (EQI.AX) at $4.40 brought in a few welcome $$.
One of my other divers Antares Energy (AZZ.AX), I think it is more a case of public panic rather than anything dramatic changing with the company.
What sparked it was a drill result from one of their wells that came up dry, they have producing wells but at present cash flow is negative, the exploration & drilling costs are not covered by the gas sales.
I've held off any more purchases until things become more clear, I'm not going to be a hero
One of my other stocks that had drifted down to levels of concern suddenly burst into life and added nearly 100% onto it's price today. Ceramic Fuel Cells (CFU.AX) announced an order for 50,000 fuel cell units, this put a rocket under the price.
The portfolio had a positive day despite the market losing over 1.5% today.

Regards

Neil

Putting out fires!
Wow what a week. Had about three shares starting to look like they are on a deep dive into oblivion.
I quit out of Credit Corp. (CCP.AX) fearing a total unraveling and collapse. Blew up about 6k, a lesson learned there.
That lesson is, no matter what the fundamentals are saying also keep an eye on the technicals.
I realise they are two camps that stay well apart but you have to use all tools available to minimise losses.
CCP had excellent fundamentals up until the first profit warning, even then a fundamental analyst may say, stick with them, its a temporary problem.
Then, as the market saying goes, profit warnings come in 3's. Warning 2 comes out and the price drops 75% to less than a $1.
This company was trading at $12 back in August.
In a sign of desperation, purchased a small quantity of shares to lower the average cost by 50% but it looks like it was a case of throwing good money after bad.
The shares continued to fall so took the decision to pull the plug at 65c.
Normally I wouldn't have touched CCP with a barge pole after the price started falling but got swayed by the siren call of fundamentals.
I am now waiting for some weakness in some of the ETF's so I can start off a few new programs.

Regards

Neil

Hello Adam,

That is the thing, Credit Corp had a high ROE, consistent dividend payer over quite a few years, increasing equity all without raising new capital.
All in all this is a company that from it's yearly accounts say that it is a growth company and it is going in the right direction.
Now, despite the two profit warnings, it is still going to generate a profit albeit smaller than their forecast (50% smaller).
Now you would think that if a company has forecast a profit of $24M and is trading at a price of over $10 then if it halves the profit then it should be trading at about $5.00, for it to trade at $0.90 seems to be an over-reaction unless there are other things to come out of the woodwork over the next few weeks.
They half yearly report is due out tomorrow.

I am looking into getting more ETF's up and running. We have a selection of around 10 now on our local market.

Regards

Neil

All Ordinaries thrashed again.
A day of red ink on the other side of the planet.
I think the thing that scared the horses was a disembodied voice from the Reserve Bank saying inflation was still on the rise and so interest rates would have to go up again after just rising in February.
We are already at 7% and it looks like we might be going higher by the middle of the year.
House prices seem to be rising faster than ever, up 20% for the year in Adelaide, idiotic.
Paper money must be devaluing at an ever increasing rate, the world powers are doing a good job of stuffing up the financial systems.
Hang onto your gold.

Regards

Neil

Hello Pierre,

This has been a problem now for over a year now as I think Don mentioned & maybe he is correct in that the program is having a problem with data for stocks that have a decimal point in the Yahoo ticker.
That never occurred to me. All I do know is that the program works fine if I download the data from Yahoo, save it as a file then get A.I. to use the file to backtest from.
If it is the decimal point that is the problem I would have thought that Mark could sort that out fairly easily and get patch sorted out.

Regards

Neil

Sliced &, Well Sliced again.

Deep diver alert!!!!!
Funny isn't it how I decided to forgo some of my conservatism when I started using the Stockval software to give me an idea of the valuation of the company I was starting an AIM program on.
The fund managers that run Stockval have a philosophy that diversification is only there for people who don't know what they are doing.
I think after todays episode with Credit Corp (CCP.AX) they will be keeping very quiet about this.
I purchased some CCP just after a profit downgrade, one week it was trading over $10 the next it was $5, I picked some up at $5.50.
Now, in hindsight, had I not been using Stockval and still relying on Tech analysis I wouldn't have touched it with a bargepole. Especially as the old saying in the market goes that when one downgrade is issued the next one can't be far away.
The stock began to fall and I purchases small quantity more at $4.00.
Well the second profit warning came out today and the stock got sliced to 91c by the end of the day, stunned to say the least.
The market is in a savage mood, shoot first and ask questions later.
I think I may start shifting some of my holdings into ETF's now that they have become more widely available over here.

So much for fundamental analysis, it is only as good as the amount of truth in the figures that the company managers release.

Regards

Neil

Hi Tom,
I think it just proves that the Efficient Market hypotheses is a load of bunk.
The reason the EMH doesn't work is that it assumes the market is informed and rational as we know, rationality is the last thing you find in the area of finance.
Anyway, even if there were a pinch of rationality out there.
A person decides to buy a stock on the assumption of some future return.
Each person may decide on a different required return that would satisfy them and so be prepared to buy at different prices and so that is no 'right' price to buy at.
People have asked "Wouldn't AIM become useless if everybody used it" well, assuming everyone bought the stock at the same price and had exactly the same parameters set up then maybe it wouldn't work but the likelihood of that happening are about as remote as a snowfall in Adelaide during February

Regards

Neil

Hi Toofuzzy,
What happened to risk management
I have been very sparing about handing over more cash unless the stock has earned me some nice profits.
I've been sticking to the 30 day rule and even longer with some companies that have no positive cash flow.
It looks like STKL has given up over a years worth of gains, it is at a low point where it got a little support last time so you will have to see if they step in again and arrest the fall.

Regards

Neil

Belted again,

Umm, Aussie market started good, up up and away then, before 11am it decided that things were not as rosy as first thought and it sold off for the rest of the day.
All my green prices slowly started to turn red and by the end we lost 90 points.
There are bears in those woods I tell ya.

Regards

Neil

Hi Toofuzzy,

I used to write Puts on stocks, usually up-trending or range trading stocks.
If I got exercised I would take up the stock and immediately write a Call.
This isn't a bad strategy but you have to ensure the company is not a real lemon or else the written call will not protect your downside by very much.
I used to create synthetic positions by buying a call and put at same price them selling a call and put on either side several strikes away.
I didn't have to put much money up front with that method, the only thing that made it not worthwhile was the brokerage and the crappy market makers who try to rip you off.

I believe I an correct in saying that U.S. options contracts are for 100 shares?
From what it looks like you are trying to do is sell a deep in the money option.
You will find that it won't save you much money as the option is basically acting like the stock itself. It has a delta of 1 which means it moves in tandem with the stock.

You will sell the $15 Put for $9 but have to pay $9 more than the stock is currently worth, it probably has zero time value.

You could sell a call on the stock with the idea that it will expire worthless seeing as the trend is down, not sure what you would get for it though.

Regards

Neil

French Trader,

I hope that French trader wasn't using AIM on the index futures.
I'll be very interested to hear his story. I find it hard to believe that he could lose that much money without anyone noticing in the bank. They must have all been too fixated on their end of year bonuses!
It wouldn't give me much confidence having a bank account with those guys.

Neil

Good result there Tom
Considering the state of the home construction industry over your side of the pond.
I heard on the radio that Adelaide home prices raced up another 20% last year, ridiculous. I don't know why they herald that as a good thing, maybe they think its good as people will take out home equity loans to blow on plasma TV's and SUV's.

They never blow the trumpet when petrol prices hit a new high, imagine that! how about Coffee, highest price ever in local cafe, wow give me laaaarrrgge cappuccino.

regards

Neil