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I don't believe it.
After this weeks trading on the Nasdaq & Australian specs and no-one says anything.
Read an interesting piece that insinuated that the Nasdaq (after its 600 pt fall in a couple of hours) was propped up by the American Govt. through Merril Lynch and (forget the other one) , obviously to prevent further freefall, mass panic & losses and all associated ills.
In case anyone is interested, my bag of techs & specs lost about 30% from thursday to wednesday dinner time and have regained about 27% back since then. Mind you helped out by a bit of good bottom fishing with the 20% I had in cash.
Thank you KRZ up 50% in 2 days.
KRZ - Indonesian oil production and exploration with solid cashflow looking at tech opportunities. Bought the oil operation cheap when oil was $10 a barrel.
www.kalrez.com.au
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>>I don't believe it. <<

I believe anything... remember the philosophy here is long term buy and hold...

>>After this weeks trading on the Nasdaq & Australian specs and no-one says anything.<<

The inverted yield curve on Friday last week meant that at 3.45pm I phoned my broker and bailed on everything at market. If the Fed's are continuing this tightening bias with a 0.25% further increase than I see a lot of storm clouds on the horizon.

Also I see the recent action overseas as stupid!

>>Read an interesting piece that insinuated that the Nasdaq (after its 600 pt fall in a couple of hours) was propped up by the American Govt. through Merril Lynch and (forget the other one) , obviously to prevent further freefall, mass panic & losses and all associated ills.<<

I read that then discounted it, as the US Mutual Funds were all holding on average 15% of reserves in cash (one had 48%). Now these are BIG funds and when they buy, they buy big. The buying would be more attributed to them taking up good valued income stocks. Tech's which rely on capital growth will be given the flick shortly as the inverted yield curve indicates troubled times ahead and the majority of investors will be heading for blue chip income stocks.

>>In case anyone is interested, my bag of techs & specs lost about 30% from thursday to wednesday dinner time and have regained about 27% back since then. Mind you helped out by a bit of good bottom fishing with the 20% I had in cash.<<

If you do not retain a portion in cash to average down then you would have hurt a lot more. Notice gold stocks did extremely well? ... no ...
Oh well one more diversified investent call fell on deaf ears. I think future IPO's will be very cautious in future.
Beware the dead cat bounce though! It may froth and gurgle along yet the implications are that the market is touchy and investor confidence is not all that high anymore!

Remember sentiment in markets can change in an instant. When it ropes in all surplus cash a 'de-wealth' effect can be created by a market crash.

Maybe Greenspan wishes this to be the case for the short term.... who knows!
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Don't worry about me John, I am diversified, even if on the high risk side.
I am 15% blue chip,5% cash, 80% spec at the moment.
BUT I consider my specs to be very good prospects and very well diversified but weighted towards resources because of the miner dotcom syndrome.
Amongst them I have oil, gas, diamonds, silver, nickel, gold x4, gas engine conversion,B2B x2, telecommunications (one with strong revenue and profit),a net portal, strong links with undersea communications cables plus a bit more.A couple have been sold down so that only profit is sitting there.
I own property and half my house, have a decent amount in super for my age and am about to have 2 incomes again when my wife starts back from maternity leave.
I could still put food on the table if the bubble burst tonight so I figure it's worth a punt to use this way to build up my blue chips.
All the same, appreciate your input and agree with nearly everything you said.
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Demiller1,

Can you please explain what you mean by "the inverted yield curve" & what its significance is.

Thanks.
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Inverted Yield Curve

Their is an old saying that "Every time there is an inversion of the yield curve, problems have followed."

I would pay more attention to the yield curve than anything else in monitoring economic activity.

The big problem with an inverted yield curve is that it puts pressure on financial intermediaries such as banks. This, in turn, puts pressure on the financial markets. All hell broke loose in 1998 when the long bond yield fell below the then 5.5% federal funds rate.

Banks borrow short and lend long, so when short term rates are higher than long term rates, it squeezes their profit margins.

The stock market tanked in 1998 when the long bond's yield dropped below the 5.5% federal funds rate.

We probably would have had a recession if the Fed had kept the federal funds rate at 5.5%, but it didn't. It dropped it to 4.75%, equities recovered, and there was no recession.

In the early 1980s the Fed was faced with the problem of double digit inflation. The solution to the problem of double digit inflation, unfortunately, required a recession.

The discount rate on 91 day treasury bills was above the long bond rate from October, 1980, through September, 1981. The 1981-82 recession followed.

Wednesday the long bond closed with a 5.80% yield, above the 5.75% federal funds rate. Two, five, and ten year treasuries all yield more than the long bond. Sometimes the one year treasury bill yields more than the long bond. We are close to the edge, but not over it. Today the Fed is trying to slow the economy down, not cause a recession.

Remember that we have had two crashes in the last century, 1929 and 1987.

In September, 1929, the discount rate was 6% and the long bond was at 3.7%. The discount rate was 230 basis points above the long bond rate, putting the squeeze on the borrow short, lend long crowd (financial intermediaries). The stock market crashed the next month.

At the end of 1986, the DJIA was 1895.95. It subsequently went up 43.59% to peak at 2722.42 on Aug. 25, 1987. The market crashed less than two months later.

What broke the market was the drop in bond prices, resulting in the long bond yield rising by 200 basis points.

You had a sharply rising stock market coupled with a declining bond market. It was not a stable situation.

I would be somewhat bearish right now. The long bond is now 20 basis points below the Fed's 6% federal funds target rate (the Fed rate being 5.75% with a tightening bias to 6.0% predicted).

In 1999 the Dow rose 23.35% from its 1998 close of 9181 until it peaked at 11326 in late August. Currently it is around 11100. Bond prices have dropped this year resulting in yields remaining static. The rise in stock prices and decline in bond prices this year is not close to the size of the moves made in 1987 prior to that crash.

Mind you, in 1987 you did not have an inverted yield curve. My premise is that they diverged too much in 1987, setting the stock market up for a crash.

In 1994, the DJIA went from a 1993 year end close of 3754.09 to a 1994 close of 3834.44, an increase of 2.14%. The long bond went from a December, 1993, average yield of 6.27% to a December, 1994, average yield of 7.97%, a rise of 170 basis points. Stocks and bonds moved in different directions in 1994, but not to the degree that they did prior to the crash in 1987.
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