RR Phantom
Location : Wasted Space
Job/hobbies : Cayman Islands Actuary
 |  Subject: Funny: Take aim or prepare to die on the market  Sat Aug 21, 2010 8:01 pm | |
| There is a saying, or did I just make it up? Put three economists in a room and you'll get five opinions. Something like that. It is certainly true in the sharemarket.
When you've been around long enough you learn that there are at least two sides to every story and, given the experience, you could pretty much find a reasonable basis for buying or selling almost every stock at the same time and at all times. Take Telstra for instance.
A great stock:
Free cash flow of $6.2 billion last year;
Going ex-dividend 14ยข on Monday;
Yields 9.3 per cent fully franked;
Yields 13.2 per cent including franking;
Highest-yielding stock in the ASX 200;
Cheap on a PE of just 10.7 x a 20 per cent discount to the market;
19 per cent off its year high;
Bottom of trading range.
Or maybe not:
Earnings will fall 5-10 per cent this year;
It is only on a 20 per cent discount to the market until the next downgrade;
Free cash flow will fall by a third next year;
One day there will be no fixed lines. It is 23 per cent of its revenue;
The share price trend is down in the short, medium and long term;
It yields only 9.3 per cent on a maintained dividend. Some forecast a cut.
Scary, isn't it? But it's implicit in a market, especially something with a pricing mechanism as efficient as a sharemarket, that price represents the equilibrium of all the actions of many people with many different views.
It is even more obvious when you consider that the ''matching'' mechanism of the Australian sharemarket requires a seller for every buyer and a buyer for every seller. The sharemarket is a competition between your views and the very differing views and agendas of thousands of other people. People who are anonymous, people who are not like you, people who are under no moral obligation or duty of care.
The sharemarket is anyone and everyone and you are a target for them all. Whenever you buy or sell a stock in Australia, someone is doing the opposite. They are your competitor. If they are right, they access your super fund. Your cash management trust. That money you borrowed against your house that is already mortgaged. And there is nothing to stop them.
In the sharemarket, taking money off fools is expected, taking money off innocents is applauded and ruining the lives, retirements, school fees funds and futures of families is an accepted, no-recourse "casualty of war". And you idly accept it as bad luck or "an education" when they succeed.
The market is a battlefield and if you read some of the more (and less) famous accounts of traders that's exactly how their stories read, like war stories with each trade a separate battle, not just against "the market" but against their own weakness, temptation and foolishness. Each skirmish remembered in vivid colour, each hard to forget.
But read their conclusions and you will also realise that in order to survive you have to work hard. Apply yourself. Develop detailed plans and strategies to keep yourself alive and construct systems that are tested and improved and in perpetual development. You have to know ''why'' you are doing what you are doing and enjoy learning ''how''.
Yet so many of us, invited by some sexy bit of technology that allows us to simply click past all those disclaimers, go wandering naively on to the battlefield without knowing anything. We have rifles, in some products howitzers, but we are not soldiers.
Bottom line: the sharemarket is a business and has to be treated as such. When you boot up that trading screen you open the door to your bank account and the only guardian is you. Arm yourself. Learn to trade.
Or better still, don't. After all, the richer you are, the more leveraged you are and the dumber you are, the better it is for the rest of us.
ANCAPS: ANARCHO-CAPITALISTS |
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