It is still the silly season, folks. Definitely time to sit on one's hands, pour the last of the festive plonk, and watch the stock market's shenanigans from a safe distance.
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You know when the market drops by more than one per cent one day and rebounds the next, only to fall just as sharply on day three, that the investment industry is guessing more wildly than usual. Exciting times for day traders, perhaps, but a bit of a worry for rational folk.
Some of the price swings are little guide to the real value of a share, because volumes over the holiday period tend to be low and in times of uncertainty even lower. If it looks as though the market is falling, buyers hold back hoping to get a better price later: sellers hold back and hope for better weather.
Automated stop-loss orders also tend to accelerate price falls, especially if there are few buyers around.
By the end of last week the stock market, as measured by the all ordinaries index, had fallen nearly 13 per cent over the past four months. The current volatility may indicate those who think the fall has been overdone are beginning to get the upper hand.
The Punter, however, is far from convinced that it is time to jump back in - with one exception. Gold - a traditional safe haven - has been remarkably flat but appears to be on the rise.
On Friday it touched the $US 1,300, up from a low of $US 1,176 in September. That's good for gold miners, and the recent fall in the Australian dollar multiplies the benefit. So the Punter has picked up 25,000 shares in Musgrave Minerals (ASX code MGV) at 9.7c each.
The company confirmed a significant gold find at Lake Austin North, in WA's Murchison region, last month, and had no trouble placing $5.5 mln of shares at 9.2c to finance the project. Results from further drilling are expected this month, which may stimulate interest in the shares.
- The Punter has no financial qualifications and no links to the financial services industry. He owns shares in a number of companies featured in this column.