Ausheds - Yeah if you had the convo over there it would pretty soon be taken over with name calling and Malaysian politics of which I think we have all had a gutful. Lets hope we can get it back on track soon.
Jan - The market is always right and that covers your examples perfectly.
Both of your cases are correct because the item has several levels of value however what it is really worth is what someone is willing to pay for it given you want to exit the asset and someone else wants to take it on, its a bargaining process..
You may be lucky enough to get 2M for that 20 turner however the buyer will have to find 2m in value from it otherwise they have other options to purchase the same utility elsewhere.
And thats all an asset provides - utility.
Same with this share really isn't it? You purchase a share because the asset provides utility at the end of the day and you seek to gain from that utility.
The market is right about Lynas. Sure there is future value however we live in the present, here and now. When Duncan is developed and comes online that will allow the company to realise more profit from their underlying assets and that will be reflected in the SP when it is developed however at the moment it is not.
The potential is real however the market is not going to pay you a premium for future potential because there are other investments out there right now that are more attractive AND once the value of that asset comes online it can be purchased anyhow with someone else holding the share tying up their working capital until then.
The idea is to allocate your capital to the most productive asset.
And yes Posiedon was worth .80 in 1969 and yes it was worth 200 in 1970 because the potential in the assets was unlocked allowing that utility to become realised which in turn allowed investors to value the company at an increased price.
The market is right about Lynas currently and as the potential in those assets is unlocked and able to add value then the SP will revalue however right now -62.5c...
How does that relate to charting ?
Well it does because the chart is showing us the psychology of how the market is valuing the company. Remember the market is all buyers and sellers for that asset.
At the end of the day the price / spread and volume is showing exactly how the valuation is changing in real time and it works the same for shares, currency or soybeans in fact anything that is of value and traded in a market.
Thats why those whom say TA is not all it is cracked up to be are plain wrong because TA is studying all of the factors that are relevant to the company, for a trade to take place the buyer has information and the seller has information and that information is how they set the value for the exchange.
Multiply that by each single share traded during a session and you are studying millions of interactions.
The information contained in those interactions is complete whether it be RE prices, production prices, global demand etc.
Even if someone has insider information and they trade on it, that is contained in the trading patterns for the day.
And it sits there in the chart - if you can interpret what is going on.
And that is why the market is right. Nothing is undervalued or overvalued because at the end of the day 2 parties, a buyer and a seller, have to come to an agreement on fair price and there is no information asymmetry in the price they set.
Understanding that psychology gives you information that allows you to make better trades and that is why we are here, to make money yeah?
I challenge anyone to say they are not investing to make money and further you are investing in this company because you feel it will provide a better return than the other range of investment options available.
You want more for your shares, fine we all do.
Will Mr.(Mrs.) Market pay it? No. 62.5c and if you don't take the offer then someone else will until it reaches a price thats acceptable to you or you find another more attractive option for your capital allocation.
However he (she) is right. Always.
Does that answer the question.
LYC Price at posting:
62.5¢ Sentiment: LT Buy Disclosure: Held
(20min delay)