So the LESSON in summary:
1. Never TRUST your broker's recomendations, EVER!
2. Success in the market requires a correct reading of market psychology (crowd behaviour). When the market is popular (e.g. during the safcom IPO, it is best not to invest). This is because extreme optimism usually happens at a market top. i.e positive social mood causes people to over-value stocks leading to high prices.
On the other extreme, you should consider investing when the 'news' or 'fundamentals' appear at their worst. When Safcom was below 5 bob everybody was shunning the stock and more people exited at big losses.
Safcom is now at its peak, alot of people are buying in.
Remember the tag: Buy when there is blood on the streets.
This discussion is important because it leads us to ELLIOTT WAVE PRINCIPLE.
Study the chart below to see the progression of a market from bear to bull.
The stock market is a popular valuation of the productive capacity of a people. It shows the progression from the extreme pessimism to extreme optimism in three waves of progress and two waves of regress, over and over again.
Quote:Charts tell the truth
, Prechter.
Conventional thinkers waste time building shelters when they are unnecessary and then have no shelters when they need them the most. Socionomists do the opposite.