re: showdown Debono,(1st off I do recomend the series SAHARA on...

re: showdown Debono,

(1st off I do recomend the series SAHARA on ABC 7.30 Sunday night , check it out if you are in front of the TV.)

In my opinion you have hit upon a generational change in the way people make / lose money on the equities market.
I think to an extent it would be dangerous to expect markets to behave as they have in the past.
Have posted several times on the shortening of transaction times which have become apparent over the last 3/4 years.
This general tendency for generic trading as opposed to investment has been brought about by a watershed change in the economic buttons that dictate investment.
Investment in equities has shifted from fundamentals to short / medium term momentum trading (up or down) with investment parameters one would find not out of place in a casino.

The reasons for this are simple to understand;

It revolves around the new concept of self funded early retirement for the masses in the western world. We are living through the beta vesion of this concept and the markets are behaving accordingly.

1) Liquidity is at levels never seen before and growing. (By liquidity I am just not referring to cheap money re low interest rates but existing wealth, superannuation etc)
2) Level of competition for this liquidity within the investment industry especially in US in very high.
The very industry itself (financial services) as gone from a satellite industry to a major industry player virtually within 2 decades.
3) Economic indicators for this liquidity currently are pointing to equites , with current interest rates all other options are ruled out as potential returns will not support the concept of mass early self funded retirement.
4) Technological change has behaved like gasoline to a fire in respect of the above.

Against this tide of money is traditional valuation models which are suggesting equity valuations are way too high , dont make sense and we are all going to die.
This has promoted the very powerful mindset (correctly so) that equity markets are overvalued and must come down.

The result is very high volatility with the emphasis on short term trading to lock in short term profits for funds to compete within the financial arena.
We are talking 100's of thousands of jobs on the line.

This will only be allievated when interest rates rise and other asset classes begin to soak up some of this unparalleled excess liquidity and only then to a small extent.

Times they are a changing.