So, any property investors still chearing on the share crash now?

[austini]

Hi Gang,

I also agree with what Chilliaa says above. Often there is too much focus on short-termism. The following paragraph from Buffet is a classic when it comes to how the majority of people can invest successfully in the stockmarket:

"Stocks are the things to own over time. Productivity will increase and stocks will increase with it. There are only a few things you can do wrong. One is to buy or sell at the wrong time. Paying high fees is the other way to get killed. The best way to avoid both of these is to buy a low-cost index fund and buy it over time. Be greedy when others are fearful, and fearful when others are greedy, but don't think you can outsmart the market. If a cross-section of American (same applies to Australia of course) industry is going to do well over time, then why try to pick the little beauties and think you can do better? Very few people should be active investors.''

If there is any lesson the life of Buffett has shown, it is the truth of that."

Cheers - Gorddon

 

[AUSPROP...]

is there a risk in indirect ownerhsip? i.e. fraud by the fund manager, the fund gets sued, the fund fails, the fund collaterises your shares agaisnt some other dodgy shceme for extra income???

 

[topcropper]

QUOTE "Originally Posted by topcropper
Boomer, you were the one who started a thread calling the bottom of the Brisy market,"
QUOTE

I started a thread which called bottom on the ASX 200 on 9 October in the middle of the credit crunch. .

I was refering to this thread,....
http://www.somersoft.com/forums/showthread.php?p=451497#post451497

Ding-a-ling, ringing the bell one.



Lets hope the credit crisis is over eh? But I don't think so.

See ya's.

 

[want2bewealthy]

Remember, with share prices like today, property looks pretty good for alot of people dont you think?

unless youd prefer to stick your savings into a high interest account. .

 

[austini]

is there a risk in indirect ownerhsip? i.e. fraud by the fund manager, the fund gets sued, the fund fails, the fund collaterises your shares agaisnt some other dodgy shceme for extra income???

I wouldn't be too concerned as these funds are very transparent, importantly there is no debt and of course there is no company specific risk. But I understand what you are getting at. I'm a very conservative person and even given the very low risk of a specific index fund/manager I like to spread my risk. Hence I also invest in a number of old Listed Investment Companies which are in some ways similar to index funds.

I also hold a number of investment properties. Bear in mind that property is not risk free either but just has different types of risk. For example, there is no litiagation risk with owning shares but there is certainly a possibility with property ownership. Don't think that landlord insurance offers 100% protection. This is why asset protection specialists recommend (ideally) that shares be held in a separate structure to property so as not to put the share portfolio at risk of property related litigation.

In terms of the old Listed Investment companies such as Argo and AFI etc the risk of them going under is so low that there is probably more chance of our coastal investment property being wiped out by a tidal surge which is generally not covered by insurance

Of course risk tolerance is unique to each investor. If owning an index fund or older LICs affects your SANF then don't invest in them. In my case I'm comfortable with owning IPs, index ETFs, LICs and direct shares (well run, good dividends and low debt ASX 200 shares). Hence diversification of assets and risk...

Cheers - Gordon

 

[boomtown]

TC

You are absolutely right on that thread - Australian RE has fallen since August. We will just have to wait and see whether the falls are sustained.

 

[plusnq]

Hi TC

I am not sure that too many people were cheering on the share market crash. Perhaps some may have been due to the infection from the forum that will not be named. There were plenty of threads though that were calling a top before the crash so it is hard to imagine that the possibility wasn't highlighted. I posted this one on the 24.6.07

http://www.somersoft.com/forums/showthread.php?t=33570&highlight=wedge

Given that a lot of hedge fund money comes from 1) pension funds and 2) loans from other banks, if hedge fund losses start impacting on bank profitability and pension fund returns, the public will start noticing.

Absolutely correct. But usually the public are the last to know (hence distribution tops). I'd rather be leaving the party early than heading for the exit with everyone else once the fire starts.

CDO's are are a great example of the failure of fundamentals. No-doc and lo-doc loans packaged up and rerated into higher grade investments. Then sliced and diced and repackaged and rerated again. Suddenly high risk, low quality investments are sold to funds and banks as high grade investments. When someone turns the music off ala Merrill Lynch taking 50c in the dollar, the "investments" start to be rerated by the market. Funds which are only allowed to hold investment grade packages suddenly are forced to sell due to the rerating of the CDO's. Forced selling accentuates and eventually reaches the attention of the general public ala LTCM. Add in rising interest rates (anyone looked at bond prices recently?) and the mix is a heady volatile mixture looking for a spark.

As a trader who trades technically but manages leverage via macro fundamental analysis, I reduced all leverage a while ago. I don't know when someone is going to turn of the music, but by reducing my leverage at least I am closer to the exit than someone who is still margined up. Obviously someone who is a buy and hold investor and who has a large margin of safety, has less issues than fund managers who use leverage to wring every last drop of return from their trading.

Those who understands economic cycles will have an appreciation that this bull run in resources probably has a fair way to go yet (with its obvious bumps along the way). There certainly are world economic growth forces via Asia and Latin America that will continue to persist as they become more middle class and urbanised. There are several worries present on the horizon as I see it. Energy supply issues (oil, coal, natural gas), Geo-political tensions (Iran, Russia, China, Israel) regarding access to energy and resources, and ever expanding $US debt are all able to significantly slow or derail the current economic expansion. The US investor has seen their purchasing power decline by a third since the start of the decade (see $US index). If the Asian central banks decide to reduce their level of support for the dollar either by allowing rerating of the yuan or buying less Treasury bonds, then this will be exacerbated. I am sure that the American public will be aware of the issue then!

Finally from a technical viewpoint the XAO is forming a broadening wedge which is a reversal pattern. The percentage of shares above their 150 day moving average have been falling and the pattern looks ready for a correction soon. When...who knows?

I supposed we can only invest and trade to our beliefs and perceptions.

Cheers

Shane

 

[Nathan]

i wouldnt say im cheering on crash either...

i know i pointed out too be warey that theres a floor that could collapse and fall further, but i am not aware of ever saying i cant wait for the asx or any other stock market to fall... if you could find any posts like that id be much appreciative...

if stock market collapses other markets will tumble..

 

[kum yin lau]

Hi,
Good measured response, Chilliaa. Need sensible people like you.

I wouldn't think a fund is the best way to go. Why not direct buying of shares? Someone suggested once the PE ratio is under 10, then it represents value buying.

Not a bad way to accummulate a portfolio. I tend to look at market capitalisation as well. Plus, someone long ago said, 'Buy on low volume'.

My personal way is to look at the broad index like the AllOrds. When the Dow is 9000 or less, the Nikkei ditto, Hang Seng the same, [don't know much about European markets because of time zones, asleep when they wake], all lesser stock markets everywhere will have dropped by the same %.

It's called reversal to the mean. And while I'm bandying all these words around, check out the Dogs of the Dow. I once worked out how much money I needed to invest if I used that strategy. I didn't have that much!

Like property, share investment still requires sound understanding of basic principles. I don't think there's anything wrong with Boomtown's assessments. D&Gs by definition belong to the group that watch what happens & generally don't do anything. Because they expect the worse, and the worse is yet to come.

Still only 4 things to do - spend, hoard, buy shares or buy property.

KY

 

[GreatPig]

If you really want to follow experts follow those that have accumulated wealth over the long term.

OTOH, be wary of trying to emulate them too closely - especially Buffett. The average investor is not Buffett, and can not get the deals Buffett gets. The edge he gets could well be the difference between a winning proposition and a losing one.

Plus he has much deeper pockets. While he has apparently put most of his personal account into US stocks now, that only amounts to a small percentage of his total wealth. The bulk of his wealth is in Berkshire Hathaway, which has recently been suffering from reduced profits like many other companies.

GP

 

[chilliaa]

OTOH, be wary of trying to emulate them too closely - especially Buffett. The average investor is not Buffett, and can not get the deals Buffett gets. The edge he gets could well be the difference between a winning proposition and a losing one.

Plus he has much deeper pockets. While he has apparently put most of his personal account into US stocks now, that only amounts to a small percentage of his total wealth. The bulk of his wealth is in Berkshire Hathaway, which has recently been suffering from reduced profits like many other companies.

GP

GreatPig, you are a trader at heart. Theres nothing wrong in this if you are good enough to compete against other traders.

The difference between an investor and a trader is an investor can be specifically wrong and vaguely right, where as a trader HAS to be specifically right.
If both party's are correct in their assessments a trader should always outperform an investor. However if both assessments are wrong, an investor (subject to conservative gearing) can still come out of it with a positive return.

 

[evand]

I find it funny seeing all these mini Warren Buffets running around. Espousing his investing principals.

Beside what GreatPig said, if a company is not performing Buffet will often send his guys in on the board and fix it up so it does perform.

He is generally not a passive investor and will manufacture profit for the company and therefor increased share price.

 

[Sunfish]

Buffett could not possibly have become as wealthy as he has done using "Buffett Principles" and simple compounding.

He plays his cards close to his chest and his biographers have not been told the whole story.

And Chilliaa, will you stop calling everyone who sells a share a "trader"? The way you say it it's a swear word.

 

[steveadl]

I wouldn't say I'm cheering for the stockmarket to crash, and I never draw any assumptions about stock market vs property market etc. beause I hate generalisations and even then I don't know enough about the stockmarket trends.

I am however taking the current ASX slump as an opportunity to buy into some blue chip co's at a good price for the long term.

 

[BayView]

I wouldn't say I'm cheering for the stockmarket to crash, and I never draw any assumptions about stock market vs property market etc. beause I hate generalisations and even then I don't know enough about the stockmarket trends.

I am however taking the current ASX slump as an opportunity to buy into some blue chip co's at a good price for the long term.

What he said.

 

[yo yo ma]

I am however taking the current ASX slump as an opportunity to buy into some blue chip co's at a good price for the long term.

Times three

 

[Sunfish]

I hate generalisations and even then I don't know enough about the stockmarket trends.

I am however taking the current ASX slump as an opportunity to buy into some blue chip co's at a good price for the long term.

Don't take this personally Steve. I would let it go to the keeper but this is a very common action today.

I highlighted the bit about not knowing stockmarket trends but that's OK. No-one does. I don't, and consequently I ain't doin' nuttin' yet.

But are you trying too hard? In Reminiscences of a Stock Operator Jesse Livermore (a fabled trader) is quoted thus: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine--that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. (my bolding) http://en.wikipedia.org/wiki/Reminiscences_of_a_Stock_Operator

He may have been talking about "sitting" the way PIs do but I doubt it. It was more short term than that. But waiting to see how the market goes from here is short term. Many here are now trying to reverse fixed loans. Obviously this seemed "a good idea at the time". Buying shares while things are still so unsettled may turn out the same.

 

[Bill.L]

Hi all,

While on the topic of knowing market trends, we all have to ask ourselves if the current situation is worse than at any time in the last 125+ years??

In that time frame our stockmarket has crashed 45%+ 3 times before. In 1929-31 our market lost 46% of its value. From 1970-74 it lost 55%, and in 87 just under 50%.

Currently our market has had 46% from peak to bottom.

In 1987 the markets loss did not take out the previous years low. Only the '29 crash and the '70 crash took out multiple year lows. So far we have exceeded the '07,'06 and '05 lows (on the downside).
Each of those large declines retraced 67-70% of the previous long term (13-18 year) bull run. To do likewise on this occasion would take us to around 3100 on the All Ords. That is also equal to the greatest fall of the last 125+ years.
On the previous occasion when the market fell 55%, from 1970 high to the 1974 low, there were 2 retracements from lows back towards the high in 1972 and 1973, before the ultimate low was reached.
Such a large correction took time.
The 1929 crash happened over about 17 months here (different in the US) for the 46% fall. Our market exceeded the '29 high by 1934.

Our current market situation looks more like the '29 example than anything else and our % drop is equal to that one.

Based on the history I can only draw a couple of conclusions.

1. The market is likely to rise 50+% in the next year or so (not necessarily new highs aka '72)

2. The bottom is already in for stocks with 100%+ rises over the next 3 years (cumulative) going to new highs.

3. The situation is worse than in the previous 125+ years, worse than 33% unemployment during the great depression, worse than when the shipping was being torpedoed Darwin bombed and invasion looked likey.

4. History is bunk.

At no point has our market just sat at bottom levels for a period of time (years).
Given that the politicians have learned that to starve off depression you create inflation (like the '70's), then I AM BETTING on at least scenario 1 happening, a market rise of at least 50% over the next year or so.

bye

 

[steveadl]

Don't take this personally Steve. I would let it go to the keeper but this is a very common action today.


He may have been talking about "sitting" the way PIs do but I doubt it. It was more short term than that. But waiting to see how the market goes from here is short term. Many here are now trying to reverse fixed loans. Obviously this seemed "a good idea at the time". Buying shares while things are still so unsettled may turn out the same.

Oh but I do take it personally Sunfish!!!! Ha, just kidding mate! Nah you raise a very good point, who's to say what is going to happen in the coming months.

For me it's just a personal thing, I'm not trying to time the market right, and we could very well have further to fall. But I'm comfortable with the stocks I'm buying and the yields they're on. I am quite open to the fact that there could be some profit downgrades amongst the bunch, but long term I'm quite happy about it and that's what I'm focusing on now.

Too many times over the years I've been burnt in the ASX by being short term focused. So now I'm changing my ways and only going for blue chips, for dividend income (although for the moment I'll be reinvesting) and for long term. Plus don't get me wrong, I'm still majorly small fry compared to yourself, Bill, Keith, TC etc. so even if I do get it a bit wrong, it won't really hurt except to add some more war wounds to my old ASX scars

Having said all that - and this is strictly just personal point of view - I don't think the recession is going to be as bad as some think, so I'm willing to buy into the market now.

 

[urchin]

Hi all,


Based on the history I can only draw a couple of conclusions.

1. The market is likely to rise 50+% in the next year or so (not necessarily new highs aka '72)


At no point has our market just sat at bottom levels for a period of time (years).
Given that the politicians have learned that to starve off depression you create inflation (like the '70's), then I AM BETTING on at least scenario 1 happening, a market rise of at least 50% over the next year or so.

bye

But this is assuming that we have hit bottom....

It sounds like you are using the pre-crash prices as your baseline and I think that is a pretty dangerous assumption.

That is, your prediction seems to indicate a belief that the pre-crash prices were more or less in line with value. The crash might have caused the economic environment to deteriorate somewhat, but overall (since you stick to a pre-crash baseline) shares have been oversold.

but consider a different scenario. consider that shares pre-crash were not "fairly priced" but rather artificially inflated to enormous PE multiples based on the expectation of never-ending economic growth. In that case the baseline you use would have to be considerably lower than the pre-crash/bubble baseline.

Furthermore we face a very grim global economic environment. Several major economies are already in recession and a large part of the world is set to follow (including australia). What would impel stocks to shoot up by 50% in this sort of environment?

Just because the price has dropped doesn't mean it is cheap. I am sure that some stocks were in the position of being the baby tossed out with the bathwater, but it will take real skill and knowledge to separate the wheat from the chaff. to rely on a massive, general market recovery simply because prices used to be much higher than they are now... well that seems a bit foolhardy. consider the situation of Japan and compare the nikkei index in 1989 to now. It peaked at 38915 in december of 1989. Now, nearly 20 years later, it sits at 8940.