Here here @Randy

I believe many of us have been feeling that sort of pain lately, to varying degrees. There is some comfort for me in knowing that others are facing similar challenges.

For me the psychological challenges that investing throws up are of great interest. Dealing with the psychological elements in productive way are my greatest challenge. I'll let you know when I work it all out.

Its great to be able to discuss this stuff with you all.

Thanks for getting into it @Randy. Its important.

Firstly great article this week @Strawman appreciate your own real life examples.

crazy week. Actually crazy last few months. For myself with the crash of the USD and most my earnings and free cash in USD, the crash of bitcoin (my largest holding) and the crash in tech which makes up the majority of my portfolio it’s been a battering time and psychological pain.

For me I have used this time whether rightly or wrongly to top up high quality stocks in particular PME, WTC, TNE plus a few small cap stocks which I have been able to increase my holdings. I do believe that this is not the end of tech and if anything I am in the camp that AI will over time benefit companies with large MOATS. Hopefully I have timed this right. But I wouldn’t be surprised to see more pain. I don’t see the catalyst at this stage for the change outside of strong earnings.

I have seen the comparison of this to the GLP drugs and resmed. You can see a straw where I spoke on this in length and loaded up on RMD when it was down at $20 making it my largest position at the time by some margin. I started buying this at $24 as it kept going under $20. At the time scary but in the end a good outcome for me. I work in the health field and use peptides for clients, many of which are unknown to the public. I have a huge understanding of these (and believe they are the future of medicine without a doubt) but knew that the first version of GLP-1s were beneficial for some people but came at a cost to long term health. I am aware of new ones which look far more promising in research now. To link this back I see the threat of AI in similar fashion from my perspective. I see good companies using this as a tailwind and not so good companies being disrupted. I could be wrong, I hope I am not. I am generally an optimistic person.

Just adding to your nice synopsis there @Randy , in times like this Mr Market goes off his medication and acts completely irrational. Wikipedia sums up Mr Markets Manic-Depressive behavour as: https://en.wikipedia.org/wiki/Mr._Market

Mr. Market is often identified as having human behavioral manic-depressive characteristics,^[2][3][11] he:

1. Is emotional, euphoric, moody
2. Is often irrational
3. Offers that transactions are strictly at your option
4. Is there to serve you, not to guide you.
5. Is in the short run a voting machine, in the long run a weighing machine.
6. Will offer you a chance to buy low, and sell high.
7. Is frequently efficient…but not always.

This behavior of Mr. Market allows the investor to wait until Mr. Market is in a 'pessimistic mood' and offers low sale price.^[15][16][17] The investor has the option to buy at that low price.^[1][5][16]Therefore, patience is an important virtue when dealing with Mr. Market.^[1][5][16]

End Quote

The unusual thing about this event is that Mr Market is serving up an opportunity to sell some overvalued stocks at a high price while at the same time discounting others to extreme lows.

When Mr Market forgets to take his medication I get a little excited. I am generally more active trading on days like Friday than when he is euphoric about every listed business. I have a list of great tech businesses on my watchlist and rather than trying to pick a winner I’m taking a slice of each. Not all will be winners, but neither will all of these be losers. I don’t know how AI is going to impact SAAS, but I’m taking a bet that it will be like coal miners are now. I think they will all have some time to run. It’s possible that in 12 months time we’ll be wondering what all this fuss was about with AI and the threat to SAAS business. I don’t know but that’s a distinct possibility,

Anyway these are interesting times and I see this as an opportunity to reassess your portfolio and make some adjustments while Mr Market is off his medication.

Hi @Rick - yeah he's a bit spevial Mr Market ... but to your point perhaps the most interesting times are when he's stopped taking his meds.

To your point about the AI disruption of SAAS businesses - not sure if you caught it, but fantastic article in AFR today on this - interestingly partly from the viewpoint of an experienced programmer, then secondly from some fundies on their take. Well worth a read.

https://www.afr.com/technology/ai-s-latest-penny-drop-moment-hit-markets-it-should-scare-all-of-us-20260205-p5o00b

In particular to your point re whether this is over-hyped or real (and thus maybe going tech SAAS stock shopping) - the following take resonated a lot with me:

**********************?*

Veteran fund manager Nathan Parkin, head of equities at Australian Ethical, is already hunting bargains in beaten-down ASX software stocks.

“This is one of those crises where there’s just indiscriminate selling, and we’ve seen that before,” he says, citing the overestimation of the impact of Ozempic on Australian shares a few years ago as a perfect recent example.

Parkin still sees value in software companies that perform an important task, that handle sensitive data, and when the costs are low relative to the value involved. Property software group PEXA, which handles the vast majority of Australia’s property exchanges, is a good example: the data it handles is vitally important, and the cost of using the service compared to the size of most transactions is tiny.

He also likes small business accounting software provider Xero. How many business owners will be prepared to trust their important financial data, which is handled by the tax man, their bank and other regulators, to AI?

“Our view is that you’ve got to be a bit more picky,” Parkin says.

******************************

As a small business owner myself - i would be highly dubious about feeding my financials into AI engines to do my accounting or a property transaction full of highly sensitive personal information.

So perhaps these are the SAAS type businesses with a data privacy/sensitivity moat?

Food for thought!

Interesting AFR article Randy! - here's a link to the full article btw.

Another take on the SaaS panic from some venture capitalists on the 'All-in Podcast': https://www.youtube.com/watch?v=wTiHheA40nI

I hear ya! Unless something is really wrong, my mantra to get me through is: JUST KEEP BUYING! My future self usually thanks me for it (but not always:-)

Stay strong @Randy

I've put some thought together for tomorrow's email on exactly this struggle.

I am with you and feel your pain @Randy

It is exactly days like this and the preceding weeks that we find ourselves few in number and offered the opportunities that small caps offer. 

This is the price of market beating returns, the ability to endure the volatility – no free lunches, it’s hard, dam hard – the thing people who don’t invest fail to give credit for when they say you got “lucky”.

Luck is important, but it’s the choices we make in the face of that luck and to capitalise on it. Our ability to stay focused on the long term is what guides us and is where we ultimately find value and wealth.

I to struggle seeing my portfolio move more in a day and sometimes minutes than I would previously earn a year. So think in % terms, think like a portfolio manager and focus on the underlying companies not what the marginal trade of some meaninglessly small amount of the company assumes it’s value to be.

We are with you and know the score.

Today we may feel the pain, but know it’s the price for the pleasure that will follow.

Stay strong.

Then future self usually says "why didn't you buy more you Idiot!!" It's been a hard month, I have been deploying capital into company's I find are great businesses that have been on my watch list just watch them drop again and again.

There lot opinions on where goes from here. Sometime best thing to do if you're unsure is do nothing. I personally taking this as buying opportunity. If you can endure pain in the short term, you can win big in the long term.

“The real key to making money in stocks is not to get scared out of them.”

— Peter Lynch

Hope that helps @Randy

@Randy , if it is any consolation, i have had my worst week in a long, long time, worse than the infamous Trump Dump. I'd have to search the records to find a worse week, but cant be bothered. Only 3 stocks up RMD PNI, and LOV. But it is hardly small caps, i wouldnt call MSFT a small cap for instance -9%, or REA -11%.

There is a sniff of real fear; uncertainty breeds fear, often it is worse than knowing a bad outcome.

i find solace in knowing my companies will survive, I dont have much or any crap, valuations are now reasonable to good, im not a forced seller, and it could be worse i could be leveraged into BTC (that's a joke).

Find something to take your mind off it, like a stiff scotch or a glass of good red. lol

The only other thing i would add is that i do use these drawdowns to concentrate the portfolio, with no or low tax consequences, ie sell the ones that aren't tracking to plan and back the ones that are

FWIW even resources are tipping over now.

I hazard a guess as say the market is correcting on rates risk and pressures. Bonds yields and their direction aren't what I would call "constructive".

Diary of a small cap investor:

1. identify good companies at a price worth buying
2. Invest
3. Retain capital to deploy if the stock drops
4. Feel smug
5. Stock drops
6. Deploy capital
7. Smugness increases
8. Stock drops off a cliff
9. Smugness waivers
10. Question life choices.

This has been my journey over the last week and while I struggle with stopping the sense of ‘did I make a mistake here’ the best solution I’ve had is to give the thesis a quick scan to confirm nothings changed and then do my best to stop refreshing the cmc app and try and focus elsewhere for the day.

Yes @Randy. it’s nasty! This is when you wish you hadn’t started buying any shares yet! If you have any cash it makes me feel better to keep buying some bargains very slowly. This correction could still have more to come, especially for the tech stocks and any business on high multiples. Next week could be worse! Fortunately I’ve had some stocks doing well this week, eg BHP, LYL, SIQ, and RMD. I’ve been selling BHP and reinvesting into some great businesses that are losing big time.

It has, and still is, brutal. It is really helpful to know that I am not the only one feeling it ...

It just feels like this time is worse than Liberation Day. Then, it was mostly clear that a hit was coming and so you braced for it. It was still nasty when it hit but there was a bit of a mental brace prior. This time, its come from nowhere, which is why it is feeling very different, and more violent than last year, I think.

Taking action helped. I took profit and exited XRO and NDQ, 2 of my very longest holdings which significantly reduced portfolio tech exposure and raised cash to unheard off levels. This gives me some gunpowder, but the challenge is to deploy to what and when.

My still very raw learnings this week:

1. A hold-forever strategy needs to be tempered somewhat - if there is profit to be taken, when the allocation is too high, I do need to be taking profit and trimming positively. "Letting winners run" is absolutely a double-edged sword.

2. My "temperament" is not great on days/weeks like these - rather than see it as a flaw, maybe that is just confirming that I am human after all ...

3. Key to write down the rationale for an action, even in these turbulent times, to stay in control - not being able to articulate why to an action means emotions have completely taken over, which is not a good place to be.

Stay well over the weekend!

06-Feb-2026: 7:30pm: This might put things into some perspective:

So the All Ords (XAO) and the ASX200 Total Return (XJO) Indices are basically moving together, and are still up for the rolling 12 months, but only by around +2%, however the Small Ords Index (XSO) is still up +10.6%.

The difference is that the Small Ords have massively outperformed the All Ords for the majority of the past 6 months, with the Small Ords being up by about +24% two weeks ago (over 12 months) when the All Ords was only +5% (over the same 12 months), so small company prices have been hit much harder over recent days (and today, see top right, above) partly because as a group smaller companies had risen much further prior to the sell-off.

Despite the Small Ords being down by so much more than the All Ords over the past fortnight, the Small Ords is still massively outperforming the All Ords. [+10.6% vs +2% over 12 months).

That might be bugger all consolation when you're seeing large percentage gain drops in your portfolio daily, and/or with individual company share prices, but I find it helps to try to put things into a bigger picture context at times like these.

Whether that relative outperformance by the ASX's smaller companies over its larger companies (as a group) is now over and large caps are going to outperform again for a time because the majority of the market now has a lower risk tolerance, perhaps because of the current market volatility and/or maybe because of a deteriorating outlook, is something that is probably worth considering.

P.S. I'm going to post over in the gold thread in a minute about the relative one year gains between the All Ords, Small Ords, physical Gold and gold mining companies and look at the relative "corrections" to the larger gold miner SPs compared to the smaller goldies' SP moves recently, but I won't bore everyone here with that analysis - I'll keep it over in the gold thread.

That about sums it up haha.

@thetjs , that sums up perfectly how I feel about it too mate. I do wonder who exactly it is that is selling into these massive routs. Is it people with automated stop losses? Is it investors that have taken positions that are over leveraged and their margin loans are forcing sale? Is it idiot traders with people's Industry Super Funds (not their own money) selling hoping to buy back cheaper and look like a rockstar on paper? Is it a more sinister vested interests sort of thing sort of like the dodgy dealings that went on recently with physical vs paper silver? I particularly worry that with the tiny size of the Australian market, how often and badly it is being manipulated by big money. Considering old Rene Rivkin used to be able to move stock prices with his little 'report', I wonder what the likes of Blackrock are doing.

I also wonder what sort of chaos this is going to cause in the 'ETF' Market, with some people getting a rude and probably unexpected wake up call that an ETF fund doesn't just track the market 'gains' but also the losses. I expect there is going to be much wailing and gnashing of teeth among certain cohorts.

@Randy unfortunately I have taken the (very belated) plunge into the magic internet beans (AKA BTC) not heeding my own warning that as soon as I invested it would crash, haha.

Adding a bit more perspective.

Look at @Bear77’s graphs above. Shift the “year” range to the right. How are the Small Caps going to look versus the All Ords/200 when we get to April 10? IF the market levels off from here (and who knows, it might) then by April 10 or so, the Small Caps XSO will have returned a very nice 25% versus the All Odds/200 at a not so shabby 17%.

Yep, it's all in the perspective.

Keep well over the weekend - and if you're like me, you'll be using the time to revisit that spreadsheet with guesstimates of reasonable prices to pay for your favorite stocks.

After the deluge, the grass grows lush and green.

The latest from the 'Chanticleer' in the AFR:

This is now a mini tech wreck. Bitcoin’s blow-up could make it worse

Sometimes it's damned if we do and damned if we don't @Randy. Luckily as a spiritedly 67 year old that started flirting with shares in the mid 80s, it is deja due all over again.

A quick look at your SM portfolio indicates you're doing OK, so I guess you're talking IRL. All I can say is hold on to the genuine belief shares or more to the point, solid companies with great opportunity and solid management and don't get too caught up in the hype or the constant price watching, it can do your head in.

Easily said I know, particularly as I hesitated myself on moving a couple of big positions earlier this week ($BHP for one), but I'm not about to sell during a route.

As @Strawman Motley Fool's mate Scott says, just look at the Vanguard index when fear strikes the market. Good luck, chin up.

Our fearless leader @Strawman couldn't have said it better in relation to your (and almost all of us) post via his weekly blog today @Randy.

Eloquent and accurate (with the added Uncle Warren or Charlie quote) as always!!

Worth a listen - they also discuss the "SaaS-geddon" (which hopefully ended with the rebound in the US overnight - time will tell!)

Stock Take: The Resources Roundup

Gaurav Sodhi and Graham Witcomb join John Addis on this week's episode of Stock Take to discuss the resources boom and share their thoughts on some of Australia's highest-quality businesses.

I take a "hiking through the mountains" approach @Randy. When I'm standing on top of a mountain I'll stop, and take in the view, and enjoy myself. When I'm down in the valley I'll keep my head down and keep working, knowing there is a hard climb out but the view will be worth it.

I also switch to thinking in percentage terms when I have decent drawdowns. "Ive had a X% drawdown", is a softer blow than Ive just blown up X amount of dollars. They're small things but they help me.

@tomsmithidg there are so many possibilities (as you’ve noted) and I’ve found it can drive me quite nuts if I spend too much time falling down those rabbit holes in the ‘why’.

My favourite, drawn from sometime spent on the HC forums before I answered the siren call that was Strawman, was that it was the ‘big boys’ back from their weekly boozy lunch where they made the decision to impact stocks before a round of back slapping and high fives.

These days I try to leave the noise as is and just accept it happened and that’s the price that’s paid when investing in the stock market. Sometimes shit just happens.