ASX 200 back to JANUARY 2006 Levels

[redwing]

You getting excited?

With the US still in a debt supercycle I'm cautious

 

[VYBerlinaV8]

V8,

Can I ask - is your mentor a trader of shares (ie. attempts to time the market or individual stock), or a long term buy and holder, prepared to sit through downtrends? Also, is he only interested in top 20 type stocks, or does he also pay attention to the smaller end of the market?

If you'd prefer to not share such detail, I fully understand.

Cheers,
Greg

He is not a trader, and generally doesn't even choose stocks himself. He buys funds with a long record of acceptable performance, and admits that he does this as a risk mitigation measure rather than for maximising return. His view is quiite simple: invest regularly in moderate risk investments, diversify, let time do its thing. He has also done some good property developments over the years, including an apartment building in St Kilda Rd, and a large subdivision (40 or so blocks) in a coastal town.

He worked hard to get into a well paying job, then in his early 20's started investing in property. He's now about 70, so has been investing regularly for nearly 50 years. He lives below his means, but still enjoys life (ie he doesn't live like a pauper).

His biggest irritation is when government changes the rules on him.

 

[Sunfish]

V8,

Can I ask - is your mentor a trader of shares (ie. attempts to time the market or individual stock), or a long term buy and holder, prepared to sit through downtrends?

I'm not surprised at the poor understanding of stocks on a property forum but there is no clear definition of a "trader" or of a "buy and holder". And there are all the shades in between.

Anyone who thinks it is safe to buy a conventional portfolio of shares and go for a 5 year sabbatical in Darkest Africa is nuts. Your portfolio must ALWAYS be work in progress. I call it "weeding the garden". Another poster and I have constantly crossed swords over this. The fact that the all ords is back to these levels demonstrates this clearly.

I have no mentor but I listen to those who take a medium term view of the future. This is not as hard as it sounds. There are timeless rules of economics which be be defied ONLY in the short term, and "short term" can be longer than you would expect when central banks interfere with QE1, QE2 and possibly QE3 and governments get involved in the property market so it is important to remember Keynes' maxim: "Markets can remain irrational longer than you can stay solvent."

Originally Posted by Belbo
But weren't they and their fellow travellers just the darlings of the stockmarket in the day of "energizing lazy balance sheets" back in the mid 90s when credit was easy?

The selective amnesia of stockmarket speculators is incomparably educational.

Never heard the term "using lazy equity"? Zacary the same thing.

I guess we all agree on one thing: It ain't easy!

 

[BayView]

The guy currently owns around 100 properties, many outright, has multi-millions in shares also, and still works as a specialist doctor at 70.

Just adding a bit of perspective on this;

It's a good amount of properties, but then; a specialist should be able to accumulate a truckload given their income; unless they spend it all on lifestyle first.

Don't forget the medico's also enjoy salary "packaging" whereby a portion of their pre-tax income is taken out before they get taxed, they then get taxed on the remainder, and then they get the removed portion back two days later without tax being paid, minus a small handling fee of about 10 bucks.

Nice little lurk when you work out what their gross pay would normally have to be to get the same nett pay without the SP (my wife is a nurse and enjoys this lurk to a degree).

There are some private hospitals which allow you to salary package your whole income.

These are the ones which are cr@p and no-one wants to work there, so they offer very nice carrots.

 

[oracle]

Tell Padley, he should have just invested in top 2 companies by market cap. (BHP and CBA).

CBA in 2006 was trading at around $45 with 224cents dividends (Grossed up 7.1%)

CBA in 2011 trading at $49 with 290cents dividends (Grossed up 8.45% or 9.2% if you are a buy and hold investor from 2006 prices, almost forgot add the 10% odd CG in share price.)

BHP in 2006 was trading at around $26 with 48.7 cents dividends (Grossed up 2.67%)

BHP in 2011 is trading at 43 with 102.4 cents dividends (Grossed up 3.4% or 5.6% if you are a buy and hold investor from 2006 prices, Not too impressive on the dividend front. Let's check Capital growth. Around 65% total or 10.6% Compounded annual growth).

In all this time the ASX hasn't changed much.

Invest in quality blue chip companies when their prices are low/attractive, they will easily beat the index over the long term. At this point I do not see any reason why these two companies will not beat the index in the next 5 years as well.

Just like with any investment philosophy. Buy and hold can work for you if you know what you are doing.

Cheers,
Oracle.

 

[Sunfish]

Invest in quality blue chip companies when their prices are low/attractive, they will easily beat the index over the long term.

I'd delete the "blue chip" reference. If you were to put the time and effort into finding value, regardless of capitalization, as you do reading Saturday's RE paper and wasting time at auctions you never really intended to bid on, you certainly can beat the market.

I enjoy reading the macro stories. Horses for courses I guess.

 

[oracle]

I'd delete the "blue chip" reference. If you were to put the time and effort into finding value, regardless of capitalization, as you do reading Saturday's RE paper and wasting time at auctions you never really intended to bid on, you certainly can beat the market.

I enjoy reading the macro stories. Horses for courses I guess.

I purposely used the example of two companies that majority of Australians would know about. They hear about their record profits every 6 months when the media reports them.

If they put in bit more effort to find value they surely can beat the index. And you can do it by investing in micro caps as well as blue chips.

Cheers,
Oracle.

 

[Sunfish]

I purposely used the example of two companies that majority of Australians would know about.

I know where you are coming from. I seldom refer to any other company than BHP. It's OK I guess but I use it as a proxy for the resource sector.

Safe! Can't be accused of market manipulation.

 

[SENIOR]

I have been trading for 10 years and still learning .I do technical stuff and I am still making money
I buy low sell high its simple but it works. I love when the ASX goes down by 90 points in a day thats when I look at buying. And when everything is going up nicely I sell. example TLS in april went down to $2.55 bought 10000 sold them 1 month later for $2.85. Today TLS trading around $3.00. So I missed more gain doesnt matter move on
I never have a great chunk of my money in the share market I use 50 k as the max in shares
I am retired and love the market
Being an invester in the stockmarket is like giving your money to a scam
CEOs of these companies never lose money and still get bonuses even if the company is not performing
I could keep going on but all I say being a trader is an apprenticeship and you never stop learning

SENIOR

 

[VYBerlinaV8]

Just adding a bit of perspective on this;

It's a good amount of properties, but then; a specialist should be able to accumulate a truckload given their income; unless they spend it all on lifestyle first.

Don't forget the medico's also enjoy salary "packaging" whereby a portion of their pre-tax income is taken out before they get taxed, they then get taxed on the remainder, and then they get the removed portion back two days later without tax being paid, minus a small handling fee of about 10 bucks.

Nice little lurk when you work out what their gross pay would normally have to be to get the same nett pay without the SP (my wife is a nurse and enjoys this lurk to a degree).

There are some private hospitals which allow you to salary package your whole income.

These are the ones which are cr@p and no-one wants to work there, so they offer very nice carrots.

Well put. This guy earns a shedload, and has done for several decades. He grew up barely above the poverty line, though, and doesn't live extravagantly. Admittedly, he has a nice PPOR, but doesn't spend money on cars, consumer goods, clothes, etc. He has just put good chunks of $$ into middle of the road investments over a long period of time. His developments came when he already had pretty large financial horsepower. No really rocket science, just compounding good amounts over a long period of time.

The reason I've listened to him so much is because I am in a similar boat. I have a very well paying job (as does my wife), and I prefer regular, moderate risk investments with a steady yield. I spend a lot less than I earn, but still have a lifestyle that even 10 years ago would have seemed laughably out of reach, and figure than over the longer term regular investments will result in good outcomes.

Make no mistake - I am not an investing guru!

 

[Sunfish]

I have a very well paying job (as does my wife), and I prefer regular, moderate risk investments with a steady yield. I spend a lot less than I earn, but still have a lifestyle that even 10 years ago would have seemed laughably out of reach, and figure than over the longer term regular investments will result in good outcomes.

Make no mistake - I am not an investing guru!

I reckon you're going about it the right way. Concentrate on your primary income and take a low key approach to the rest. You have no need to spend all weekend reading the property ads and going to open houses as so many here seem to do, or spend all week reading about shares as I do.

 

[VYBerlinaV8]

I reckon you're going about it the right way. Concentrate on your primary income and take a low key approach to the rest. You have no need to spend all weekend reading the property ads and going to open houses as so many here seem to do, or spend all week reading about shares as I do.

Cheers.

And no, I don't live and breathe this stuff the way some here do. I enjoy it, but my job is pretty busy these days and spending time with my family is a high priority for my down time.

As I've said previously on here, I'll probably never be uber-rich, but if I can get to about $5M in yielding assets I'll be very, very satisfied.

 

[Vesuprop]

I reckon you're going about it the right way. Concentrate on your primary income and take a low key approach to the rest. You have no need to spend all weekend reading the property ads and going to open houses as so many here seem to do, or spend all week reading about shares as I do.

Do you trade short term, or do you have more of a portfolio-type approach?

I was wondering, because I was trying to figure out what the big fuss about 'shorting' stocks in the short-term was and how traders use this type of play to create cash flow / profit in a falling market (like we've had over the last month or so). Do you need to physically own the stock to go 'short'?

 

[Sunfish]

Do you trade short term, or do you have more of a portfolio-type approach?

I was wondering, because I was trying to figure out what the big fuss about 'shorting' stocks in the short-term was and how traders use this type of play to create cash flow / profit in a falling market (like we've had over the last month or so). Do you need to physically own the stock to go 'short'?

My largest position I bought in '04 so I must be long term.

The rest I have more than 100% churn so I must be a trader.

No. I do not believe in a "balanced" portfolio. Why would I spend my weekends researching the macro conditions and then go for average returns? If I was in a classic portfolio I could go fishing instead. Who am I kidding. I read up on what's happening because I enjoy it. Having this insight why wouldn't I have a punt on it?

As for shorting, you are betting against the house and the house seldom loses. The guys I respect take a medium term view but shorters must have faith in their short term indicators.

 

[Vesuprop]

In other words: you do not have a "plan" or a "system" like many, but you acquire "knowledge" and act on it how best suits (either short term, or mid to long-term)?

I find it interesting that you say you have never read books in another thread. Do you have any education or finance? Or do you an intuitive mind that is able to string together sets of data to make a solid decision?

Sorry for the prying questions; I am trying to learn where I am at through the experiences of others at the moment.

 

[Sunfish]

In other words: you do not have a "plan" or a "system"

I have tried to explain this before but as you seem interested I'll try again.

I DO have a plan. That is to buy into companies BEFORE they become mainstream. But that's a bit like the princess kissing toads. Not many are cursed princes.

Almost without exception, everything I buy I HOPE to keep long term. But things happen. Most just don't make the grade, others that do are bought out. My experience and psychology aren't always good enough to prevent being shaken out of a position.

It's called LIFE.

The company I've held longest has yielded 2,000%. An obscure prospector when I bought in was bought out last year for US$7.1 bill. Sadly the acquirer isn't as good as I'd hoped, but that's another story.

 

[Vesuprop]

That makes a lot more sense now. Thanks for that. I've tried the same thing recently with TXN, but I got in at the wrong time ($0.825). It should recover, but it's only a small position, and any losses so far have been a worthwhile education. On the other hand, the one that I also looked at in that same sector and skipped was AUT and it's gone up 40% in the month or two since. I enjoy reading about some of these mirco or smaller caps, but they're really hard to value, especially if they're not making money. Perhaps it's an experience thing. Any tips of advice, or resources to learn about that sort of thing would be much appreciated.

 

[Sunfish]

Any tips of advice, or resources to learn about that sort of thing would be much appreciated.

No share tips, and I doubt I have more to add generally.

 

[redwing]

From the 'net yesterday..

BHP Billiton and the big banks may be the most popular stocks, but other blue chips have delivered investors better long-term growth.

Research by Macquarie Private Wealth examined our biggest stocks and found almost all had good average annual growth in the long term.

Just 18 stocks that are in the current S&P/ASX50 index of the 50 biggest companies were around in 1980.

The best performers have been Coca-Cola Amatil, Leighton Holdings, News Corporation and QBE Insurance.

The only stock to suffer a negative annual growth was property trust GPT Group, at -1.4 per cent, after it plunged from $19 to $2 a share during the global financial crisis.

Macquarie Private Wealth head of research Riccardo Briganti says building a blue-chip share portfolio requires more than just picking the best historical performers.

"Each stock has had periods of poor performance not necessarily related to market movements," he says.

"Coca-Cola Amatil had three consecutive years of poor performance in the late 1990s when the broader market was providing above-average returns. It then outperformed the market in the subsequent five years."

Several of today's biggest companies were not listed in 1980, with the Commonwealth Bank joining the ASX in 1991 and Woolworths in 1993.

A blue-chip stock derives its name from the tokens used in casinos where, traditionally, the blue chip was the highest-value, Mr Briganti says.

But, he says, instead of a speculative gamble, they are "the stocks seen as appropriate for a buy and hold strategy".

"Don't be fooled when someone says: 'This stock has given you the best return and therefore it's the best investment'. How risky is it?"

Mr Briganti says a solid blue-chip portfolio should hold at least 10 stocks to be properly diversified, and investors should make their decisions based on dividends as well as capital growth.

Healthy dividends are a key reason for the banks' popularity among investors and super funds.

"The capital return of BHP has averaged 13.3 per cent per annum since 1980, compared to ANZ's lower capital return of 9.8 per cent," Mr Briganti says.

"However, the dividend yield from ANZ has consistently been above 4 per cent whereas BHP has recently been closer to 2 per cent."

Macquarie's 12-month dividend forecasts for the big banks are all above 6 per cent, with franking credits lifting the after-tax dividend yield further.

Australian Index Investments says the banks' after-tax dividend yields should top 9 per cent next financial year, thanks to the 30 per cent tax credit that investors get for fully franked dividends.

It says bank shares have underperformed the broader market over the past year and their dividend income is now "substantially higher" than term deposits.

"A more attractive and tax-effective option might be using those term deposits to buy bank shares," Australian Index Investments chief executive Annmaree Varelas says.

The overall market has dropped sharply in the past month, but Mr Briganti still sees steadier times ahead.

He says Macquarie's forecast for the S&P/ASX200 index is 5190 points by June 2012, a rise of 13 per cent above current levels, despite renewed fears about European debt and money printing in the US.

"We believe that these issues are transitory and (are) going to be resolved. If you look at the underlying economic growth of the world, it's solid."

But investors are growing more uncertain, with a new survey by the Australian Investors Association finding the number of people bearish about the future has more than doubled since January to 35 per cent.

The proportion of investors bullish about shares has dropped from 31 per cent in January to just 11 per cent in May.

"Our members remain cautious about how they approach markets for the rest of this year," AIA president Alison Harrington says.

And while many of us can't stretch out budgets to snap up Rio Tinto shares at $80-plus or BHP and Woodside Petroleum at $40-plus, there are many cheaper stocks listed on the S&P/ASX 50.

Those under $10 (latest price: June 10) include AMP, Alumina, Bluescope, Fosters, Brambles, Tabcorp and Fortesque Metals.

 

[willair]

From the 'net yesterday..

"

Several of today's biggest companies were not listed in 1980, with the Commonwealth Bank joining the ASX in 1991 and Woolworths in 1993.



"A more attractive and tax-effective option might be using those term deposits to buy bank shares," Australian Index Investments chief executive Annmaree Varelas says.



Those under $10 (latest price: June 10) include AMP, Alumina, Bluescope, Fosters, Brambles, Tabcorp and Fortesque Metals.


Makes you look at something like this over the years,with the B4Banks you would also have to take in the franking credits-GC- so it is higher than fixed low risk terms,and with the way the market is going over the next few weeks then one small state based bank is down just under 32%
from what i sold them for so i just waiting to jump back in again you can never pick the bottom 100%,for the entry point but if you can get within
1-5% and ride it back up again and pick up the div's-franking credits then what ever the media spinners write is not important..