AMR and Steve
AMR quote explain further
From a TA perspective (within NZ-small finance company sector) the Elliott wave principle is showing wave c which is better known by ordinary investor as capitulation (same in Financials USA). This is the damaging last half stage of the bear cycle, which gives the investor the feeling of doom and gloom, despair and no hope. This is exactly the stage what is happening on this NZ-SF sector at present. To the broader market overall the bear cycle is not at this stage yet. It could be possible (not known yet) that the overall market may suffer a teddy bear cycle and capitulation maybe shallow with only certain sectors taking the blunt end such as the small finance companies...or a nastier (grizzley) bear may emerge later using the self feeding demise into other economic sector areas. eg Recessions
My view on this is that the financial sector was the trigger to ending the bull market in the USA. In NZ we have had financial problems on a small scale all throughout 2007 as we are well aware by looking at the stress of the local finance companies, however the lag effect prevailed and compounded by USA it was as late as (August)November 2007 that the tide turned for NZ Inc. As this financial problem in NZ is now a year old the big damaging shake out is near the end and the surviving Finance companies have now developed their new strategies of doing business in an altered financial landscape, and it is only the investor perception (doom & gloom) which will take some time to return to normal (confidence). There may still be collapses of weak companies but I personally think we know which of the companies are survivors. Chris Lee's latest summary gives a good indication as to the health of these companies he is in constant contact with.
When to return to the battered small financial markets is up to the investment strategies that each individual investor uses as well as their psychological makeup.
At present the "perceived" risk is huge, real risk is less but is unknown as to what degree. (Note: At Phase 3 of a Bull market "perceived" risk is low real risk is high)
Many investors nowadays are using TA and await buy signals therefore lessening the risk. The problem with this is with illiquid shares especially in the SF companies is when buy signals emerge there will be a sudden lift in share price and many may miss their ideal re-entry price.
Steve..The likes of Byrnes at DPC, Rod Duke and Alaister Wall at PPL, Jan Cameron at PPG, and countless others under the radar are taking an investment strategy approach of invest now to maybe lose some money but reap a much bigger reward later. For us smaller investors it must be remembered that Cameron Duke and Co are buying large chunks of shares in low share liquidity companies, only possible to do so at certain times. However by using this strategy you don't miss out.
Long term investors (e.g Hoop:D) who saw this bear coming and got out early will also be looking to buy back their portfolio before the buy signals start firing. It all has to do with how much risk you are prepared to take when timing to re-enter.
Those investors who are riding out the downturn, the SF sector bear cycle is probably at the stage where it would be foolish to jump ship and sell now. You have decided earlier to take the long term view of holding and that discipline must be heeded, especially now at this later stage. Buying to average down may be premature.
AMR + Steve.....There are cycles within cycles, many at different oscillations and frequencies. With Byrnes, he may be thinking the worst is over in the SF sector and it is time to buy up amongst the carnage, DPC is as cheap as chips.
Personally I must admit DPC DFH and NZF are all looking extremely attractive FA wise, but I am still undecided about the re-enter timing. (How much risk to take buying before the TA buy signals).
Note: My buying before TA buy signals strategy only apply to illiquid shares...liquid shares (eg FBU) wait until TA buy signals)
Been in and out of DPC since 1998. Bought /sold DFH 2006-2007 (+50% profit)... Both on my watchlist.
AMR hope this explaination helps.
:)Hoop