All P.I.G.S. fed and ready to fly

[WinstonWolfe]

I am not sure whether global consumption WILL collapse. Could we just see below trend growth in consumption (pre GFC im talking about).
Consumption growth financed by credit has to cease.

I've just been pondering how much global consumption might decrease in the face of decreased credit.

It's logical to assume consumption has to decrease by the amount of credit taken out of the system for the medium term. Economies living off higher levels of credit will be effected moreso.

Global GDP equals global consumption and investment, where investment is dependent on credit drawn on future productivity.
It is hard to imagine global gdp going down more than 5% for a 'sustained' period. Greece's austerity measures aren't expected to reduce their gdp by more than 4% in 2010 and 2.6% in 2011.

Tracking the MSCI All Country World Index will be interesting to watch over the coming 2 years, as it should reflect the effect of credit withdrawal and consumption reduction.

Anyone who can understand how much credit (borrowings against future production) is sloshing around in the system contributing to global consumption and investment, should be able to set some realistic boundaries on the limits of a bear market, whether cyclical or structural. Something else to add to my reading list.

 

[steveadl]

I'm all ears. I've been wanting to buy div plays for some time now but the returns from strong companies are less than property even.

Here ya go SF.

Not all what you'd call strong players though, some I've got but many with problems I wouldn't touch. (table is couple weeks old, so prices not all accurate)

 

[Intrinsic_Value]

Here ya go SF.

Not all what you'd call strong players though, some I've got but many with problems I wouldn't touch. (table is couple weeks old, so prices not all accurate)

thats a reasonable list from which to do further homework.
Out of the list i have more significant stakes in MTS, NAB,CAB,WAN.
but only added in the recent downturn to NAB. MTS i bought just before the recent downturn and its not dropped much since so no inclindation to further dollar average yet. CAB and WAN were bought in the major downturn of 2008/09 and prices below current prices, so happy to just sit on them for the moment (i partially dollar averaged out of WAN at $8, 25% of my holdings).

Another big cap that is not on the list, but i am starting to take a position is MYR. Didnt participate in the float, but happy to START dollar averaging from $3.10

The other two large caps that i have a significant stake in is AHD and QBE

Note significant stake means more than 3% of the portfolio and the total of the above mentioned stocks represent around 25% of the portfolio.
All other significant stakes are in small and micro cap stocks.

 

[Sunfish]

Thanks Steve. I'll see if any stir my emotions.

 

[oracle]

Here ya go SF.

Not all what you'd call strong players though, some I've got but many with problems I wouldn't touch. (table is couple weeks old, so prices not all accurate)

Hi Steve,

Thanks for the list. What do the colour codes mean? The blue one in particular?

Cheers,
Oracle.

 

[steveadl]

Hi Steve,

Thanks for the list. What do the colour codes mean? The blue one in particular?

Cheers,
Oracle.

The shaded co's are part of one of the recommended portfolio's. The list continues on but I cropped it to fit SS image size allowance, but the yields obviously only get lower further down. It's an income portfolio, but they also try to get the best possible growth as well hence not into the top div payers.

Don't hold them all myself. Though I do hold a few of the infrastructure plays higher up the list - couldn't help myself.

Astro Prop looks tempting at 20% yield, but it'll probably collapse next month!

 

[oracle]

The shaded co's are part of one of the recommended portfolio's. The list continues on but I cropped it to fit SS image size allowance, but the yields obviously only get lower further down. It's an income portfolio, but they also try to get the best possible growth as well hence not into the top div payers.

Don't hold them all myself. Though I do hold a few of the infrastructure plays higher up the list - couldn't help myself.

Astro Prop looks tempting at 20% yield, but it'll probably collapse next month!

Thanks.

Cheers,
Oracle.

 

[Sunfish]

I've been looking at a few of those div plays and there aren't many that have paid enough in divs to exceed the loss in value.

How's this chart I've pinched from another forum:

So if you want Return OF Capital, not Return On Capital some Perth Mint gold still looks good.

It's from Zero Hedge here: http://www.zerohedge.com/article/10...-investment-firms-dont-want-their-clients-see

 

[Sunfish]

How's this for NYSE:TOT

Market Cap (mil) 111,722.9
Shares Outstanding (mil) 2,348.6
EPS 5.42
DPS 3.28
P/E 8.8
Yield 6.5
52-Wks-Range 67.52 - 45.50

That is a French oil co that is not involved in the Gulf oil spill. BP has lost far more than than the spill could cost them.

 

[boz]

oil prices lost 25% in the last 3 weeks. i would wait to buy as it would look like catching a falling knife.
on the positive thing is that probably the euro bottomed against the aU$ and even if those eu shares goes down you would still make money in AU$

 

[Intrinsic_Value]

I've been looking at a few of those div plays and there aren't many that have paid enough in divs to exceed the loss in value.

from what time frame?
from the peak of 2007???

out of curiosity, what has been the TOTAL return on shares including dividends from the last gold high in the 80's to now? and what has been the TOTAL return on gold from the last high until now?????

shares would still win hands down

 

[Sunfish]

Don't you know how to use charts? It would be STUPID of me to make my claim based on that simple criteria.

I have used 5 years as a basis and very few are above where they were back then.

I read in the Weekend Australian that the ASX is on a P/E of 11.4 against a long term P/E of >14 and the writer drew the conclusion that stock prices are therefore cheap. That's rubbish. A P/E of 14 means that an enterprise is giving a return of 7% on it's capitalisation which is only just above the bond rate. To be acceptable to investors it must also give a capital appreciation something like that which prop investors expect of "doubling every 10 yrs".

Today, the doubling of stock prices in the next 10 years seems but a dream! So with poor/non-existent cap returns fair value would might be a P/E <9. I still can't find any compelling reason to be investing in the ASX 100 now, and definitely not for the lousy dividends.

If I had 2 mil in the market I would be able to live on 3 to 4% returns while waiting for the good times, but I don't. I must care for my limited capital.

 

[Sunfish]

shares would still win hands down

Post the chart then. I'm happy that eight years is a trend.

 

[BV]

Today, the doubling of stock prices in the next 10 years seems but a dream! So with poor/non-existent cap returns fair value would might be a P/E <9. I still can't find any compelling reason to be investing in the ASX 100 now, and definitely not for the lousy dividends.

Sunfish

I agree, it's not pretty out there and current share prices haven't adjusted for the amount of risk visible in the horizon.

The risk of government defaults is currently small but is increasing. The problem is with government deficits worldwide which are at record high levels and are becoming unsustainable. Everyone says let's spend now to keep our economies afloat and better times will come next year.

But the fact is that they've been doing this for 2 years in a row and now entered a 3rd year. They can't be doing this forever. They're staying above water with borrowed money. At the same time bad debt from the private sector is slowly passing over to governments who chose not to let their banking institutions lose money.

If this continues the debt situation of some countries will get to levels of no return...

 

[Peter 14.7]

Glad I found this thread, Peter

 

[Intrinsic_Value]

I read in the Weekend Australian that the ASX is on a P/E of 11.4 against a long term P/E of >14 and the writer drew the conclusion that stock prices are therefore cheap. That's rubbish. A P/E of 14 means that an enterprise is giving a return of 7% on it's capitalisation which is only just above the bond rate. To be acceptable to investors it must also give a capital appreciation something like that which prop investors expect of "doubling every 10 yrs".

Today, the doubling of stock prices in the next 10 years seems but a dream! So with poor/non-existent cap returns fair value would might be a P/E <9. I still can't find any compelling reason to be investing in the ASX 100 now, and definitely not for the lousy dividends.

You are forgeting dividends.

A PE of 14 DOESNT need to double earnings every 10 years to justify the multiple. It does need to DOUBLE TOTAL RETURN (ie dividends distributed and increases in earnings) over 10 years.

Otherwise why do companies like fosters trade on their multiplies (not that i recomend buying fosters, in fact i dont recomend even holding fosters).

For what its worth though i cant see excessive value even after the decline in the ASX100 accross the board, i can justify some of them, but not overall, thats why i am mostly in small and micro caps.
Small and micro caps are inherintly more risky, but if you get the right ones, the returns are fabulous, why, because they have lots of room to grow, a large cap doesnt have this opportunity to the same degree.

 

[Sunfish]

You are forgeting dividends.

You really do think I'm thick don't you? Divs are paid out of E! so I only addressed E. Banks and Telstra typically pay out a high percentage of their E because that's all they are: Mature profit making machines than cannot usefully use extra capital. Others keep most of the E in the belief that they can use that capital more productively than share holders. (Or the directors/CEO want to expand the business so they can get a pay rise )

A PE of 14 DOESNT need to double earnings every 10 years to justify the multiple. It does need to DOUBLE TOTAL RETURN (ie dividends distributed and increases in earnings) over 10 years.

"TOTAL RETURNS" is dividends plus cap appreciation NOT dividends plus earnings, as explained above. A P/E of 14 without cap gains is a total return of 5% (divs do not matter!) which is less than the bond rate. How could you possibly accept that return?

Otherwise why do companies like fosters trade on their multiplies (not that i recomend buying fosters, in fact i dont recomend even holding fosters).

I have no idea. What is their P/E and why do they trade there? You're telling the story.

For what its worth though i cant see excessive value even after the decline in the ASX100 accross the board, (Especially if the decline is likely to continue, as I believe.) i can justify some of them, but not overall, thats why i am mostly in small and micro caps.
Small and micro caps are inherintly more risky, but if you get the right ones, the returns are fabulous, why, because they have lots of room to grow, a large cap doesnt have this opportunity to the same degree.

I know! That's what I've been saying and is completely at odds with everything you have said in the past. Fact is, being even more unpredictable than the ASX 100, you must be willing to discard those that don't deliver on their promise and thus you become A BLOODY TRADER!!!!!!!

So you don't mind if I ask: Are you an investor or a trader? You must be one or the other or so you have been saying ad nauseum

PS The very best small caps are explorers and they are easier to understand than a start-up drug or tech company where we have no idea if what they are selling is worth anything. I know a gold explorer's end product is worth A$1,400/oz today and possibly twice that by the time they get into production.

 

[Sunfish]

Originally Posted by Intrinsic_Value
Otherwise why do companies like fosters trade on their multiplies (not that i recomend buying fosters, in fact i dont recomend even holding fosters).

I just looked it up. It has a p/e >14 and a share price a little below where it was 5 yrs ago. Considering they are a brewery and the beer market is already fully developed and they do not do wines very well, you would need rocks in your head to buy it. Why did you ask?

Edit: Looks a good short though.

 

[Intrinsic_Value]

"TOTAL RETURNS" is dividends plus cap appreciation NOT dividends plus earnings, as explained above. A P/E of 14 without cap gains is a total return of 5% (divs do not matter!) which is less than the bond rate. How could you possibly accept that return?

The earnings will be the DRIVER of the share price, so over time the share price will reflect the earnings. And dividends DO matter. A 5% fully franked yld is equal to 7.14% gross which is equal to the bond rate.

Now i never said i would accept this return, but the market obviously does, at least with the assumption that there will be a growth component as well.

I know! That's what I've been saying and is completely at odds with everything you have said in the past. Fact is, being even more unpredictable than the ASX 100, you must be willing to discard those that don't deliver on their promise and thus you become A BLOODY TRADER!!!!!!!

I invest based on intrinsic value. Intrinsic value has nothing to do with the SIZE of the company. Intrinsic value is subject to more VARIANCE with small and micro cap shares because of the higher intrinsic risk in their business models. Thus if the variance is higher, transactional volume can be higher.
THIS IS NOT TRADING.

So you don't mind if I ask: Are you an investor or a trader? You must be one or the other or so you have been saying ad nauseum

I am an investor, i have my focus, and thats why i'm not panicking. I have my risk protection strategies in place. I have my intrinsic valuations for different shares, i update these frequently based on new information and i just sit back and let Mr Market decide what i should do. His mood swings dictate my actions.

Very simple and very easy to make money.

 

[Aaron Sice]