Elixirnaires Lounge, page-266

It'll get there and be a great Australian company, but does the price move around on it or what? One of the downsides as any company gets bigger and enters into different parts of the ASX (ie 200 or 300) is the presence of continuous machine trading and shorting - the former being a minor issue for us and the latter not a problem at all (currently).

Generally I try to avoid being sooky about either (which indicate the presence of professional market participants) because it doesn't achieve anything, and it's pretty well impossible to understand how or why they're doing what they do. One thing you can always count on is that they're trying to make money. There's another company again that I hold where people on Hotcopper were making pejorative comments about a particular fund and suggesting they were deliberately driving down the share price. The CEO of the fund responded personally on the thread and pointed out his fund was a major holder, their job was to make money for the holders of their fund - and why on earth would they deliberately try to make the price go down?

I suspect we'll see some similar roller coaster adventures with EXR as the price does crazy things, like head to $4, then back to $2.20, then back to $3 (sound familiar @westsurf ) and none of it for any fundamental reason. In fact, all that's happened is the fundamentals have improved and de-risking has been on-going. I suppose QGC saw a similar pattern as well.

The trick is to see through the noise and the games and hold on with the end in sight. If the price takes a dip try and understand why. Is there a fundamental reason why the price is falling? Has some risk appeared on the horizon, timelines slipped, are management setting of the bullshit detector? If the answer to those things is no that's where I find TA quite useful. It can usually show you the SP is going through a period of profit taking, and weaker hands selling out.

Not being spooked is easy in theory, less easy in practice, but it truly is the key to wealth creation. You can even accelerate the wealth creation further by increasing your holdings in the dips.

I know we all sometimes think we're at the mercy of the market, but truth is we have some advantages over the professional market participants and my particular theory is to exploit those advantages.

1. We can deeply understand individual shares (particularly small caps) that are not even on the radar of professionals.
2. We're playing with our own money. We don't answer to anyone else, we decide when to buy and sell.
3. We don't have to panic sell because a bunch of holders of our fund lose their nerve and want to get out - matter of fact that's often the time to buy - and we can!
4. We don't have to rebalance. If we find a winner we can ride it out, even if it becomes disproportionately large.

Also I think we sometimes give the professional market participants far more credit than they're due. They get it wrong ALL the time. Remember those predictions about housing prices? What about the unemployment rate? What about the length and depth of the recession? What about the predications of the price of APT (which I dont hold) for example, or their guesses about Iron Ore.

Fact is they don't have to get it right all the time, just more often than they get wrong. In that sense their business model is like a casino, to make money they rely on turn-over and margin.

We shouldn't try and emulate them because most of us retail investors are relying on our smarts to pick the right companies - and then relying on our nerve to hold on with a clearly defined target in mind. For EXR that's a medium term rake-over. For a company like PNV that's growth (hopefully significant) and dividends. Take a look at your own portfolios. How many professional funds have outperformed you over the last 12 months? Bet it's not to many.

As for CGT, at least most of it will be discounted by the time of a take-over. Whatever I make in the super will be taxed at 10% and everything else will be about 25% - sadly no avoiding it.