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This is how I understand it, people have their computers to automatically buy or sell stocks when certain parameters are met,
basically when such and such stock hits $1.06 sell
then on occasion like 2008 if there is a glitch it triggers a response and the result looks like this.

 

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hay con, i think its important to get back to first principles.

2 things dictate a shares price, the companies earnings/profits per share and the number of people buying and selling into the market (this is influenced by psychology greed/fear and demographics).

common sense often goes out the window and the managerial bureaucracy who run public companies are not so interested in their profitability as in "expanding' the company. growth is fine but sometimes its better to stick to the knitting. (see brambles disastrous expansion into europe, harvey norman into eastern europe, leightons into europe, etc etc)

its fairly obvious which companies will always be profitable...coles and woolies , i could get my jack russell on the board and they'd still make money. so buy for the dividend.

its fairly obvious which companies should be brought and traded. bhp, rio, etc. their share price goes up and down in tune with the mineral prices. no point holding them long term,. get in get out and keep repeating the cycle.

the bigger problem is demographics. their is simply a mass accumulation of shares occuring at the moment as super funds are buying like crazy as the boomer bubble works its way thru its highest earning years. and lots of buyers means inflated prices. as this bulge retires and starts to draw down its holdings there will be massive selling pressures and far fewer buyers. this , should, if my predictions are correct cause a fairly bad period of stagnation. i think you can see this is japan a;lready where the aging population are simply net seller, not net buyers. (though japan has a lot of public debt problems) i think japan will be the first of the big economies to fail. that should get the market down.

just re, how out of touch the game has become, i read about a hedge fund in the usa who spent millions running high speed cable thru a mountain to give them a few nano seconds advantage in their trades. when the disengagement between what a share market is meant to represent and this sort of behaviour has got so bad , it will merely serve to amplify the ripples. should be interesting mate.

you always have plenty of carbs to eat on your farm :D :D
 
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