Forum Archive Index - March 2003

["Lazy Haggis" <lazyhaggis@hotmail.com>]

MacDunk says to use common sense in studying the market as opposed to total 
reliance on mathematical systems and charts. Right now the way the world is 
heading, and the possible global ramifications (economic and more) that 
could follow, to use common sense would appear to be sound advice, and 
advice that could easily be justified to overrule any forms of technical 
and/or fundamental analysis.

For example, the outcome of the US/UK Iraq war situation is unknown, albeit 
many have their opinions. The result of a split in the UN over Iraq is 
unknown. The final North Korean result is unknown. Pending terrorist threats 
and actions are unknown. And, there are several other serious unknowns that 
can be added to this list right now.

To use technical analysis or fundamental analysis on any stock anywhere to 
predict how the unknown result of the above would affect that stock would be 
foolhardy. Common sense would dictate that there are many other geopolitical 
factors to consider.

After the US started to withdraw from Afghanistan one of the first things 
they announced was the introduction of steel tariffs amongst others, even 
against their strong supporting allies. Now the US allies seem to be 
becoming less and less. Common sense dictates "watch out" for after the 
event.

Anti-American sentiment around the world is growing, not only amongst the 
friendly nations, but even more so now amongst the terrorists and rogue 
states. This anti-sentiment is also directed at the UK and Australia, but 
not to the same degree. Common sense clearly dictates "watch out" for future 
retaliation against these nations and their icons.

Given a nasty but quite possible scenario, common sense would suggest that 
the following could easily occur in New Zealand and negatively affect many 
stocks.

The US could retaliate against NZ (in trade terms) for their ongoing lack of 
military nuclear co-operation (not allowing US nuclear vessels in the 
country) and lack of support for the Iraq war. Terrorists are likely to 
strike US/UK/OZ interests worldwide, which could easily affect airlines, 
hotels, casinos, public transport, and clubs. Common sense dictates that 
tourism and associated stocks could easily be savaged.

US icons and franchises such as fast food outlets (globally) will almost 
certainly be targeted by terrorists. Common sense dictates stocks involved 
in such trade could also be easily savaged. There are many other 
possibilities, and many other stocks which could suffer. If and when it 
happens is anyone's guess, but it's certainly outside of the realm of 
technical and/or fundamental analysis. If it does occur it will be quick and 
practically overnight.

Common sense (and prudence)  would certainly suggest that having money in 
the bank rather than in stocks right now, may prove to be very wise in the 
coming months. In addition, common sense also would suggest that many other 
stocks will suffer if the US stockmarket continues to slide, and also when 
the compounding effect of all these unknown situations start to crescendo.

Lazy Haggis

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