VSA Capital Buy Note, page-24

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gassed

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05/12/18

16:04

Post #: 36760674
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Originally posted by randosmit: ↑

But, its wider than that ...

Maybe they've invested in LKE using Margin Loan money based on a company in the ASX which is heavily affected by the US / China trade war.

Suddenly their other company drops in value, causing their margin loan to be called to maintain their margin (often 65% based on CommSec numbers). Then they have a very small time to find the money to repay the difference on the margin loan.

If they've spent their loan on LKE, then maybe they need to sell LKE in order to cover their loan requirements, but, the market is in a bad state meaning they will not get a good price on LKE, and their sell in LKE may be large enough that it could cause a drag on the Share Price.

Maybe also, the US / China trade wars might affect the future sales prices of Lithium, pushing up the costs and reducing profits. Reduced profits would also have an effect on the share price as the company is no longer as valuable.

In simple terms, the share price of a company is based upon the future value (and profits) of a company but discounted by the threat that it wont happen (there's more to that but you get the point).

Maybe the risk is that larger Chinese companies will be hurt by the US trade wars, and therefore don't have enough cash to spread around their potential suppliers. In this scenario who would the Chinese company drop their funding for? Would they drop SQM or Livent? Both already producing? Or would they potentially halt investment in smaller startups like LKE reducing the chances of LKE even getting started.

Maybe China is affected by the trade war and it reduces how much Lithium they're going to buy, now the market is flooded more and Japan and Korea can buy more at a cheaper price.

I think you may already understand where I'm going with this.

The US / China trade war does affect LKE today, and will in the future. We live in a global world and the effects of others can reach farther than you might first realise.

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All true, but, I'm keeping it very simple, the relatively small volume these last two days, strongly suggests that the sell off isn't any more sophisticated than short term punters jumping out ASAP. In saying that, when (not if) this volatility settles and Steve comes out with all the news, they'll be back just as quickly, but, having to pay a bit more for that short term "peace of mind". IMO, just further great opportunities for the true believers in Lake Resources and their 4 projects. The perfect example of the KISS principle!!!

LKE Price at posting: 10.0¢ Sentiment: Buy Disclosure: Held
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