# HLI - Helia Group



## peaceofmind (24 April 2014)

hi any interest for this coy? Largest IPO of the year at $700m raising

$2.20 to $2.90 a share
approx 6.5 to 8.2 PE ratio
yield 6.7 to 8.9% fully frank

in the midpoint of the range $2.55 - it is 7.35PE and 7.8% fully franked

it is a LMI mortgage insurer - one of two in australia with QBE.
there are lots of risks in the prospectus
on raw numbers, yield and PE ratio attractive if at midpoint of the range.


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## Miner (17 May 2014)

*Re: GMA - Genworth Mortgage Insurance Australia IPO*



peaceofmind said:


> hi any interest for this coy? Largest IPO of the year at $700m raising
> 
> $2.20 to $2.90 a share
> approx 6.5 to 8.2 PE ratio
> ...



The issue got fully subscribed with issue price about $2.65. The promoters hold large amount of stock holding and going to be traded from 25 May 2014. Interesting time of listing .


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## Sound (18 February 2015)

Down 18% today, anyone looking to bite?

Kind of decent yield? Thoughts?


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## Wysiwyg (19 February 2015)

Sound said:


> Down 18% today, anyone looking to bite?
> 
> Kind of decent yield? Thoughts?



 One of the many breakouts I had on watchlist so saw the action and set the order up but froze on the mouse at $3.23 - $3.25 thinking there was further downside, which didn't manifest today. Noticed a big soak up of volume at price $3.30 and large volume there which I could not see on the d.o.m. Still some time left to trade up before the Westpac decision impacts the company. Sentiment ???


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## mg11 (19 February 2015)

Wysiwyg said:


> One of the many breakouts I had on watchlist so saw the action and set the order up but froze on the mouse at $3.23 - $3.25 thinking there was further downside, which didn't manifest today. Noticed a big soak up of volume at price $3.30 and large volume there which I could not see on the d.o.m. Still some time left to trade up before the Westpac decision impacts the company. Sentiment ???




my rough workout says the dividend shld have made GMA drop abt 7 or 8% , but it went down 23% & stayed there

Any Idea why there was such a huge drop ?


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## PinguPingu (19 February 2015)

mg11 said:


> my rough workout says the dividend shld have made GMA drop abt 7 or 8% , but it went down 23% & stayed there
> 
> Any Idea why there was such a huge drop ?




Westpac. 

http://www.businessinsider.com.au/s...lling-as-westpac-withdraws-it-business-2015-2


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## Rainman (16 September 2015)

Is anyone else in this stock?  On my calculations it is incredibly cheap and to all appearances a solid company.  

I have been steadily building a position in it since it dropped below $2.70.  It is now trading at just over 60% of book value.


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## So_Cynical (17 September 2015)

Rainman said:


> Is anyone else in this stock?  On my calculations it is incredibly cheap and to all appearances a solid company.
> 
> I have been steadily building a position in it since it dropped below $2.70.  It is now trading at just over 60% of book value.




The banks taking their Mortgage insurance business in house doesn't worry you? concerned me so i stayed away.


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## skc (17 September 2015)

So_Cynical said:


> The banks taking their Mortgage insurance business in house doesn't worry you? concerned me so i stayed away.




That's one concern... a fair chunk of the FY15 income will not be repeated next year so any valuation needs to take that into account.

Plus the fact that arrears / default rates are at historic lows. So it may be a case of "as good as it gets". A potential investor needs to determine earnings through the housing / default cycle and apply the appropriate "through the cycle" discount rate / multiple in their valuation model.

In summary - not an easy task.


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## Rainman (18 September 2015)

So_Cynical said:


> The banks taking their Mortgage insurance business in house doesn't worry you?...




Banks?  As far as I am aware, it was just one bank - Westpac: http://www.reuters.com/article/2015/02/17/genworth-mtg-ins-westpac-contract-idUSL4N0VR2AD20150217.  That contract represented 14% of GMA's gross written premiums.


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## Rainman (18 September 2015)

skc said:


> That's one concern... a fair chunk of the FY15 income will not be repeated next year so any valuation needs to take that into account.




A "fair chunk"?  The Westpac contract represented 14% of GWP.  I have still got GMA earning around $280 million in NPAT for FY 2016 which factors in a full year without the Westpac contract.  At $280 million in NPAT, that still gives GMA a current earnings yield of 17.3% and puts it on a forward P/E of 5.7. 



skc said:


> Plus the fact that arrears / default rates are at historic lows. So it may be a case of "as good as it gets"...




It is true that mortgage delinquency rates are at historical lows - provided that your timeframe goes back no further than 2006.  That is what Moody's observed in its most recent report on the topic:http://www.securitisation.com.au/Li...tial Mortgage Delinquency Map, March 2015.pdf.  Moody's found that 1.19% of mortgages were in arrears as at the end of last year.  

However, if you take a wider historical perspective, you will see below that mortgage delinquencies are actually higher than they have been: 





So, while I don't have the data to work out what the long term average - say, across 20 years - is of mortgage delinquencies in Australia, the indications are that they are not presently at record lows.  

I welcome any data suggesting the contrary.


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## So_Cynical (18 September 2015)

Rainman said:


> Banks?  As far as I am aware, it was just one bank - Westpac




1 bank we know of Westpac, the other 'banks' we don't know what will happen but it makes some sense to bring that business in house, the banks sell other insurances so why not mortgage? 



			
				SMH said:
			
		

> CLSA insurance analyst Jan van der Schalk argued the group's underlying earnings were affectd by the loss of a major contract with Westpac Banking Corp, and a lower mix of 90 to 95 per cent LVR loans written in the business.
> He argued there was also increasing pressure for Genworth's biggest client,* the Commonwealth Bank of Australia, to pull the plug* on its contract with the group. CBA accounts for *41 per cent of Genworth's premium revenue*




http://www.smh.com.au/business/genw...falls-25pc-in-first-half-20150804-girhdm.html


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## Rainman (18 September 2015)

So_Cynical said:


> ... it makes some sense to bring that business in house, the banks sell other insurances so why not mortgage?




Because the very risk that the banks are seeking to insure against would remain on their books.


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## Rainman (18 September 2015)

So_Cynical said:


> http://www.smh.com.au/business/genw...falls-25pc-in-first-half-20150804-girhdm.html




Thanks for the link to the article.  

If there is "_increasing pressure_" on CBA to terminate its contract with GMA, it is probably for the same reason that WBC ended its agreement with GMA: because it no longer wants to make loans of greater than 90% of the value of the property mortgaged.  But if CBA did that, it would be giving up valuable market share and someone else is certain to pick up that business in any event.  

I venture also that the business that WBC has given up by its decision not to make 90%+ LVR loans has gone to competitors - either banks or other mortgage lenders.  I doubt whether the business has simply evaporated in the ether - especially in this low-interest rate environment.


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## So_Cynical (19 September 2015)

Rainman said:


> Because the very risk that the banks are seeking to insure against would remain on their books.




As would the profits...remain on their books - do a deal with a reinsurance firm to reduce risk.


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## Rainman (20 September 2015)

So_Cynical said:


> As would the profits...remain on their books - do a deal with a reinsurance firm to reduce risk.




Yes, CBA could do that perhaps.  And perhaps it might.  But perhaps it might not.  Anything is possible in the future.  There is always a reason not to buy when value is staring one in the face.


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## joeno (21 September 2015)

Rainman said:


> Yes, CBA could do that perhaps.  And perhaps it might.  But perhaps it might not.  Anything is possible in the future.  There is always a reason not to buy when value is staring one in the face.




I said the same about gold stocks...


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## Rainman (22 September 2015)

joeno said:


> I said the same about gold stocks...




I couldn't comment on the value of gold stocks.  But I know a little bit about insurance. 

For any of you who are yet to be convinced that GMA is probably one of the most undervalued companies currently trading on the ASX, you might benefit from a post by a guy called *dannyboyLIAC* who is a member on the forum Hot Copper.  He has written on GMA and has crunched the numbers.  He also knows the mortgage insurance business like the back of his hand.  

His post on GMA, apart from being quantitatively compelling, confirms my initial belief that, fundamentally, GMA's undervaluation is due to ignorance of the mortgage insurance business.   That ignorance has bred fear.  But fear, thankfully, brings opportunity.


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## Triathlete (22 September 2015)

Rainman said:


> His post on GMA, apart from being quantitatively compelling, confirms my initial belief that, fundamentally, GMA's *undervaluation is due to ignorance of the mortgage insurance business. That ignorance has bred fear.  But fear, thankfully, brings opportunity*.




That may be true,but looking at it from a technical view also I certainly would not buy it at the moment while it is in a downtrend,who knows the stock may keep going down or move sideways from here.

If you are confident about the value I would at least wait until there is more information that the stock price is going to move up and earn some capital gains,cannot see that at present.


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## Rainman (22 September 2015)

Triathlete said:


> That may be true,but looking at it from a technical view also I certainly would not buy it at the moment while it is in a downtrend,who knows the stock may keep going down or move sideways from here.
> 
> If you are confident about the value I would at least wait until there is more information that the stock price is going to move up and earn some capital gains,cannot see that at present.




If it is a bargain at $2.44, it will be even more of a bargain at a lower price.


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## Triathlete (22 September 2015)

Rainman said:


> If it is a bargain at $2.44, it will be even more of a bargain at a lower price.




Who says that it is a bargain? that is just your opinion.

I would be asking if it is such a good value buy now why is the rest of the investment community not getting behind it and pushing the price up? but rather the price has been pushed down.

Obviously not everyone is sharing your enthusiasm for this company.

The numbers only tell half the story always remember that...


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## Tooth Faerie (22 September 2015)

Rainman said:


> I couldn't comment on the value of gold stocks.  But I know a little bit about insurance.
> 
> For any of you who are yet to be convinced that GMA is probably one of the most undervalued companies currently trading on the ASX, you might benefit from a post by a guy called *dannyboyLIAC* who is a member on the forum Hot Copper.  He has written on GMA and has crunched the numbers.  He also knows the mortgage insurance business like the back of his hand.
> 
> His post on GMA, apart from being quantitatively compelling, confirms my initial belief that, fundamentally, GMA's undervaluation is due to ignorance of the mortgage insurance business.   That ignorance has bred fear.  But fear, thankfully, brings opportunity.




I agree with the valuation. I think GMA is a bargain as well but I'm afraid of one uncertainty.

What's your opinion on the likely effect on GMA _if_ a housing market crash or correction occurs?


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## Rainman (22 September 2015)

Triathlete said:


> Who says that it is a bargain? that is just your opinion.
> 
> I would be asking if it is such a good value buy now why is the rest of the investment community not getting behind it and pushing the price up? but rather the price has been pushed down.
> 
> ...




Stick to  your knitting, my friend.  You're a technical analyst guy.  You're not competent to comment on valuation - with respect.


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## Rainman (22 September 2015)

Tooth Faerie said:


> I agree with the valuation. I think GMA is a bargain as well but I'm afraid of one uncertainty.
> 
> What's your opinion on the likely effect on GMA _if_ a housing market crash or correction occurs?




I think the fear of a "housing market crash" in Australia is largely influenced by conceptions of the US subprime crisis that occurred in 2007 and 2008.  But if you understand the causes of the US subprime crisis, you will see why such a meltdown did not spread to Australia at the time and why it will not happen in Australia in the foreseeable future.  

The US subprime crisis was due to many factors - too many to go into here.  But chief among them were:

1.  slack underwriting standards (and in many cases outright fraud);

2.  loans being made for 100% of property values where property values were already grossly inflated;

3.  securitization which allowed those underwriting crap mortgages to get them off their books;

4.  the failure of the ratings agencies to properly investigate what they were rating;

5.  the peculiarity under US law where mortgage claims losses cannot be pursued, making walking away from a mortgage almost consequence-free for the defaulting mortgagor.  

We have point 3 above in Australia.  I don't believe that we have point 2 and we certainly don't have points 1, 4 or 5.  

I don't mean to suggest by this that we won't see an uptick in mortgage defaults in Australia, particularly in the mining states.  But once you understand GMA's business, factor in the enormous size of its investment portfolio and realize that it would really take a US-style subprime mortgage crisis (which is simply not going to happen in Australia) to materially weaken GMA, then you will see that all the current hysteria about GMA and the Aussie housing market is just that - hysteria.


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## Triathlete (22 September 2015)

Rainman said:


> Stick to  your knitting, my friend.  You're a technical analyst guy.  You're not competent to comment on valuation - with respect.




See Rainman you jump to conclusions...I always start my analysis with the companies Fundamentals,and only then do I do the technicals to ensure myself that the fundamentals are being supported....I have seen too many companies that had great looking Fundamentals only to go out of business.....with respect.


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## satanoperca (22 September 2015)

Rainman said:


> I think the fear of a "housing market crash" in Australia is largely influenced by conceptions of the US subprime crisis that occurred in 2007 and 2008.  But if you understand the causes of the US subprime crisis, you will see why such a meltdown did not spread to Australia at the time and why it will not happen in Australia in the foreseeable future.
> 
> The US subprime crisis was due to many factors - too many to go into here.  But chief among them were:
> 
> ...




GMA looks like an excellent company to go short on, given we are the most highly indebted nation per capiter in the western world and how much lower can IR's go, not much.

Good luck with your valuations, I stick with trend following and charts, the market does what it does.


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## Rainman (22 September 2015)

Triathlete said:


> See Rainman you jump to conclusions...I always start my analysis with the companies Fundamentals,and only then do I do the technicals to ensure myself that the fundamentals are being supported....I have seen too many companies that had great looking Fundamentals only to go out of business.....with respect.




I'd be interested in knowing the names of those companies which you say had "good looking fundamentals" but then went out of business.


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## Rainman (22 September 2015)

Ok, satanoperca, so you think Australia is headed for a US-style mortgage meltdown based on some superficial resemblance that you find between the current housing market in Australia and that which existed in the US between 2003 to 2007.  How about backing that up with research?  

In relation to the contribution of non-recourse loans in some US states to the subprime crisis, you say that less than 12 US states have laws making loans non-recourse.  Firstly, you're wrong.  It is 12 states.   

Secondly, it is interesting that you did not name the states.  Which states are they?  They are Alaska, Arizona, California, Iowa, Minnesota, Montana, Nevada, North Carolina, North Dakota, Oregan, Washington and Wisconsin.  And which US states were the epicentre of the subprime crisis?  California, Arizona and Nevada.  

Now it is true that Nevada only introduced laws forbidding lenders recourse on defaulted mortgages in 2009 (see here: https://www.cga.ct.gov/2010/rpt/2010-R-0327.htm).  But whether the law had been in place in Nevada prior to 2007 or after is irrelevant.  The effect of it is the same: lenders cannot recover from defaulting mortgagors.    



satanoperca said:


> GMA looks like an excellent company to go short on, given we are the most highly indebted nation per capiter in the western world and how much lower can IR's go, not much.




Do it then.  And be sure to share with us your success.


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## satanoperca (22 September 2015)

Rainman said:


> Ok, satanoperca, so you think Australia is headed for a US-style mortgage meltdown based on some superficial resemblance that you find between the current housing market in Australia and that which existed in the US between 2003 to 2007.  How about backing that up with research?
> 
> In relation to the contribution of non-recourse loans in some US states to the subprime crisis, you say that less than 12 US states have laws making loans non-recourse.  Firstly, you're wrong.  It is 12 states.
> 
> ...




You make me laugh Rainman. You imply the whole of the states and I am out by less than 5%.

Seen your type many times on this forum. You need to proves to yourself your investment worth, I do not.

Good Luck living the dream.


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## Triathlete (22 September 2015)

Rainman said:


> I'd be interested in knowing the names of those companies which you say had "good looking fundamentals" but then went out of business.




Sent you a PM..


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## Rainman (22 September 2015)

satanoperca said:


> ... You imply the whole of the states and I am out by less than 5%.




You really need to bone up on your knowledge of the US subprime crisis.  The subprime crisis did not occur in every state in the US.  For example, the New England states were hardly touched by it.  The subprime crisis occurred principally in California, Arizona, Nevada and Florida.  Three of those states had or now have laws preventing recourse by lenders against defaulting mortgagors.  What is your point?  



satanoperca said:


> You need to proves to yourself your investment worth, I do not.




My friend, I have zero interest in proving anything to you.


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## satanoperca (22 September 2015)

Rainman said:


> You really need to bone up on your knowledge of the US subprime crisis.  The subprime crisis did not occur in every state in the US.  For example, the New England states were hardly touched by it.  The subprime crisis occurred principally in California, Arizona, Nevada and Florida.  Three of those states had or now have laws preventing recourse by lenders against defaulting mortgagors.  What is your point?
> 
> 
> 
> My friend, I have zero interest in proving anything to you.






My point was don't make grand statements without detail. Seems you have found wiki, all power to you.

Hope it doesn't rain tomorrow.So easily baited. Hate to be proven wrong or dare I say to question your thoughts or beliefs.


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## satanoperca (23 September 2015)

Rainman,

Bargain to be had today, even cheaper than yesterday.

The only thing that might save it in the short term is the gap downs that need to be filled.

From purely a charting view point, there is nothing to suggest that this stock will reverse and start trending up again no matter what the fundamentals say.

Happy to be proven wrong


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## skc (23 September 2015)

satanoperca said:


> Rainman,
> 
> Bargain to be had today, even cheaper than yesterday.
> 
> The only thing that might save it in the short term is the gap downs that need to be filled.




Is it really that hard to provide commentary on the chart without taunting people with different views or methods?

Rainman has provided plenty of arguments supporting his assertion. He's contributed to the richness of the content in this thread... regardless of whether he's right or wrong.

He's definitely forced me to take a closer look and try to learn more about GMA. 



satanoperca said:


> From purely a charting view point, there is nothing to suggest that this stock will reverse and start trending up again no matter what the fundamentals say.




Technical analysis is all about seeing what others are doing through price / volume etc. If ALL market participants use solely technical analysis, there will NEVER be any reversal in price. The reversal in price action you see in the chart are results of people who don't subscribe to technical analysis. The chartist is trying to follow the trend set by someone else... someone who doesn't use charts. And the chartist will be following the new trend set by someone whom they have just mocked for not respecting the previous trend.


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## sinner (23 September 2015)

skc said:


> Is it really that hard to provide commentary on the chart without taunting people with different views or methods?
> 
> Rainman has provided plenty of arguments supporting his assertion. He's contributed to the richness of the content in this thread... regardless of whether he's right or wrong.




Big +1 on this skc. You know what? Any random can screenshot a chart with some lines or whatever. The only interesting thing, the thing that actually builds a discussion is the fundamentals. What can a technician add to the conversation? Pretty much nothing, only an analysis of what happened in the past and unscientific predictions about the future that are only relevant in the context of a broader trading system and completely useless in the idiosyncratic sense. 

The trend is down? Wow thanks for nothing. Tell me something I can't figure out from looking at a 6 month price chart for 3 seconds.

NB: Saying this as an avid technician and quantitative analyst, before the chartists jump down my throat.


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## The Falcon (23 September 2015)

Triathlete said:


> Sent you a PM..




Keen to see you can share the same Triathlete


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## tech/a (23 September 2015)

skc said:


> Is it really that hard to provide commentary on the chart without taunting people with different views or methods?
> 
> 
> 
> Technical analysis is all about seeing what others are doing through price / volume etc. If ALL market participants use solely technical analysis, there will NEVER be any reversal in price. The reversal in price action you see in the chart are results of people who don't subscribe to technical analysis. The chartist is trying to follow the trend set by someone else... someone who doesn't use charts. And the chartist will be following the new trend set by someone whom they have just mocked for not respecting the previous trend.






sinner said:


> Big +1 on this skc. You know what? Any random can screenshot a chart with some lines or whatever. The only interesting thing, the thing that actually builds a discussion is the fundamentals. What can a technician add to the conversation? Pretty much nothing, only an analysis of what happened in the past and unscientific predictions about the future that are only relevant in the context of a broader trading system and completely useless in the idiosyncratic sense.
> 
> The trend is down? Wow thanks for nothing. Tell me something I can't figure out from looking at a 6 month price chart for 3 seconds.
> 
> NB: Saying this as an avid technician and quantitative analyst, before the chartists jump down my throat.




I love you guys
I wont clutter this thread but will post another with regard to these comments.


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## Rainman (23 September 2015)

satanoperca said:


> ... From purely a charting view point, there is nothing to suggest that this stock will reverse and start trending up again no matter what the fundamentals say...




I. Don't.  Care.


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## skc (23 September 2015)

tech/a said:


> I love you guys
> I wont clutter this thread but will post another with regard to these comments.




PLEASE don't. I just want posters to respect each other.


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## tech/a (23 September 2015)

skc said:


> PLEASE don't. I just want posters to respect each other.




Not here but on a separate thread.


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## tech/a (23 September 2015)

A CHART





I agree with short.

Ill post when I think--if ever that its a long.
For my own amusement no one else's.

Losing around 50% of its value in 6 mths 
Something isn't right in paradise and the markets voting with
its wallet.


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## Rainman (23 September 2015)

tech/a said:


> A CHART
> 
> View attachment 64423




To answer your question why "_if it's way undervalued, aren't 100s of others agreeing_" with me: let me put this to you.

Suppose the "_100s of others_" that you are referring to are just like you.  Then suppose they were all asked: How much is GMA worth?  

You and the "_100s of others_" wouldn't have a clue.  

That is the answer to your question.


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## satanoperca (23 September 2015)

Rainman said:


> That is the answer to your question.




Clearly Tech/A the market must be *wrong*. That is the answer or the fact that we are pumped full of cheap mortgage credit and their business model is based on that one asset class that they have insured against.

Then again, property values only every go up in Australia, sort of like believing a casino only has the colour black.

As for SKC and Sinner, read the first post I wrote regarding this thread, nothing to do with charts, but fundamentals. Geez, I actual gave you guys some credit but bias is blinding.

:dunno::dunno:


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## Rainman (23 September 2015)

satanoperca said:


> Clearly Tech/A the market must be *wrong*.




So much waffle.  Do a valuation of GMA and tell us how much you think it is worth.


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## tech/a (23 September 2015)

Rainman said:


> So much waffle.  Do a valuation of GMA and tell us how much you think it is worth.




Who cares how much you think it's worth.

Clearly it's not worth more than $2.44

But hey delusion in ones ability to value ( above all other punters )
Is clearly brilliance.

Still it doesn't matter that your wrong
Only how long you stay wrong.

I'll check back in a month----see how that valuation v market sentiment is going.
Bet sentiments winning.


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## skc (23 September 2015)

satanoperca said:


> As for SKC and Sinner, read the first post I wrote regarding this thread, nothing to do with charts, but fundamentals. Geez, I actual gave you guys some credit but bias is blinding.




My post is primarily about treating posters with different methods and opinion with respect. I hate to see people being driven away from this forum because they are mocked for offering their view.

I won't get drawn into any technical vs fundamental debate because I am not an idiot.


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## satanoperca (23 September 2015)

tech/a said:


> Only how long you stay wrong.




It took me many years and way to much cash in trading and business to understand this statement, but once I did, life became easier.

Maybe a drought will help Rainman understand the meaning of this statement to, but like myself, it may take years.


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## satanoperca (23 September 2015)

skc said:


> I won't get drawn into any technical vs fundamental debate because I am not an idiot.




It was just a fundamental debate, but like technical analysis, detail is king. There is no black or white, just shades of grey. I personally believe that like cooking, one just cannot use a single ingredient to make a great meal.


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## Rainman (24 September 2015)

tech/a said:


> Who cares how much you think it's worth.
> 
> Clearly it's not worth more than $2.44




With respect, you're simply not in a position to say that.  Surely, as a T/A guy, even you would concede that.  

By all means, wax lyrical about resistances and supports and break-outs.  But don't pretend that you have any idea what GMA is actually worth.  You just sound foolish otherwise.



tech/a said:


> I'll check back in a month----see how that valuation v market sentiment is going. Bet sentiments winning.




How about checking back in a year?  Care to wager on that?


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## Rainman (24 September 2015)

skc said:


> I won't get drawn into any technical vs fundamental debate because I am not an idiot.




Wise.  Possibly *THE* most sterile debate that one can have.

You can have a debate with some people on this forum about a stock and the debate is instructive - especially when the person disagrees with your investment thesis.  They force you to go back,  check your figures and reassess your assumptions.  

But then there are others who disagree with you and they add zero value.  They point to grey clouds and predict rain.  Then they want plaudits when it starts raining - even (or especially) if it is just a dribble and quickly passes.    

What value is there in pointing to a chart that is trending down and saying: "_The trend is down_"?  Then the trend reverses and they say: "_Look, the trend is reversing_".  Zero value.


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## Triathlete (24 September 2015)

Rainman said:


> What value is there in pointing to a chart that is trending down and saying: "_The trend is down_"?  Then the trend reverses and they say: "_Look, the trend is reversing_".  Zero value.




As I have said above in a previous post  I also use both types of analysis FA/TA to base my decisions.

*Now let us say your valuation is correct *and it is an undervalued company and has plenty of upside then *great* I will keep this company on my *watch list for now *until I can see that the trend is starting to *support the fundamentals.*

 Once this happens being knowledgeable about TA* I  will also work out the likely percentage rise this move is going to be and will then take a position on those predictions if this move shows profitability to me and that the odds are in my favour.*

*Currently though the move is down so we cannot see any previous support levels where it will stop * and also this company does not have much data too analyse from a T/A view since it show May 2014 at $2.58 on a monthly chart as the beginning of its share market journey.

I will say that if we are currently on an EW C ??? ( maybe some of the other TA analysts could take a look and give there views here please) then I would expect that this move down could go to $1.86 but again as I said not much data as I like to have at least 5 years worth to give myself more confidence that I am correct.


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## tech/a (24 September 2015)

Nothing wrong with fundamentals particularly if you control the Company.
The problem I and others like me have with F/A is 

(1) The time it takes for Valuation Models to be proven accurate.
(2) The time it takes to filter through Fundamental data.
(3) The accuracy of that data ( I have had 3 Companies Go broke on me ---- In the real world---as in Clients
who's books work according to VEDA was fine) Unless your on the board ---do you really know??
(4) The tendency for the market to be oblivious to professional Valuations.
(5) The wide range of accepted ways to value a company---often giving a different result.

*Supported by others who understand*



> That's one concern... a fair chunk of the FY15 income will not be repeated next year so any valuation needs to take that into account.
> 
> Plus the fact that arrears / default rates are at historic lows. So it may be a case of "as good as it gets". A potential investor needs to determine earnings through the housing / default cycle and apply the appropriate "through the cycle" discount rate / multiple in their valuation model.
> 
> *In summary - not an easy task*.




Certainly T/A is also subjective---but for me--

(1) I know I'm wrong very quickly.
(2) I can be wrong far more often than right and still be profitable.
(3) I can analyse a chart in a few minutes.
(4) I can test theories.
(5) I have no attachment to my analysis---I don't have to be right--I welcome being wrong.

I don't see an argument when both types of analysis are mentioned.
I see variations in selected method. For any number of reasons.



> What value is there in pointing to a chart that is trending down and saying: "The trend is down"? Then the trend reverses and they say: "Look, the trend is reversing". Zero value.




*Ok Lets take GMA*



> I have been steadily building a position in it since it dropped below $2.70. It is now trading at just over 60% of book value.



So right now you've been building a position from $2.70.
We as Techies aren't---yet---(It may never be---to us) so even if your Dollar cost averaging your still below the figure at which you think it was a bargain. 

So to your Quote above What's the value.
If we can indeed see a change in sentiment we should be able to do 2 things.
(1) Not lose as much as you.
(2) and or Profit more than you.
Both because our timing and nimble footedness---according to us---skews our sort of analysis in our favour.



> How about checking back in a year? Care to wager on that?




Sure I love a wager and if wrong I actually pay up.(Ask Joe Blow).

But for me to participate I'm not saying your wrong---you may well be.
I'm saying F/A is as imperfect as T/A or any other form of analysis.

I'm happy to bet an amount of your choosing the winner paying Joe in support of his legal fund.
The trade/s must be real and have a brokers trail that can be verified by Joe.

I wage I will not lose as much as you or gain more than you trading or not trading GMA for 12 mths

That should add some interest in the thread!

Note there are no personal attacks here only my own opinion.


----------



## Trembling Hand (24 September 2015)

skc said:


> I won't get drawn into any technical vs fundamental debate because I am not an idiot.


----------



## tech/a (24 September 2015)

Trembling Hand said:


>




Its always the same.
F/A put up their point of view and if there is any view put up by T/A guys you get this.



> Stick to your knitting, my friend. You're a technical analyst guy. You're not competent to comment on valuation - with respect






> And the chartist will be following the new trend set by someone whom they have just mocked for not respecting the previous trend






> Big +1 on this skc. You know what? Any random can screenshot a chart with some lines or whatever. The only interesting thing, the thing that actually builds a discussion is the fundamentals. What can a technician add to the conversation? Pretty much nothing, only an analysis of what happened in the past and unscientific predictions about the future that are only relevant in the context of a broader trading system and completely useless in the idiosyncratic sense.
> 
> The trend is down? Wow thanks for nothing. Tell me something I can't figure out from looking at a 6 month price chart for 3 seconds.






> So much waffle. Do a valuation of GMA and tell us how much you think it is worth.




Then the classic



> I won't get drawn into any technical vs fundamental debate because I am not an idiot




*Unless your an F/A don't bother to comment*---your an idiot to present anything different.

Love it!


----------



## McLovin (24 September 2015)

tech/a said:


> Then the classic
> 
> 
> 
> ...




Wow. Talk about misinterpretation. Sometimes I wonder (hope is maybe a better word) if it's deliberate.


----------



## tech/a (24 September 2015)

> Wow. Talk about misinterpretation. Sometimes I wonder (hope is maybe a better word) if it's deliberate.




*Mc Muddle*
Exactly the way I feel about the snippets of quotes taken from the Fundies directed at the techies.
Difference is that I know its deliberate.

Its seen as Intelligence V Voodoo.

Why cant views be expressed without quotes like those above?



> My post is primarily about treating posters with different methods and opinion with respect. I hate to see people being driven away from this forum because they are mocked for offering their view.




Start with your own clan!---Evidently your not idiots.


----------



## McLovin (24 September 2015)

tech/a said:


> *Mc Muddle*
> Exactly the way I feel about the snippets of quotes taken from the Fundies directed at the techies.
> Difference is that I know its deliberate.
> 
> ...




"Fundies"? No. One poster. It's not exactly uncommon, and it tends to be newbies who have just discovered FA or TA. I don't really see the point of getting so worked up about what they say. It's not like I lose sleep because rimtas told me I have NFI. There are people on here, long time posters, whose opinion I respect, even if I might disagree with them. For everyone else it's water off a duck's back. 

Try it. It's very liberating.


----------



## skc (24 September 2015)

tech/a said:


> Then the classic
> 
> 
> 
> ...




Lol Tech/A. Please interpret my post correctly.

What I said is I would be an idiot if I spend time debating TA vs FA (because it's time wasting and you'd never convince anyone). 

What I am NOT saying is anyone doing TA is an idiot.

I am trying foster mutual respect... something you can definitely try sometimes.


----------



## tech/a (24 September 2015)

> I am trying foster mutual respect... something you can definitely try sometimes.




All for it.



> What I said is I would be an idiot if I spend time debating TA vs FA (because it's time wasting and you'd never convince anyone).




For me its a matter of presenting to some a method that they may not have considered.
Not trying to convince. I could be wrong but I thought I provided a checklist above of my
own personal reasons for selecting T/A not debating F/A V T/A just comparing preferences.


----------



## Rainman (24 September 2015)

tech/a said:


> Sure I love a wager and if wrong I actually pay up.(Ask Joe Blow).
> 
> But for me to participate I'm not saying your wrong---you may well be.
> I'm saying F/A is as imperfect as T/A or any other form of analysis...




I knew it.  Now the fudging starts.  

Let's be clear: the card that you've constantly pulled on this thread (and not only on this thread) is: Why, if GMA is undervalued, is its price not going up?  Ergo, it is not undervalued and any claim that it is undervalued is false because the chart shows that it is in a down trend.  

That is the substance of your position.  Now the problem that I (and others, it seems) have with it is that you then use it to club others over the head who have crunched the numbers and concluded that the market has mispriced the stock.  Thus, we get:



tech/a said:


> Who cares how much you think it's worth... Clearly it's not worth more than $2.44




And yet the reality is that you don't have a clue how much GMA (or any other stock) is worth.  But you claim, after another member has announced a position in a stock, that the fact that the stock has gone down at a particular point in time proves that the stock is not mispriced. 

This is like someone arguing that your identification of a support line or a head-and-shoulders pattern is wrong because the company has just reported bumper earnings.  By contrast, as the quote from you above shows, you're constantly advancing technical reasons why a fundamental claim is wrong. 

Now, the bet is this: you've said above that "_Clearly_ [GMA] _is not worth $2.44_".  That is a claim made by you as to GMA's valuation.  It is a fundamental claim, albeit based on technical analysis.  Therefore, by your reckoning, the price of GMA should not exceed $2.44 in the next 12 months.  If it does rise above $2.44 in the next 12 months, I win.  If it does not, you win.  That is the bet.  It is simple.   

Now put your money where your mouth is.


----------



## Trembling Hand (24 September 2015)

Rainman said:


> Now, the bet is this: you've said above that "_Clearly_ [GMA] _is not worth $2.44_".  That is a claim made by you as to GMA's valuation.  It is a fundamental claim, albeit based on technical analysis.  Therefore, by your reckoning, the price of GMA should not exceed $2.44 in the next 12 months.  If it does rise above $2.44 in the next 12 months, I win.  If it does not, you win.  That is the bet.  It is simple.
> 
> Now put your money where your mouth is.




So this as usual is getting silly.


----------



## tech/a (24 September 2015)

> that the fact that the stock has gone down at a particular point in time proves that the stock is not mispriced.




Proves that the market doesn't agree with you that its mispriced.



> And yet the reality is that you don't have a clue how much GMA (or any other stock) is worth.




Yep don't care----I only care about what price I can get in at and what price I can get out at and make a profit or minimize my losses.



> you're constantly advancing technical reasons why a fundamental claim is wrong.




I am?

I think I'm reading market action you yourself agree I have no idea what any stock is worth---I freely admit I don't care. I care about what its trading at day to day.



> Now, the bet is this: you've said above that "Clearly [GMA] is not worth $2.44". That is a claim made by you as to GMA's valuation.




Well you thought it was undervalued at $2.70 now at $2.36 My argument is when is price really undervalued.
If your analysis is that good then the market would agree at $2.70 and surely by $2.36
Truth is the market determines price not a valuation by you or anyone else. Price may never agree with your valuation. Price may agree at sometime with your valuation. Ill see it when the two align. Ill even buy it if I think they align.
I wont sit in it waiting for the market to agree with anyone's analysis that its undervalued.



> Therefore, by your reckoning, the price of GMA should not exceed $2.44 in the next 12 months




If you deduce that from my posts Id hate to see what you read into a balance sheet.

I don't know if the stock price will finish above $2.44 in a year---nor do you.
But Ill bet I don't lose as much and or make more money out of the trade than you do.


That---is my bet.---I can do that by taking a trade today!!!---yeh yeh you can average down.

Come on lets do it.
Name your price.(Bet).


----------



## Rainman (24 September 2015)

tech/a said:


> Clearly it's not worth more than $2.44




They are your words.  

The bet is that in 12 months the price of GMA is higher than $2.44.  It is simple.  Now stop being a pussy and make the bet.


----------



## Rainman (24 September 2015)

tech/a said:


> I'll check back in a month----see how that valuation v market sentiment is going.
> Bet sentiments winning.




They are also your words.  

You first offered to make the bet, not me.  And it is a bet between, in your words, "_valuation v market sentiment_".  You bet that sentiment will win over fundamental valuation.  Sentiment currently says that GMA is not worth more than $2.44.  You've agreed to a timeframe of 12 months.  Those are the terms of the bet - all in your own words.  It is that simple.  

So stop trying to complicate things.  Make the bet that you first offered to make.


----------



## tech/a (25 September 2015)

Ok I'll play
$1000
it's lower than $2.44 in 12 mths.
If I lose Joe gets a grand.
If you lose you send Joe a grand.

Done?


----------



## skc (25 September 2015)

tech/a said:


> Ok I'll play
> $1000
> it's lower than $2.44 in 12 mths.
> If I lose Joe gets a grand.
> ...




On touch or on close? GMA also pays chunky dividend so that needs to be adjusted for.


----------



## craft (25 September 2015)

skc said:


> My post is primarily about treating posters with different methods and opinion with respect. I hate to see people being driven away from this forum because they are mocked for offering their view.





Occasionally when researching a company I will come across a Google link to ASF and my anticipation of a changed culture and broader participation arises.

This site should be thumping along with stock discussion – a relevant marketing name and a good platform. So what’s the problem? I think the answer is in this thread and how it is representative of what happens on ASF.

As somebody who is interested in the likely long term cash flow generation of businesses as opposed to day to day gyrations of the market price, I must say NOT posting anymore on ASF is blissful.


----------



## tech/a (25 September 2015)

craft said:


> Occasionally when researching a company I will come across a Google link to ASF and my anticipation of a changed culture and broader participation arises.
> 
> This site should be thumping along with stock discussion – a relevant marketing name and a good platform. So what’s the problem? I think the answer is in this thread and how it is representative of what happens on ASF.
> 
> As somebody who is interested in the likely long term cash flow generation of businesses as opposed to day to day gyrations of the market price, I must say NOT posting anymore on ASF is blissful.




Yet you still find threads and you cant help but post. I'm sure it generates some traffic.
This thread will get back on track very soon.

To add to my offer Ill also bet my bet of either losing less or profiting more that Rainman over the next 12 mths on this stock. Another ($1000)

Not only that Ill send Joe my $2000 on Monday and he can keep it *even if I win *as a donation towards his Legal Fund.

The only Caveat is Rainman does the same (He doesn't have to Give Joe his $2k(Unless he loses) just lodge it.(So he cant just disappear into cyber space) I'm sure Joe will refund it if he is successful in either.

Joe will report he has it in his account.

*So win or lose ASF wins.*

I'm sure Joe wont mind if others wish to back either competitor! *Funds to ASF.*

From here on my posts will be related to GMA


----------



## craft (25 September 2015)

tech/a said:


> Yet you still find threads and you cant help but post.




Yes of course I'm sorry for posting.

It was just a heads up to Joe that people coming here to discuss stocks inevitably end up being subjected to an ego driven wank fest rather than an environment that fosters broad discussion. 



tech/a said:


> *So win or lose ASF wins.*
> 
> This might appeal to a few but I suspect overall ASF is the loser




Back to my bliss.


----------



## tech/a (25 September 2015)

craft said:


> Yes of course I'm sorry for posting.
> 
> It was just a heads up to Joe that people coming here to discuss stocks inevitably end up being subjected to an ego driven wank fest rather than an environment that fosters broad discussion.
> 
> ...




Carry on.


----------



## Rainman (25 September 2015)

tech/a said:


> Ok I'll play
> $1000
> it's lower than $2.44 in 12 mths.
> If I lose Joe gets a grand.
> ...




Done.


----------



## tech/a (25 September 2015)

Rainman said:


> Done.




Send your grand to Joe and Ill send mine on Monday

Done?


----------



## skc (25 September 2015)

skc said:


> On touch or on close? GMA also pays chunky dividend so that needs to be adjusted for.




Please clarify re above.

opcorn:


----------



## Rainman (25 September 2015)

tech/a said:


> Send your grand to Joe and Ill send mine on Monday
> 
> Done?




I'll send it when/if I lose.


----------



## tech/a (25 September 2015)

Rainman said:


> I'll send it when/if I lose.




Yeh but you could just disappear of the face of the planet.

If your serious just send a grand over other wise its just hot air.
Bets off if you don't part with your $$s
Joe will refund it----He has mine wether I win or lose!

skc

On close at the end of 12 mths GMA below $2.44---generous.
Although He thought it was undervalued at $2.70

Stop stuffing around your turn to put your $$s where your keypad is!

*Try telling a bookie you'll pay him if you lose!!!*


----------



## Rainman (25 September 2015)

tech/a said:


> Yeh but you could just disappear of the face of the planet.
> 
> If your serious just send a grand over other wise its just hot air.
> Bets off if you don't part with your $$s
> ...




I am good for it.  Forfeiture of a year's worth of compounding was not part of the deal.  I'll pay it if I lose.  I promise you that.


----------



## sinner (25 September 2015)

I just want to point out that this so called wager is pretty idiotic all round and proves absolutely nothing regardless of the outcome (aside from the fact that y'all crazy).


----------



## Rainman (25 September 2015)

sinner said:


> I just want to point out that this so called wager is pretty idiotic all round and proves absolutely nothing regardless of the outcome (aside from the fact that y'all crazy).




What it will prove is that, in the long term, the market is a weighing machine.


----------



## The Falcon (25 September 2015)

Rainman said:


> What it will prove is that, in the long term, the market is a weighing machine.




12 months is hardly long term though. These kind of bets aren't helpful for proving anything... beyond the already obvious.


----------



## sinner (25 September 2015)

Rainman said:


> What it will prove is that, in the long term, the market is a weighing machine.




1 year is long term now? 

I better adjust my models!

The way I have termed timeframes (based on testing about a hojillion trading strategies):

* Intraday
* Short term (<21 days)
* Medium term (<252 days)
* Long term > 504 days. I actually have a propensity to think valuations are most effective at >=5y region. GMO Capital bases their forecasts for 7y, Hussman and most others for 10y. Strong evidence for timeframes greater than that as well. I only say 2y as the minimum because of the old Graham exit rule of "exit at 50% profit or after 2y".


----------



## luutzu (25 September 2015)

Rainman said:


> What it will prove is that, in the long term, the market is a weighing machine.




But isn't today the long term of some days that have long passed? 

Or is today + 1 year the long term of some previous days passed?


anyway, I'm holding a few stocks that's been down... but it's OK, it's for the longterm


----------



## Rainman (25 September 2015)

The Falcon said:


> 12 months is hardly long term though.




I agree.  But I'm betting it will be long enough for GMA to revert closer to its book value at least.

GMA made $215 million last year.  It will make more this year.  And you can buy the entire company on the market now for a little over $1.5 billion.  At that price, you get an investment portfolio of over $4 billion earning about $160 million a year thrown in.

There is only so long the market can remain irrational.


----------



## tech/a (25 September 2015)

Whatever.


----------



## Rainman (25 September 2015)

tech/a said:


> Whatever.




Say that again in 12 months' time.


----------



## ThingyMajiggy (25 September 2015)




----------



## CanOz (25 September 2015)

Ahhh, this is where everybody is...move over Sam!


----------



## sinner (25 September 2015)

Rainman said:


> There is only so long the market can remain irrational.




haha are you the only person on the planet which does not know the following *iron law of the markets*? 



> “The market can remain irrational longer than you can remain solvent”



Not attributing it to Keynes, like everyone else does (http://blogs.wsj.com/marketbeat/2011/02/11/keynes-he-didnt-say-half-of-what-he-said-or-did-he/)


----------



## Rainman (25 September 2015)

sinner said:


> haha are you the only person on the planet which does not know the following *iron law of the markets*?
> 
> 
> Not attributing it to Keynes, like everyone else does (http://blogs.wsj.com/marketbeat/2011/02/11/keynes-he-didnt-say-half-of-what-he-said-or-did-he/)




Thanks for enlightening me.  Sometimes the odds of a bet are just so good I can't help myself.


----------



## tech/a (26 September 2015)

Rainman said:


> Thanks for enlightening me.  Sometimes the odds of a bet are just so good I can't help myself.




So take it!

Stop yabbering

Hot air no action.

Doubt you can scrape 
up a couple of grand.

Put your money where you mouth is 
Promissory notes aren't worth the paper they are written on.
Man up.
Bet on!


----------



## McLovin (26 September 2015)

Is this a schoolyard because it sure feels like one.


----------



## CanOz (26 September 2015)

Instead of betting, which is a bit "school yardish", why not both of you make an option play on it? Maybe there are no options on it, i don't know. I just think there must be some interesting way to express your views where we can all watch and learn something new?


----------



## tech/a (26 September 2015)

Come on Can
Bets a bet it's pretty easy 
Place it----watch
Doesn't have to be discussed
If Rainman amd I place the bet 
Simple.I'm sending Joe 2 k Monday.

This Ducks no welcher!

Bets are made all day everyday.
It's taking a position with conviction
And supporting that view with a wager.


----------



## DeepState (26 September 2015)

A bet has been placed in which a 1:1 payout has been agreed for a wager which is about 2/3rs likelihood of closing in Duck's favour.

That's interesting for quite a few reasons.


----------



## Rainman (27 September 2015)

tech/a said:


> Doubt you can scrape
> up a couple of grand.




Quite right.  I am utterly broke.


----------



## skc (27 September 2015)

DeepState said:


> A bet has been placed in which a 1:1 payout has been agreed for a wager which is about 2/3rs likelihood of closing in Duck's favour.
> 
> That's interesting for quite a few reasons.






Rainman said:


> Quite right.  I am utterly broke.




In all fairness, the wager amount should be an equal percentage of each person's net worth.

So please, can Tech/a and Rainman present to Joe by next Monday, audited financial statements and asset valuations by a Big 4 accounting firm, as of 30 Sept 2015.

I suggest the wager amount be set at 2% of net worth of each individual.


----------



## CanOz (27 September 2015)

skc said:


> In all fairness, the wager amount should be an equal percentage of each person's net worth.
> 
> So please, can Tech/a and Rainman present to Joe by next Monday, audited financial statements and asset valuations by a Big 4 accounting firm, as of 30 Sept 2015.
> 
> I suggest the wager amount be set at 2% of net worth of each individual.




Bahahahahahaha! Pssssssst, this ain't gonna happen!


----------



## DeepState (27 September 2015)

skc said:


> In all fairness, the wager amount should be an equal percentage of each person's net worth.
> 
> So please, can Tech/a and Rainman present to Joe by next Monday, audited financial statements and asset valuations by a Big 4 accounting firm, as of 30 Sept 2015.
> 
> I suggest the wager amount be set at 2% of net worth of each individual.




Tech/A may have much of the flock's wealth housed with his wife to protect against the prospect of creditors being brought in to recover his excavators. A wise thing to do.  Hence, 2% seems far too low for him.

I also see no need for audited statements from one of the Big 4.  After all PwC (they of the focus-group-tested 'little middle w' acronym) signed off on VET-AU's fabricated results.  So what the heck? A small spivvy firm will do.

In any case, what's the point of placing at risk a mere single day's percentage move on the FTSE for something of such import as proof of superior investment ability on an anonymous website??? NOTHING!!! For the loser will be foreeeeeeever tainted with the knowledge that they lost...and everyone will know it.  Everything will be tarred with, "yeah but..." Like Clinton, no review of his Presidency can occur without a stained little blue dress in the background of conversation. Any good call made will be lucky.  Any bad call will be "of course, what did they know anyway?" 

Tech/A may well need to retire the moniker and re-emerge as Foie Gras.  Rainman might need to ask Joe to reboot him as Kimputer.  Still, the legend of defeat will be forever on the ASF records.

This challenge should be settled as gentlemen did in the age when such things were important.  I suggest the financial equivalent of an outright duel.  100% or nothing. To the broke I say.  Perhaps even a year's worth of additional private services from the loser on top of that.  Together with the book and movie rights.

Light 'em if you got 'em.


:sword:

----

Gamble like The Man:




...might be some tossing yet to come.


----------



## CanOz (27 September 2015)

Lol...priceless deepstate!


----------



## Triathlete (29 September 2015)

sinner said:


> 1 year is long term now?
> 
> I better adjust my models!
> 
> ...




Can you explain why you believe valuations are more effective in the 5 year region as you mentioned above ?

I look at Fundamental advisory firms and they try to value companies based on their current balance sheets , then add in the likely EPSG, what contracts they have and how much will be generated going forward etc,etc and based on that analysis will work out the likely share price going forward. 

So to me a valuation would be easier working it out every 6 months or so??


----------



## Trembling Hand (29 September 2015)

CanOz said:


> Lol...priceless deepstate!


----------



## sinner (29 September 2015)

Triathlete said:


> Can you explain why you believe valuations are more effective in the 5 year region as you mentioned above ?




Equities are claims on the long term cashflows of a business. What is the lifetime of a equity claim? It is not 1 day 1 month or 1 year, it is essentially infinite.

Valuations are borne out over the course of a business or economic cycle.

This is shown in the data again and again, everywhere you'd care to look. A lesson that investors always seem they need to relearn.

5 years is something life half of a business cycle (depending on how you measure) so it is only barely an appropriate.



> I look at Fundamental advisory firms and they try to value companies based on their current balance sheets , then add in the likely EPSG, what contracts they have and how much will be generated going forward etc,etc and based on that analysis will work out the likely share price going forward.
> 
> So to me a valuation would be easier working it out every 6 months or so??




Depending on the data available one can work out the valuation as frequently as they choose. I am sure, for example, that Tim Cook works out the valuation for Apple on a daily or weekly basis. But so what? The frequency at which the valuation is calculated is not informative of the next 6 months returns and therefore holds low utility. 

In the short/intermediate terms, undervalued shares can become more undervalued, overvalued shares can become more overvalued with both momentum and systematic/ideosyncratic investor risk preferences dominating even the perfect valuation.

Chasing results from quarter to quarter, report to report is how most sellside analysts operate and you can see from their own results how that works for them: read, crap. At best it turns into a game of chasing EPS momentum.

Here's a quote from the CEO of Sun Microsystems (later bought by Oracle at crappy valuations btw) during the popping of the first tech bubble:


> “But two years ago we were selling at 10 times revenues when we were at $64. At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?”




Note that the CEO of the company, with perfect information is operating:
* on a 10 year hypothetical investment duration (not 6 months)
* on a very very simple metric

to try and illustrate the importance of valuations.


----------



## tech/a (29 September 2015)

> Note that the CEO of the company, with perfect information is operating:
> * on a 10 year hypothetical investment duration (not 6 months)
> * on a very very simple metric
> 
> to try and illustrate the importance of valuations.




This is however an extreme case.
sure at the time it was shared by a high number of other extreme cases.

How does this hold in not so extreme cases?
GMA for example or was $4.40 extreme.


----------



## sinner (29 September 2015)

tech/a said:


> This is however an extreme case.
> sure at the time it was shared by a high number of other extreme cases.
> 
> How does this hold in not so extreme cases?
> GMA for example or was $4.40 extreme.




Just going off comsec data for 2013-2014FY (which I assume released around Aug-Sep 2014).

Assume I was the owner of an unlisted private civil engineering company called GMA with the following result last year, trying to sell the company to your good self:

Net Profit before abnormals: 180.7 million
Shares outstanding: 650 million

So profit per share: $0.278

$4.40 would mean a ~15-16 multiple on profit per share (although the comsec chart only shows ~$4).

i.e. *assuming* that you believe current profit per share is a sufficient statistic to represent the long term future cashflows of GMA, then it'd take 15 or 16 years to get "paid back" what you put in as an owner of the business. 

Would you pay $4.40 per share to buy me out of the business?

Of course, if you add the assumption of growth (and/or assumptions of compounding reinvested profits) that is where the projected payback goes down and your returns (whether you overpaid or underpaid) will become largely a function of how accurate your forecast for future profit growth was.

Right?


----------



## tech/a (29 September 2015)

Yes I get that. If Im going to buy and control the company
or perhaps buying enough in a share for a controlling interest.
Then I can understand attempting to gain an accurate valuation.
Makes complete sense. And of course $2.40 has its set of numbers.

There could be other reasons I'd want to buy-- 
maybe to increase my market share.

I don't know how you can get remotely accurate
over a 10 yr term with any company that wasn't 
in the top 100 even then can be difficult HIH and 
the likes.

I've seen studies on Professional recommendation 
results over time and those I saw were no better than
any other form of stock selection.
Is there any papers you can direct me to?


----------



## sinner (29 September 2015)

tech/a said:


> I don't know how you can get remotely accurate
> over a 10 yr term with any company that wasn't
> in the top 100 even then can be difficult HIH and
> the likes.




Yes that's right. You don't. But the fact that you don't know how it can be done is not really evidence of anything is it? 

The goal isn't even to be super accurate. The goal is merely not to overpay for a share in a going concern and then use a fundamental stop loss (i.e. continued analysis of ongoing results) to decide whether or not to remain invested (since you bought into a good business at a good price) or sell out (since the business is no longer good or because the investment has become severely overvalued).

I am not really sure what HIH has to do with anything. My guess is that in 2001 you had an argument on a forum with someone who claimed that HIH was "good value" and you therefore believe that proves empirically that all fundamental analysis is flawed. Or, whatever. 



> I've seen studies on Professional recommendation
> results over time and those I saw were no better than
> any other form of stock selection.




So what? As I'm sure you've seen crappy technical analysis calls and crappy macro calls. What does that prove? When will you stop repeating yourself?



> Is there any papers you can direct me to?




For real? I have posted so many links to value papers in so many threads...I quote sinppets of Hussman value discussion in like every second post...go back and take your pick.


----------



## tech/a (30 September 2015)

sinner said:


> Yes that's right. You don't. But the fact that you don't know how it can be done is not really evidence of anything is it?




Yes correct but it is an observation over many years. 



> The goal isn't even to be super accurate. The goal is merely not to overpay for a share in a going concern and then use a fundamental stop loss (i.e. continued analysis of ongoing results) to decide whether or not to remain invested (since you bought into a good business at a good price) or sell out (since the business is no longer good or because the investment has become severely overvalued).




Yes agree with this as well.
My only observation with this is that a lot then put these stocks which alter their long term out look over a longer timeframe (Thus becoming a sell) become bottom draw stocks.



> I am not really sure what HIH has to do with anything. My guess is that in 2001 you had an argument on a forum with someone who claimed that HIH was "good value" and you therefore believe that proves empirically that all fundamental analysis is flawed. Or, whatever.




No HIH was/is an example of a seemingly solid company that just goes belly up. 
There are many.



> So what? As I'm sure you've seen crappy technical analysis calls and crappy macro calls. What does that prove? When will you stop repeating yourself?




I totally agree. All analysis in my view is flawed and that's mainly due to its application in a trading environment.




> For real? I have posted so many links to value papers in so many threads...I quote sinppets of Hussman value discussion in like every second post...go back and take your pick.




And all analysis works at some point and for sometime.
Profit will be determined (in my view) again to its application and the management of your trading.

Ill stop repeating myself when exponents of *any* analysis believe that their analysis on face value is un questionable. That a valuation or a signal is un questionable fact of pending profit.

When people understand you don't need a Doctorate in Economics to profit from the markets or a graduate
of a $20,000 Latest Technical Methodology course---so probably not that soon.


----------



## sinner (30 September 2015)

tech/a said:


> Ill stop repeating myself when exponents of *any* analysis believe that their analysis on face value is un questionable. That a valuation or a signal is un questionable fact of pending profit.




That is not what happened here. Rainman did some FA and was kind enough to share his thoughts. Others who think they know better came to make fun of his buying because of a few down days.

Actually, I won't bother describe what happened next, go back and reread it for yourself to see. My shorthand description would be "goaded into a retards pissing contest".



> When people understand you don't need a Doctorate in Economics to profit from the markets or a graduate
> of a $20,000 Latest Technical Methodology course---so probably not that soon.




You forgot to mention every time someone says anything you perceive as negative about a methodology you subscribe to (VSA/EW/tech) regardless of the actual contents or merits of the discussion.


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## tech/a (30 September 2015)

sinner said:


> That is not what happened here. Rainman did some FA and was kind enough to share his thoughts. Others who think they know better came to make fun of his buying because of a few down days.
> 
> Actually, I won't bother describe what happened next, go back and reread it for yourself to see. My shorthand description would be "goaded into a retards pissing contest".




Never said it was.
By the way My comment of Bet Sentiment wins---was as you'd have worked out---a figure of speech.
A challenge was issued --- I accepted ----- Joe is richer.





> You forgot to mention every time someone says anything you perceive as negative about a methodology you subscribe to (VSA/EW/tech) regardless of the actual contents or merits of the discussion.




Don't think that's the case either. Ill point out the strengths and weaknesses in any analysis I use-----Both VSA and E/W are way less than perfect---as I see them.
Ill also point out bad T/A if I see it on the boards.
But Ill give a reason-----albeit my opinion.


----------



## satanoperca (30 September 2015)

Rainman said:


> Stick to  your knitting, my friend.  You're a technical analyst guy.  You're not competent to comment on valuation - with respect.




Maybe Sinner this is the comment from the Rainman himself that started the **** flying.

I cannot seem to find in the title, ye can only comment if you only apply fundamental analysis to your stock selection.

My comments not long after that where questioning how he came at the evaluation and whether the points he made were valid and correct. F--k me, I thought that what forums where for, discussion.

Funny how people behalf when they are loosing monies.


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## Rainman (30 September 2015)

tech/a said:


> ... By the way My comment of Bet Sentiment wins...




Time is still running on this bet, my feathered friend.  It is not over until 25 September 2016.


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## Rainman (30 September 2015)

satanoperca said:


> Maybe Sinner this is the comment from the Rainman himself that started the **** flying.
> 
> I cannot seem to find in the title, ye can only comment if you only apply fundamental analysis to your stock selection.
> 
> ...




I stand by those comments.  But I am happy to be enlightened to the contrary.  

If you know and apply only technical analysis, please tell me how you can say anything meaningful about whether a company is correctly priced or mispriced relative to its assets and earnings power by the market?  

Now, before I have a bunch of angry TA guys jumping down my throat, I want it on the record that I think that TA has its place.  TA shows how much interest there is in a stock, among other things.  Resistance and support levels also seem to reflect quite clearly on occasions the fact that at particular points in time there are price levels beyond which buyers are unwilling to buy or at which sellers are unwilling to sell.  

But it is absurd for TA devotees to pretend that anything revealed by TA says something fundamental about the value of a company - and this for the sole reason that TA guys are only ever interested in the price.  And yet the price is precisely the aspect of a stock that highlights for an FA guy whether it is correctly priced or mispriced which in turn requires consideration of the underlying value of the stock's assets and earnings power. 

Therefore, sticking to your knitting means: if you are a TA guy, analyzing a stock with technical analysis and not purporting to offer an opinion on a stock's pricing relative to its underlying value.  Sticking to your knitting also means that FA guys don't analyze a stock with fundamental analysis and then purport to make findings about momentum and price patterns.

It is not that hard.


----------



## Trembling Hand (30 September 2015)

Good post Rainman.


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## Ves (2 October 2015)

In the 30 June 2015 results presentation they are claiming to have reinsurance cover of $915 million on their loan book.

I cannot find any details of how this type of cover works in their prospectus or market releases.

Does anyone know how this type of agreement generally works?

Do they pick LMI policies on their books that they consider to be "risky" and pay the re-insurer to cover the entire risk in case of loan default?   

The above scenario seems the most likely as I doubt it is a cover-all agreement where the reinsurer agrees to cover the first $915m of losses for any loan defaults.


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## McLovin (2 October 2015)

Ves said:


> In the 30 June 2015 results presentation they are claiming to have reinsurance cover of $915 million on their loan book.
> 
> I cannot find any details of how this type of cover works in their prospectus or market releases.
> 
> ...




Generally, it will be non-proportional excess of loss reinsurance, which is just insurance speak for once you reach a level of payout the reinsurer covers the rest. So GMA will have an aggregate limit that they will pay up to in a given period, and then the reinsurer will cover additional loss. It can be measured across the portfolio of insured assets or mortgage to mortgage (I haven't looked so don't know). It's not usually done by passing the whole insurance risk on to the reinsurer (aside from other things that would create some pretty big agency risk for the reinsurer). The liability of the insurance contract is still with the head insurer, not the re.


----------



## Ves (2 October 2015)

McLovin said:


> Generally, it will be non-proportional excess of loss reinsurance, which is just insurance speak for once you reach a level of payout the reinsurer covers the rest. So GMA will have an aggregate limit that they will pay up to in a given period, and then the reinsurer will cover additional loss. It can be measured across the portfolio of insured assets or mortgage to mortgage (I haven't looked so don't know). It's not usually done by passing the whole insurance risk on to the reinsurer (aside from other things that would create some pretty big agency risk for the reinsurer). The liability of the insurance contract is still with the head insurer, not the re.



Thanks mate,   I think that helps me figure it out.

On page 16 of the latest results preso there is a table  

http://www.asx.com.au/asxpdf/20150805/pdf/4309m5cx9c987j.pdf

Looks like they have a fair few reinsurers involved (which is great, because you'd hate a single reinsurer to go bust and not pay out).

In the context of GMA,   if my understanding of what you've said is correct:

GMA takes first $500m of losses
Provider 2 takes next $125m of losses

Of the next $1 billion of losses:

GMA takes at least $910m  with  $51m (provider 3) of reinsurance kicking in when total losses are around $650-750m and another $39m (provider 3) near the $1.5 billion mark.

From about $1.8billion loss mark to around the $2.7 billion loss mark  there is $700m of reinsurance.

I believe it is fairly safe to say that before the reinsurer is even called that they've already ripped up around $0.80 per share in assets to foot the bill.

My conclusion is that the reinsurance contract doesn't help provide a margin of safety for an asset play,   but it does mean that you are more likely to not lose every cent as an investor if the **** hits the fan. Small mercies, I guess.


----------



## Ves (2 October 2015)

Another question that I haven't answered yet:

Do  WBC (and maybe CBA) see:

a)  less risk in the market due to a move away from high LVR loans,  so are happy to take the risk internally 

b)  take the risk internally and potentially use overseas reinsurance firms because it is cheaper than using Genworth / QBE LMI

c)  know something about their loan books insured by Genworth that we don't  (ie.  they are deteriorating quickly) and wish to move all future business away from Genworth because it is becoming less likely that they will be solvent enough to pay the cover out in its entirety?

A combination of any of the three is also possible. Anything I've missed?

edit:  I think the fact that Genworth,  QBE and a major bank subsidiary make up 90% of the Australian LMI market tells you something about the scale needed to be profitable in this business.


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## skc (2 October 2015)

Ves said:


> Another question that I haven't answered yet:




I remember reading something about how, if GMA loses more business, they get to release more excess capital over time. The PV of the stream of excess capital return is worth more than the share price (or something like that). I can't recall which analyst did the numbers but it was around the time when they lost WBC's business.

Definitely worth some research in your analysis of GMA. 

In other words... to me this means that the market is pricing in a large payout. That's how it can trade below book value (in case it wasn't obvious enough). And I found it difficult to fully quantify the probability of such event, and hence determine whether GMA is cheap or not.


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## craft (2 October 2015)

skc said:


> In other words... to me this means that the market is pricing in a large payout. That's how it can trade below book value (in case it wasn't obvious enough). And I found it difficult to fully quantify the probability of such event, and hence determine whether GMA is cheap or not.




That's also my problem with GMA. Even in run out its quite cheap at 60% of net tangible assets not including the unearned premiums.  If it remains an ongoing business like it has for the last 50 years it will return great cash flows.  But with over ~300B of loans insured and ~3.5B of equity and re-insurance coverage in place it could conceivable blow up in a property market correction. Its US parent company share price is informative of what happens in a property bust - they did manage to survive, I don't know if they had to be re-capitalised.


----------



## Ves (2 October 2015)

skc said:


> I remember reading something about how, if GMA loses more business, they get to release more excess capital over time. The PV of the stream of excess capital return is worth more than the share price (or something like that). I can't recall which analyst did the numbers but it was around the time when they lost WBC's business.
> 
> Definitely worth some research in your analysis of GMA.
> 
> In other words... to me this means that the market is pricing in a large payout. That's how it can trade below book value (in case it wasn't obvious enough). And I found it difficult to fully quantify the probability of such event, and hence determine whether GMA is cheap or not.



Hey SKC,

I believe the analysis report was written by UBS,  in fact they see a value that is higher than NTA in a run-off. I saw a few comments in an SMH article if I recall. I don't have access to their report,  so no idea how they came to that conclusion.

I'm looking at GMA as more of an asset play, and considering run-off value in the event of them losing the CBA contract and the LMI market in Australia drastically shrinking.   However,  it obviously pays to study the market dynamics a bit  and get a feel for the potential earnings base if something different happens.

You're correct that a shrinking insurance portfolio will add to the already excess capital position.  They seem to be carrying about $500m excess on their balance sheet compared to their Prescribed Capital Amount (PCA) target coverage ratio.

The key to me is what happens in a number of the gloomier  property bear phases and recession scenarios.   I get the feeling that they may be OK if prices are moderately bearish.

Business leveraged to property cycles like banks and mortgage insurers are historically boom and bust,  and it's all inherently linked to risk taking behaviour (or lack of).

Based on the LVR / change in price / insured amounts in their 30 June 2015 presentation,  I'm a lot more comfortable with say a 15% fall in house prices and approaching 5% delinquency than I was initially.  They'd still lose a lot of capital, maybe even up to the excess amount above, but I don't think it'd come close to knocking them out.  Would be still equity left.

However,  ramp the figures up to 30% and 5% delinquency and it starts reaching "ouch!" proportions IMO.   I guess it stems down to how bearish one feels.

FWIW,   ex-WBC and CBA  they may still be able to earn EBIT in the order of $50m-100m including investment income,   with a chance of rosier days in the next big risk-taking property boom (depending on how the market competition plays out).

Like most things in life,  the beauty of situations like this are that they are not black and white.   Often you can find something you're on the bearish side of for instance,   but the market can be potentially far more bearish than you.   It's all about probabilities and nuances by that stage.

Thanks craft,   I haven't go around to checking out Genworth US yet.   I'm sure their story is a rollercoaster given what happened in the last decade.


----------



## craft (2 October 2015)

Ves said:


> Another question that I haven't answered yet:
> 
> Do  WBC (and maybe CBA) see:
> 
> ...




Hey Ves

One thing that crossed my mind; With the banks being forced to raise their capital buffers and receiving no capital requirement offset for insured mortgages the banks might be thinking - we have to hold the capital anyway, why not self insure and claw back some of the lost ROE from higher capital requirements.

David Murray's financial services enquiry recommended that mortgage insurance be recognised in the capital framework where appropriate, if that ever gets implemented it would be a game changer in favour of GMA retaining the banks as customers.


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## Ves (2 October 2015)

craft said:


> One thing that crossed my mind; With the banks being forced to raise their capital buffers and receiving no capital requirement offset for insured mortgages the banks might be thinking - we have to hold the capital anyway, why not self insure and claw back some of the lost ROE from higher capital requirements.



That's a good point.   I did consider that if the big banks were taking a lot more LMI in-house it would mean that the overall risk in Genworth would probably reduce as the Big 4 seem to be responsible for most of the higher LVR loans on their books.   Whilst this probably means lower margins,  it could also be offset by lower delinquencies.  I think it's a positive,   lower returns perhaps,  but much less earnings volatility (and business default risk) over the cycle.

Additionally,  as a going concern,  there is also some possibility that if APRA is reining in the big banks,  that the medium and smaller sized loan writers may see more business within their capital limits, which could have a flow-on effect to GMA.



craft said:


> David Murray's financial services enquiry recommended that mortgage insurance be recognised in the capital framework where appropriate, if that ever gets implemented it would be a game changer in favour of GMA retaining the banks as customers.



I didn't realise that this was in the Murray enquiry.   I did realise that Genworth have lobbied for this change very hard over the years and continue to do so.   If you think about it,  it's a solid recommendation.  Not sure what the politics (and vested interests) involved are, though.

I think this sort of stuff,   would be a big bonus,  but not something I would want to have to include in a valuation to justify purchase.

Definitely some good discussion going on here.


----------



## McLovin (2 October 2015)

What happened in 2010 in GMA's business? The claims development triangle (4.4b - annual report) basically reduced by 2/3rds from the prior year. Did they reduce their business or was this actually a genuine reduction in what they thought they'd pay out? They haven't underestimated (so far), to be fair. In fact conditions look very benign per that table. If I'm reading that correctly, it is a decent map of where things can go when GFC type events hit.



			
				Ves said:
			
		

> Based on the LVR / change in price / insured amounts in their 30 June 2015 presentation,  I'm a lot more comfortable with say a 15% fall in house prices and approaching 5% delinquency than I was initially.  They'd still lose a lot of capital, maybe even up to the excess amount above, but I don't think it'd come close to knocking them out.  Would be still equity left.




Does LMI protect the lender if the borrower goes into negative equity but is still keeping up with their payments?


----------



## Ves (2 October 2015)

McLovin said:


> What happened in 2010 in GMA's business? The claims development triangle (4.4b - annual report) basically reduced by 2/3rds from the prior year. Did they reduce their business or was this actually a genuine reduction in what they thought they'd pay out? They haven't underestimated (so far), to be fair. In fact conditions look very benign per that table. If I'm reading that correctly, it is a decent map of where things can go when GFC type events hit.




I'm not 100% sure of the answer to this question.   I did find out that the IPO was delayed in 2012 because the company's pre-2009 loan book in particular started performing really badly.  Lots of claims were made etc.  I'm not sure if it has anything to do with that.  They seem to have cleaned up a lot of that mess, and the selling point of the 2014 IPO was along those lines if you read parts of the prospectus on claims.

It does go to show how cyclical this industry does become.   It's a pity that we have no financials before the 2010 comparatives.

There's a few articles if you do a google search for the failed 2012 IPO.  I think a big pension fund in the US even threatened to sue the American arm for false information.




> Does LMI protect the lender if the borrower goes into negative equity but is still keeping up with their payments?



Nope,  it only applies to loan defaults (ie.  when the borrowing stops making payments and the loan gets called in).   They can't force you to sell your house if the market goes backwards,  so there can be no claim, as the lender hasn't made a loss on the loan at that point.


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## Rainman (2 October 2015)

Ves said:


> ... Like most things in life,  the beauty of situations like this are that they are not black and white.   Often you can find something you're on the bearish side of for instance,   but the market can be potentially far more bearish than you.   It's all about probabilities and nuances by that stage.
> 
> Thanks craft,   I haven't go around to checking out Genworth US yet.   I'm sure their story is a rollercoaster given what happened in the last decade.




Genworth US is a very different business to GMA - a worse business, although it too is extremely cheap.  Genworth US has a long term care insurance business which has turned out to be a real dog.  GMA, by contrast, is a straight mortgage insurer.

I think, when looking at GMA, naturally one needs to weigh the prospect of a serious housing downturn occurring in Australia.  But any assessment of that probability needs to be realistic.  

If one is going automatically to use the US subprime mortgage crisis as the measure of how bad things could get in Australia, one needs first to show just why the US subprime crisis is an applicable example.  Too often, the US subprime crisis is evoked in the context of the booming Australian property market simply because it is the most recent housing crisis one can think of.  But that is just lazy analogizing: like generals who are always preparing for the last war. Instead, one should be asking whether the most important conditions that caused the housing bubble to grow as big as it did in the US and to pop as spectacularly as it did are present in more or less the same form in Australia.  

It does not follow that, simply because house prices may fall, a wave of defaults ensues.  Studies have shown that house prices need to fall to an extent that places the mortgagor deep in negative equity before mortgage defaults turn from a trickle into a tsunami.  In fact, even when mortgagors are in negative equity, most fight tooth and nail to keep their home.  The decisive factor on whether they continue to do so is their ability to continue to service the mortgage.  

Sure, we have low interest rates in Australia. We have an RMB securities market that allows lenders to securitize mortgages and get them off their books. Both were necessary but not sufficient conditions for the US subprime crisis.  But I haven't seem anything like the deterioration in lending standards in Australia  that preceded the US subprime crisis.  Also, the "_crisis_" part of the US subprime crisis was the collapse in property values.  Most subprime borrowers had very little or no equity in their homes and were on adjustable-rate mortgages.  So when the US Fed began raising rates in 2006, these borrowers could not refinance their mortgages and were stuck with the higher adjusted rate, resulting in a wave of defaults.  That, in turn, caused property prices to collapse.  Property prices collapse only because there are a wave of sellers desperate to sell and no buyers. 

This last aspect is important because, as things currently stand, GMA's claims costs have been going down largely due to the fact that, where mortgagors default and the property is sold, the rise in property values has allowed GMA to recover almost all of its claims costs.  Thus, between 1H2013 and 1H2015 GMA's average claims cost has gone down from $80,000 to $49,000. 

This is not to say that Australian property prices will not decline.  But what is required is a decline and a meaningful uptick in defaults and one does not inevitably follow the other.  There is an uptick in defaults in certain parts of Australia - most notably in the mining states.  But this is a very small part of the Australian mortgage market.  Defaults in Sydney and Melbourne which receive the most press coverage over rising property prices have remained fairly stable over the last several years.  

Across Australia, GMA has seen mortgage defaults since June 2013 go from 0.34% to 0.40%. There is a trend here.  But whether that trend continues and becomes meaningful remains to be seen.  For those who think it will, GMA is probably a stock to be avoided.  But for those who think it won't, GMA offers a pretty attractive risk/reward proposition at its current level, in my view.


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## craft (2 October 2015)

Rainman said:


> I think, when looking at GMA, naturally one needs to weigh the prospect of a serious housing downturn occurring in Australia.  But any assessment of that probability needs to be realistic.




Yep, GMA is a macro bet on housing valuation..... end of story for me - too much earnings risk that I don't have the competence to assess,  Maybe on the backend of a major down turn which shakes it to its core I might be interested, that is when, with my limited knowledge I would be more confident that they have priced the risk they carry effectively. But I'm a pussy.


A perspective on why housing/land may be overvalued from a long term perspective.

https://www.prosper.org.au/wp-content/uploads/2014/02/Prosper-Australia-Senate-Housing-Submission.pdf

A good RBA speech for another perspective.

http://www.rba.gov.au/speeches/2015/sp-dg-2015-08-12.html#t4


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## skc (2 October 2015)

craft said:


> Yep, GMA is a macro bet on housing valuation..... end of story for me - too much earnings risk that I don't have the competence to assess,  Maybe on the backend of a major down turn which shakes it to its core I might be interested, that is when, with my limited knowledge I would be more confident that they have priced the risk they carry effectively. But I'm a pussy.




+1. That's similar to my conclusion at the end of my research. It's an instrument to place bets on the cycle and we are certainly nearer to the top than we are nearer to the bottom.

The market may or may not have mis-priced the risk... and if I have to guess I'd say it has probably oversold the potential risks. But I don't make a large enough number of these bets to ensure it is a successful venture overall.

Best of luck Rainman. And thanks for provoking a very informative discussion.


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## Rainman (3 October 2015)

craft said:


> Yep, GMA is a macro bet on housing valuation..... end of story for me - too much earnings risk that I don't have the competence to assess,  Maybe on the backend of a major down turn which shakes it to its core I might be interested, that is when, with my limited knowledge I would be more confident that they have priced the risk they carry effectively. But I'm a pussy.
> 
> 
> A perspective on why housing/land may be overvalued from a long term perspective.
> ...





Thanks for the links.  

I found the first of the papers the most informative, particularly page 8 which dealt with the debt-to-cashflow ratio.  The authors rightly acknowledge that this ratio is key because it goes to the serviceability of per capita debt of which mortgage debt is overwhelmingly the dominant form of debt for most Australians.





The authors say that, where the ratio rises to 20 and above, it is in the "_calamity zone_" and seriously threatens "_household solvency_" (interestingly, the "_calamity zone_" is not a precise measurement, the authors note, but is merely a "_rule of thumb_" - whatever that means).  As you can see from the table, both housing and investment stock peaked in the "calamity zone" in 2008 and both have been steadily declining since then.  The table is current up to 2013 and this paper was written at the end of February 2014.  I'd be interested to know whether the trend has reversed and started climbing back into the "_calamity zone_" since the data were gathered in 2013.   

By leaving the answer to that issue hanging renders the dire predictions of the paper a little underwhelming because the size of mortgage debt is meaningless unless one can get a sufficiently clear measurement of the ability of borrowers to service that debt.  Until and unless the debt becomes so great that borrowers can't service it, you are not going to get a mortgage meltdown in any meaningful proportion.


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## Rainman (3 October 2015)

craft said:


> Yep, GMA is a macro bet on housing valuation..... end of story for me - too much earnings risk that I don't have the competence to assess,  Maybe on the backend of a major down turn which shakes it to its core I might be interested, that is when, with my limited knowledge I would be more confident that they have priced the risk they carry effectively...




In light of the recent discussion on whether Australia is or is not in the midst of a property bubble that is about to burst (or to seriously deflate) Ã  la US subprime mortgage crisis, I was reminded of the phenomenon of "representiveness bias" to which the psychologist Daniel Kahneman first drew attention in his book _Thinking Fast and Slow_.

In _Contrarian Investment Strategies: The Psychological Edge _ (a great book for value investors) David Dreman describes the form that this bias typically takes in assessing stock market opportunities:

"_*In the market, representiveness might take the form of labelling two companies or two market environments as the same when the actual resemblance is superficial.  Give people a little information and click! they pull out a mental picture they're familiar with, though it may only remotely represent the truth.  The two key ways that representiveness bias leads to miscalculations are that it causes us to give too much emphasis to the similarities between events and does not take into account the actual probability that an event will occur and it reduces the the importance that we give to variables that are actually critical in determining an event's probability*_" (underlining added).   

I can't help but think that much of the fear that a slowdown in the Australian mortgage market will lead to something like, even if not on the scale of, the US subprime crisis is an example of representiveness bias at work.

Just my penny's worth.


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## craft (4 October 2015)

Rainman said:


> Thanks for the links.
> 
> I found the first of the papers the most informative,




The first paper is interesting to me for the length of the data, but the RBA link is the really interesting one for me as it’s the first I have seen them talk about how the wealth effect from increasing home values is changing and the intergenerational aspects .




> The complication here comes from the fact that Australians are both owners of housing assets and consumers of housing services. We don't just own housing and the land on which it is built, but we also live in that housing, and on that land. And that housing and land provide us with valuable services.
> 
> If housing is fairly valued – in the sense that the price of housing is equal to the present discounted value of the future rents – then the rise in prices implies an increase in the expected future cost of housing services.
> 
> ...







> It is quite likely that these trends will continue with it becoming more commonplace for parents to help their children in the property market. This has both economic and social consequences. Of course, if this type of intergenerational assistance does become more common, then fewer parents will be able to use the capital gains that they have benefited from to boost their own consumption. Instead, in effect, they will be using those capital gains to support the following generations with their higher housing costs. Alternatively, if it turns out that today's generations use their capital gains to increase their own spending, then they will have less ability to help their children. If this were to happen, I suspect that, over time there would be some downward pressure on the price of housing, relative to incomes, as future generations deal with the high cost of housing.


----------



## Gringotts Bank (4 October 2015)

Rainman said:


> Thanks for the links.
> 
> I found the first of the papers the most informative, particularly page 8 which dealt with the debt-to-cashflow ratio.  The authors rightly acknowledge that this ratio is key because it goes to the serviceability of per capita debt of which mortgage debt is overwhelmingly the dominant form of debt for most Australians.




http://getgreenshot.org/

Handy.


----------



## craft (4 October 2015)

Rainman said:


> In light of the recent discussion on whether Australia is or is not in the midst of a property bubble that is about to burst (or to seriously deflate) Ã  la US subprime mortgage crisis, I was reminded of the phenomenon of "representiveness bias" to which the psychologist Daniel Kahneman first drew attention in his book _Thinking Fast and Slow_.
> 
> In _Contrarian Investment Strategies: The Psychological Edge _ (a great book for value investors) David Dreman describes the form that this bias typically takes in assessing stock market opportunities:
> 
> ...




Where is this discussion you are talking about. It appears that is you talking about things not being like the USA rather then anybody particularly saying that it will be. You no doubt would be aware of confirmation bias and bias blind spot.

For me I look at Australian Housing and see high valuation on many fronts. No idea if that situation will reverse and even less idea how exactly it may trigger or unfold. Simply know I don't like buying high valuation situations and even less things leveraged to them.  GMA for me has too much earnings risk because I *don't* know what happens to Aus housing in the future. I don't run an investment strategy suited to dealing with a lot of earnings risk so its a pass for me.


----------



## Rainman (4 October 2015)

craft said:


> Where is this discussion you are talking about. It appears that is you talking about things not being like the USA rather then anybody particularly saying that it will be...




Clearly, you have not been following the entire thread on GMA.  See the posts by Satanoperca (or whatever his name is) on this thread.  His argument is basically that the Australian mortgage market is on all fours with that of the US pre-2007. 

Satanoperca's posts apart, the general thesis against GMA is that Australian housing is overvalued = a crash is imminent = mortgage defaults will rise dramatically = GMA will suffer large and unrecoverable claims losses.  Each of these links in the causal chain is theoretically in general but, applied to the Australian housing market as it currently exists, breaks down for lack of evidence in the particular.  

I agree that there is earnings risk in GMA but not as a result of a large increase in a wave of mortgage defaults in the foreseeable future.  Rather, it resides in the risk of CBA following WBC and not renewing its agreement with GMA in 18 months time.


----------



## Triathlete (4 October 2015)

The Falcon said:


> Keen to see you can share the same Triathlete




The one that comes to mind was Forge group and this is because I nearly invested in this company based on Fundamentals alone and at the time was also supported as a buy by two of the best known Fundamental investment advisory firms in the country which I will not name here. 

I would have thought with all these analyst looking over the companies balance sheet that someone would have picked up that something was not quite right and both these companies got it wrong and to think that investors pay for this information.

Just looking at a chart at this time was enough for me to stay out of the company until the technicals supported what was being said about the company even though the fundamentals were good at the time.

*For me the chart is my insurance no matter how good the fundamentals look*.

Technicals need to support Fundamentals ,otherwise I stay out until they do.

That is my rule...this has kept me safe in the market...


----------



## DeepState (4 October 2015)

Rainman said:


> Thanks for the links.
> 
> I found the first of the papers the most informative, particularly page 8 which dealt with the debt-to-cashflow ratio.  The authors rightly acknowledge that this ratio is key because it goes to the serviceability of per capita debt of which mortgage debt is overwhelmingly the dominant form of debt for most Australians.
> 
> ...




I don't understand the chart.  If mortgage debt to net cashflow is around 20, then an interest rate of 5% would leave nothing to put food on the table, pay off credit cards, ... or any of the principal.

The serviceability of debt has improved since despite increasing housing debt to disposable income ratios.  This occurs because interest rates on the debt has declined in the interim.


----------



## McLovin (5 October 2015)

DeepState said:


> I don't understand the chart.  If mortgage debt to net cashflow is around 20, then an interest rate of 5% would leave nothing to put food on the table, pay off credit cards, ... or any of the principal.
> 
> The serviceability of debt has improved since despite increasing housing debt to disposable income ratios.  This occurs because interest rates on the debt has declined in the interim.




I think it's measuring the gross rental income that can be generated from the stock of housing (real and imputed), not the income of households.


----------



## Rainman (6 October 2015)

tech/a said:


> Ok I'll play
> $1000
> it's lower than $2.44 in 12 mths.




Get your cheque book out, Daffy Duck.


----------



## tech/a (6 October 2015)

Rainman said:


> Get your cheque book out, Daffy Duck.




Joe got my direct transfer of 1 k when I said I would in September.

He keeps it win or lose.

I said sentiment would win in a month---so that's still going.
You then made it a year so that is also still going.
Show me where I said it would never trade above $2.44.

Start saving!

Now if you want to take up the second part of the bet Ill send Joe off another K
and ill trade it in and or out as the bet states. Joe keeps another K wether I win or lose.

You send him a K in 12 mths if I perform better than you as stated in the bet
and another K if Sentiment (price) is lower than $2.44 in 12 mths.

Joe gets 2K regardless---if you take up the bet.(Stage 2)

You have a habit of moving goal posts.
But hey Joe has a good cause happy to support.


----------



## Rainman (6 October 2015)

tech/a said:


> Show me where I said it would never trade above $2.44




You did not say that GMA "_would never trade above $2.44_".  As I quoted you above, you must know that.  

You said you bet that "_it's lower than $2.44 in 12 mths_".  They are your words. 

Now, any reasonable person who speaks the Queen's tongue would understand your words to mean that you were betting against GMA being higher than $2.44 at any time over the course of the next 12 months.  

By that measure, you lose.


----------



## tech/a (6 October 2015)

Rainman said:


> You did not say that GMA "_would never trade above $2.44_".  As I quoted you above, you must know that.
> 
> You said you will bet that "_it's lower than $2.44 in 12 mths_".  They are your words.
> 
> ...





We must all speak Swahili


----------



## Rainman (6 October 2015)

tech/a said:


> Joe got my direct transfer of 1 k when I said I would in September.
> 
> He keeps it win or lose.
> 
> ...




You have, however, proved a far more important point - and that is that you are just kidding yourself and others if you believe that you can predict the trajectory of stock prices over the course of a 12 month period.  

In my view, that is worth highlighting, especially to those just starting out in stock investing.


----------



## tech/a (6 October 2015)

You appear to have misguided opinion of your abilities.

Along with an innate capacity of devising your own concept of reality.

Paired with a strong desire to be right.

Fortunately your post will be here in 12 mths for reflection.
As of course will be this one.


----------



## Rainman (6 October 2015)

tech/a said:


> You appear to have misguided opinion of your abilities.




You mean "_misguided_" like trying to predict where stock prices are going to be in a year's time?


----------



## satanoperca (6 October 2015)

Rainman said:


> You said you bet that "_it's lower than $2.44 in 12 mths_".  They are your words.




11 Months still to go. Bet still in place.


----------



## satanoperca (12 October 2015)

Jumping Ship maybe.

Genworth Mortgage Insurance Australia faces investor and analyst backlash on Monday after the lenders mortgage insurance giant revealed late on Friday that its chief executive, Ellie Comerford, was leaving the company.

Or he just looked at the chart and said to himself, I am doing a crap job.


----------



## skc (12 October 2015)

satanoperca said:


> Jumping Ship maybe.
> 
> Genworth Mortgage Insurance Australia faces investor and analyst backlash on Monday after the lenders mortgage insurance giant revealed late on Friday that its chief executive, Ellie Comerford, was leaving the company.
> 
> Or *he just looked at the chart and said to himself, I am doing a crap job.*




Lol... 

It's a She actually.


----------



## Rainman (12 October 2015)

satanoperca said:


> ... Genworth Mortgage Insurance Australia faces investor and analyst backlash on Monday...




Some backlash!  It closed up over 300 points.

Take that as a lesson, Satanoperca.  Be smarter than the SMH and don't try to predict stock prices.


----------



## satanoperca (14 October 2015)

Rainman said:


> Some backlash!  It closed up over 300 points.
> 
> Take that as a lesson, Satanoperca.  Be smarter than the SMH and don't try to predict stock prices.




Only took a couple of days.

Those that live in glass houses should not throw stones.

Those that call themselves Rainman should not predict stock prices. 300 point drop today.

Looks like Joe is going to win either way.


----------



## Rainman (14 October 2015)

satanoperca said:


> Only took a couple of days.
> 
> Those that live in glass houses should not throw stones.
> 
> ...




I am starting to think that you're on crack, Satanoperca.


----------



## skc (27 October 2015)

2 weeks on the price chart doesn't look too bad...


----------



## So_Cynical (27 October 2015)

skc said:


> 2 weeks on the price chart doesn't look too bad...




Yeah but everything bounced from that point, a few energy and gold stocks up 40% or more...everything i bought 2- 4 weeks ago has bounced, RFG, TPE, AFI, MVW. all up.


----------



## Rainman (1 November 2015)

satanoperca said:


> GMA looks like an excellent company to go short on, given we are the most highly indebted nation per capiter in the western world and how much lower can IR's go, not much...






tech/a said:


> I agree with short.




I hope you and Tonto are still short, Satanoperca, going into that share buyback announcement.  I am on the other side of that trade.


----------



## Rainman (19 November 2015)

I find it extremely instructive to occasionally look back at the posts of our resident tea-leaf readers who are full of all sorts of dire prognostications at a particular point in time about a deeply undervalued stock's future but when that stock performs in just the opposite way to the way that these fortune-tellers have predicted, they are nowhere to be heard.  

I am yet to find a TA guy who has bagged an investment thesis based on fundamental analysis ever owning up to the fact that they were wrong.


----------



## skyQuake (19 November 2015)

Rainman said:


> I am yet to find a TA guy who has bagged an investment thesis based on fundamental analysis ever owning up to the fact that they were wrong.




Its a timeframe differential. The FA guy will still be there a year later whereas the t/a guy will be gone in days/weeks at most.


----------



## Rainman (19 November 2015)

skyQuake said:


> Its a timeframe differential...




Well, if you are right only for a couple of days, can you really be said to be right at all?  

It's like calling Operation Barbarossa a victory for the Nazis.  Actually, that analogy is too generous.  At least the Nazis' initial success against the Soviets lasted longer than a few days unlike the call by tech/a and his side-kick on GMA.


----------



## CanOz (19 November 2015)

Rainman said:


> Well, if you are right only for a couple of days, can you really be said to be right at all?
> 
> It's be like calling Operation Barbarossa a victory for the Nazis.  Actually, that analogy is too generous.  At least, the Nazis' initial success against the Soviets lasted longer than a few days unlike the call by tech/a and his side-kick on GMA.




If you're a trader, being right is only necessary less than 50% of the time. Being profitable is what matters to most of us.


----------



## Rainman (19 November 2015)

CanOz said:


> Being profitable is what matters to most of us.




In this case, I doubt whether tech/a was even profitable.  But I suggest you go back and look at the original thread of the discussion.  The substance of tech/a's criticism was: 

1. Anyone who invests in GMA was an idiot because the trend was down;

2. Anyone who says that GMA at $2.40 was undervalued was an idiot because the trend was down; and

3. Anyone who says that GMA will not stay down at $2.40 for long was an idiot because the trend was down.

As you can see, the insights offered by tech/a were penetrating by their obtuseness.  Needless to say, there are many instances of tech/a and his acolytes on ASF thundering away against fundamental analysis in this way.


----------



## So_Cynical (19 November 2015)

Rainman said:


> 1. Anyone who invests in GMA was an idiot because the *trend* was down;
> 
> 2. Anyone who says that GMA at $2.40 was undervalued was an idiot because the *trend* was down; and
> 
> 3. Anyone who says that GMA will not stay down at $2.40 for long was an idiot because the *trend* was down.




Its called trend following, can be very profitable, personally i have no interest in it.


----------



## Rainman (19 November 2015)

So_Cynical said:


> Its called trend following, can be very profitable, personally i have no interest in it.




I know what it's called.  

My point is that in this particular case those who subscribed to it considered those who didn't to be idiots in circumstances where the "trend" was just about to turn and those who were predicting GMA to go lower were wrong and would have got squeezed if they had then gone short.


----------



## skyQuake (19 November 2015)

Rainman said:


> I know what it's called.
> 
> My point is that in this particular case those who subscribed to it considered those who didn't to be idiots in circumstances where the "trend" was just about to turn and those who were predicting GMA to go lower were wrong and would have got squeezed if they had then gone short.




Yep, could have gotten squeezed, could have taken some quick profits too. Next trade! I know tech/a can seem like he's attacking the fundamental story but in reality most tech traders simply aren't interested.

I too consider those that take the other side of my trade idiots 
and if i lose money clearly they're lucky idiots


----------



## Triathlete (19 November 2015)

I am still here and watching with interest....

On the 22/09/15 I said I would not buy at this point in time because the stock was still trending down and could not tell how further it was likely to fall at that point the stock was at $2.41.As we now know it continued down till 30/09/2015 at $2.21 or 8%.

This is where the stock turned up and broke through the down trend line and as you mentioned before that this was an undervalued stock it now becomes interesting to me because it is moving in the right direction based on the valuations and the technicals are also supporting this. 

So since I trade on technicals there were some trades that could have been taken to support this move up based on timing the entries. 

It now seems to have found resistance at this $2.88 level and would become interesting if it can break $2.90 and continue its upward move time will tell.

In the end it does not matter which method you use as long as you are profitable...


----------



## Rainman (19 November 2015)

Triathlete said:


> I am still here and watching with interest....
> 
> On the 22/09/15 I said I would not buy at this point in time because the stock was still trending down and could not tell how further it was likely to fall at that point the stock was at $2.41.As we now know it continued down till 30/09/2015 at $2.21 or 8%...




And after bottoming at $2.21, it is up over 20% in just over 2 months - 120% return on an annualized basis.  If it was cheap at $2.40, it was even cheaper at $2.21.  

Whether one bought the stock or not is a matter for the individual concerned.  But I really don't understand the rationale behind an approach that agrees that the stock is fundamentally cheap (or at least not fundamentally expensive) but then waits until everybody starts buying, thereby making the stock more expensive, before one starts buying oneself.  

By your reasoning, one should only buy a stock once it is _really_ expensive because by then everybody is buying and pushing up its price.


----------



## CanOz (19 November 2015)

Hmmm, 20% off the low? I know of one trend following momentum system that would buy it if the index filter was all go....


----------



## Rainman (19 November 2015)

The more important point in all of this, of course, is merely that the recent performance of GMA should serve to humble those who claim to be able to see the future on the basis of some deciphering of lines on a chart.  The future is uncertain and any claim that it's not is the snake oil of charlatans.

As every wise gambler knows, the race may not always be to the swift nor the battle always to the strong but that is the way to bet.  Similarly, with undervalued stocks, the way to bet in the long run is to be long.


----------



## Triathlete (20 November 2015)

Rainman said:


> And after bottoming at $2.21, it is up over 20% in just over 2 months - 120% return on an annualized basis.  If it was cheap at $2.40, it was even cheaper at $2.21.
> 
> Whether one bought the stock or not is a matter for the individual concerned.  But I really don't understand the rationale behind an approach that agrees that the stock is fundamentally cheap (or at least not fundamentally expensive) but then waits until everybody starts buying, thereby making the stock more expensive, before one starts buying oneself.
> 
> By your reasoning, one should only buy a stock once it is _really_ expensive because by then everybody is buying and pushing up its price.





I see what you mean but what I am looking for is confirmation that the move has started. If we go back over and do the sums at the time we started and the actual time I would have had my money exposed to the market I come out with this below:

Buy and Hold                                       22/09/15 @$2.41........ 
Closed and holding still                         19/11/15 @ $2.87.........8 weeks  = 114% annualised

Trading                                                06/10/15 @   $2.40....... 
Exited trade and money in the bank       19/11/15 @   $2.76........6 weeks =130% annualised

So in this scenario the holding time was less for the trader and has a higher return at this stage with the money already in there account so if the price falls from here it is of no concern to the trader as his money is out of the market and if the stock continues higher which I hope it does based on your valuations they should get another chance to trade it when the time is right.


----------



## Rainman (20 November 2015)

Triathlete said:


> ...
> 
> Trading                                                06/10/15 @   $2.40.......
> Exited trade and money in the bank       19/11/15 @   $2.76........6 weeks =130% annualised...




Where are you getting $2.76 from?  On 19 November 2015 GMA's price closed at $2.87.

In any event, if you bought at $2.40 and sold at $2.76, that's a 13.05% return over 6 weeks.  A 13.05% return over 6 weeks does not work out to be 130% annualised.  It works out be about 113% annualised.  Are you saying you earned the difference between 113% and 130%, i.e. 17%, in interest?  In which bank?


----------



## Triathlete (21 November 2015)

Rainman said:


> Where are you getting $2.76 from?  On 19 November 2015 GMA's price closed at $2.87.
> 
> In any event, if you bought at $2.40 and sold at $2.76, that's a 13.05% return over 6 weeks.  A 13.05% return over 6 weeks does not work out to be 130% annualised.  It works out be about 113% annualised.  Are you saying you earned the difference between 113% and 130%, i.e. 17%, in interest?  In which bank?




My mistake with the date

Should have been exited on 16/11/2015 @ $2.76 as I showed on the chart I posted previously

$0.36/2.40 =15%

15%/ 6 weeks =2.5% a week

2.5% x 52 weeks = 130% annualised

I have attached the spreadsheet


----------



## satanoperca (8 February 2016)

Looking very shaky.

Wait until the sheepie realize that property just dosn't always go up and those 1000's of apartments sold off the plan aren't settled on.

Charts are useless if you don't look at them.

We must be getting closer to peak private debt.


----------



## satanoperca (18 February 2016)

Rainman said:


> And after bottoming at $2.21, it is up over 20% in just over 2 months - 120% return on an annualized basis.  If it was cheap at $2.40, it was even cheaper at $2.21.




Where are you know Rainman, seems you got caught without an umbrella. The market must be wrong once again.

Shame you pissed off a valued contributor to this forum.


----------



## Rainman (24 February 2016)

satanoperca said:


> Shame you pissed off a valued contributor to this forum.




Clearly, you can't be referring to yourself.


----------



## satanoperca (24 February 2016)

Still holding this undervalued stock, Rainman. 

Even more undervalued since you did you evaluation on it.

Shame Tech/A has taken leave from the forum.

Cheero


----------



## Rainman (1 June 2016)

tech/a said:


> Ok I'll play
> $1000
> it's lower than $2.44 in 12 mths.
> If I lose Joe gets a grand.
> If you lose you send Joe a grand.




GMA closed at $3.10 on 23 May 2016 after earlier reaching a high of over $3.16.

In light of the proposed capital reduction and share consolidation, it is probably appropriate to draw a line under the bet that tech/a offered to make with me on 25 September 2015. 

The return from the low on 25 September 2015 to the high on 12 May 2016 works out to be around 20% with the dividends and return of capital included.  It's more, of course, if you annualise it.       

Now, I hope this serves as a lesson to the newbies.  That anyone with any experience of markets would offer to make a bet as to whether a stock that was as cheap as GMA was in the last quarter of 2015 and, what's more, was paying the enormous yield that GMA was paying (and has continued to pay by way of the recent return of capital to shareholders) in an environment where bond yields are barely above 2% shows you just how dumb some people are.  

Oh, and before I forget... Tech/a, you can make out that cheque to my favourite charity and to your old school: Midvale, School for the Gifted.


----------



## tech/a (3 June 2016)

Rainman said:


> Is anyone else in this stock?  On my calculations it is incredibly cheap and to all appearances a solid company.
> 
> I have been steadily building a position in it since it dropped below $2.70.  It is now trading at just over 60% of book value.




So at this time anything under $2.70 is great buying.
*You valued it at $4.50.*

Stock reaches $2.81 and your crowing loudly.
Back to mid $2s and your silent.

THEN--------



Rainman said:


> GMA closed at $3.10 on 23 May 2016 after earlier reaching a high of over $3.16.
> 
> In light of the proposed capital reduction and share consolidation, it is probably appropriate to draw a line under the bet that tech/a offered to make with me on 25 September 2015.
> 
> ...




Price closes at $3.10 and a week later after you've waited to see if it goes higher----you clearly decide
the Fundamentals have changed---



> *In light of the proposed capital reduction and share consolidation*, it is probably appropriate to draw a line under the bet that tech/a offered to make with me on 25 September 2015.




So GMA is no longer valued at $4.50---$3.10 is great value.

The lesson to be learned here is that ALL Analysis can change over time.
Currently technically GMA is *STILL* not a buy---hasn't been since Sept last year.
There is *NOTHING *here to be learned at all---*YET.*

This poster has been on about LONGTERM investing in undervalued instruments yet wants to make his point on minor short term peaks and troughs. Infact if you read back his case is compelling over a number of pages---even when faced with contrary argument. Now he is I think --Confused.

Joe has had a grand of mine---not the first---since early October---I don't mind supporting ASF.

Rainman on the other hand -------

*ME*

I await September and *will note if in that time the stock is a technical buy*.

Strange that at $2.70 its a great buy and at $3.10 its not!! (15% higher). Long way short of $4.50---my---how that's changed!!!

So what your saying Rainman is that the fundamentals have changed and you sold all your accumulated shares at $3.10---that's a great price and should be grabbed.

My personal opinion is that RM is so concerned about his $1000 and seeing the stock immediately returned to $2.60 ish after reaching $3.10 + he has hurriedly posted to appear vindicated---a week after it happened!!

Clever little Rainman??

Ill leave that to you the masses to form your own conclusions.


----------



## kid hustlr (3 June 2016)

omg hes back


----------



## Ves (3 June 2016)

Not sure why there's a need to bag the guy.   I know Rainman is pretty arrogant Tech/a,  but you too have been the same in some cases IMO.  You're like a Fundie / Techie reverse of each other.  Passionate, stubborn, ruthless,  and call a spade a spade. 

But hasn't this company paid out $0.532 per share (plus franking credits of $0.082 per share) or so in cash since the bet started?

Also issued shares got reduced in quantity by a multiple of 0.8555.

Think the bet was at $2.44.

So basically if you purchased at $2.44 you currently have the following:

$0.532 per share cash  in the bank. Plus $0.082 per share in tax credits you can use against your taxable income.

And shares that are trading on the market at the equivalent of $3.22.  This is calculated by dividing the current market price  of $2.755 by the share consolidation multiplier  0.8555.  

Unrealised market gain of $0.78  + $0.532 cash + $0.082 tax credits = $1.394 per share gain current.

$1.394/$2.44  =  57.1% return in about 7-8 months.

Not bad.   I don't know if the current valuation is sustainable as I haven't looked at the fundamentals for a while, mind you. *But those are the facts to date,  whatever method you used to buy.*


----------



## skc (3 June 2016)

Ves said:


> Not sure why there's a need to bag the guy.   I know Rainman is pretty arrogant Tech/a,  but you too have been the same in some cases IMO.  You're like a Fundie / Techie reverse of each other.  Passionate, stubborn, ruthless,  and call a spade a spade.
> 
> But hasn't this company paid out $0.532 per share (plus franking credits of $0.082 per share) or so in cash since the bet started?
> 
> ...




No this is incorrect.  You've calculated the consolidation the wrong way. 

Say you started with 4,000 shares @ $2.44 = $9,760 capital invested in Sept 2015, you return consists of:

+ 19.3c dividend per share = $772
+ 8.3c franking credit per share = $332
+34 capital return = $1,360

Your holding is consolidated into 4000 x 0.8555 = 3,422 shares. At current price of $2.76 stake is worth $9,445.

So total value = $9445 + $772 + $332 + $1360 = $11,909. Or ~22% on capital invested (as per Rainman's calculation).

And yes... all these back and forth are totally silly. It's was silly to start. It's still silly now. It's just silly all round.


----------



## Ves (3 June 2016)

skc said:


> No this is incorrect.  You've calculated the consolidation the wrong way.



So I have!!!  Thanks mate.


----------



## Joe Blow (3 June 2016)

There's nothing wrong with spirited debate but can I ask that everyone please resist the temptation to provoke, insult and attack others. It's not only completely unnecessary but makes reasonable discussion all but impossible.

For the sake of the thread, please stick to the topic at hand (i.e. Genworth Mortgage Insurance Australia).


----------



## Value Hunter (3 June 2016)

Rainman its good to see somebody else standing up for fundamental analysis and denouncing tea leaf reading a.k.a. technical "analysis" as they should.


----------



## galumay (3 June 2016)

The more things change, the more they stay the same.


----------



## Rainman (4 June 2016)

tech/a said:


> So at this time anything under $2.70 is great buying.
> *You valued it at $4.50.*
> 
> Stock reaches $2.81 and your crowing loudly.
> Back to mid $2s and your silent.




Tech/a, stop dodging the issue and distorting your original position.  

On 25 September 2015, you wrote:



tech/a said:


> Ok I'll play
> $1000
> it's lower than $2.44 in 12 mths.
> If I lose Joe gets a grand.
> If you lose you send Joe a grand...




Your words.

The bet was not about whether GMA's stock price would dock with my valuation of it like a space shuttle docks with its space station.  

The bet was, as you said above, that GMA would be lower than $2.44 in 12 months - and lower here meant, self-evidently, lower after factoring in dividends and, as it has turned about, the capital return and reduction of the share float.    

Now, so far, the return from holding GMA from the time of the bet has been around 22%. 

But you're right: perhaps I am being premature. We should wait until the close of the market on 25 September 2016.  Perhaps GMA will end up giving up all the gains that it has managed to earn to date.  I am prepared to do that.     

One final point: this bet arose because of your dismissive attitude to my initial view that GMA was undervalued.  I could marshall dozens and dozens of posts of yours on this forum where you have rubbished other members who have ventured opinions on stocks which you disagreed, typically in derogatory terms, were good investment candidates because the technical picture looked unfavourable.  

You would do well to take that on board the next time you consider dismissing someone as an idiot for liking a stock that happens at that particular point in time to be out of favour.


----------



## tech/a (4 June 2016)

Rainman said:


> They are your words.
> 
> The bet is that in 12 months the price of GMA is higher than $2.44.  It is simple.  Now stop being a pussy and make the bet.




This is The bet nothing more nothing less.

Before I post a chart

Answer the question

Has your valuation altered
Is the stock still a buy
Hold or sale?

At $2.70 it was undervalued
At $2.44 and lower it was even better buying 
Today at $2.70 is it still a buy?


----------



## sval62 (4 June 2016)

tech/a said:


> This is The bet nothing more nothing less.
> 
> Before I post a chart
> 
> ...




FIGJAM ,The site has been nice and friendly since you left for the 10th time 
give it a rest.


----------



## satanoperca (4 June 2016)

Come on, the bet is still on.

Pretty simple.

At least whoever wins, the big winner is Joe.


----------



## Quant (4 June 2016)

GMA things that might be of interest fwiw


----------



## Quant (4 June 2016)

cont ..


----------



## tech/a (4 June 2016)

sval62 said:


> FIGJAM ,The site has been nice and friendly since you left for the 10th time
> give it a rest.




Let me get this right.

Any question related to the way this guy has analyzed GMA is seen as 
Confrontational?

He has presented his thinking I'm questioning his current thinking as 
He has very clearly decided that he needed to draw a line as he called 
It at $3.10

So is GMA still fundamentally undervalued.
Simple non confrontational answer required and expected.

The reaction has been so good I might just hang about.


----------



## Rainman (4 June 2016)

tech/a said:


> ... He has very clearly decided that he needed to draw a line as he called
> It at $3.10




As I said earlier, tech/a, I am prepared to let the bet play out to the market's close on 25 September 2016.  In the interim, I want to watch you squirm.


----------



## Rainman (4 June 2016)

Quant said:


> cont ..
> View attachment 66977
> 
> View attachment 66978
> ...




GMA is a financial business.  The two most important metrics are tangible book value per share and return on equity.  I would put earnings and earnings growth a distant third and fourth respectively.


----------



## Rainman (4 June 2016)

sval62 said:


> FIGJAM ,The site has been nice and friendly since you left for the 10th time
> give it a rest.




It's alright, sval62. I only wish that there were more people like tech/a willing to take the other side of my trades.  

To adopt and adapt a remark of Kerry Packer's: You only get one tech/a in your life and I have had mine.


----------



## Value Hunter (4 June 2016)

Rainman said:


> GMA is a financial business.  The two most important metrics are tangible book value per share and return on equity.  I would put earnings and earnings growth a distant third and fourth respectively.




That is a bit of a contradiction as earnings is obviously a component in calculating return on equity. Without knowing earnings you can't know the return on equity.  Also earnings growth if it occurs due to retained earnings adds to future tangible book value per share. So if you are look at what net tangible asset value will be in the future then earnings growth is important. It seems illogical to me to rank the importance of metrics which involve common inputs and effect each other.


----------



## Rainman (5 June 2016)

Value Hunter said:


> That is a bit of a contradiction as earnings is obviously a component in calculating return on equity. Without knowing earnings you can't know the return on equity.




I didn't say earnings was of zero importance.  I said it was of lesser importance.  There's a difference.



Value Hunter said:


> Also earnings growth if it occurs due to retained earnings adds to future tangible book value per share. So if you are look at what net tangible asset value will be in the future then earnings growth is important.




The income generated by an insurer's investment portfolio will do that anyway. To that extent, an insurer does not need earnings growth for its book value to grow.  The income generated by the portfolio and reinvested will do grow book value anyway.

Insurers frequently go into run off, i.e. they cease writing new business and so cease generating premium income, and they are still able to grow their book value for this very reason.


----------



## Joe Blow (5 June 2016)

This thread is increasingly getting off-topic and personal and there is no need for it to go down that road. So let's get back to discussing GMA please and leave all the insults and provocation behind.

For the record there have been a number of posts by several people removed from this thread and nobody has been specifically targeted. I can only remove over-the-line posts when I see them and sometimes when threads get nasty or go off-topic I don't see it right away, especially on weekends.


----------



## Miner (5 June 2016)

Joe Blow said:


> This thread is increasingly getting off-topic and personal and there is no need for it to go down that road. So let's get back to discussing GMA please and leave all the insults and provocation behind.
> 
> For the record there have been a number of posts by several people removed from this thread and nobody has been specifically targeted. I can only remove over-the-line posts when I see them and sometimes when threads get nasty or go off-topic I don't see it right away, especially on weekends.




Good work Joe. Who says you do not read during weekends. Today is Sunday and tomorrow a public holiday in WA too .
I have purchased GMA through IPO and sold out with a good quick profit and do not hold.
Reading some of the nice and not so nice postings and predictive behavior of GMA scrip price, my 
With previous closing price of $2.8, PE 7.93 and yield more than 9% by comparison it is running excellent IMO.
what we need to consider that there is a change in housing sales and hence mortgages/mortgage insurance. So GMA is driven by industry weakness. Their margin is however very good and with consolidation the share price at current level once again good.
I am watching GMA and DYOR


----------



## Rainman (5 June 2016)

Miner said:


> Good work Joe. Who says you do not read during weekends. Today is Sunday and tomorrow a public holiday in WA too .
> I have purchased GMA through IPO and sold out with a good quick profit and do not hold.
> Reading some of the nice and not so nice postings and predictive behavior of GMA scrip price, my
> With previous closing price of $2.8, PE 7.93 and yield more than 9% by comparison it is running excellent IMO.
> ...




I would just add to this that GMA has a combined ratio below 50%.  In the insurance business, that is exceptional.


----------



## tech/a (5 June 2016)

Technical view

*Click to expand.*




Back in September.
Unless something of 
interest pops up in the 
mean time.


----------



## Rainman (5 June 2016)

tech/a said:


> Technical view
> 
> *Click to expand.*
> 
> ...




Just to show you how meaningless this chart is: if you had held GMA through September 2015 to now, you'd have earned a 22% return in an environment of 2% bond yields and where the market is down around 3% over the same period.


----------



## skc (5 June 2016)

tech/a said:


> Technical view
> 
> *Click to expand.*
> 
> ...




You need an adjusted price chart to take into account of the capital return and share consolidation.


----------



## Rainman (5 June 2016)

skc said:


> You need an adjusted price chart to take into account of the capital return and share consolidation.




Agree.


----------



## tech/a (6 June 2016)

skc said:


> You need an adjusted price chart to take into account of the capital return and share consolidation.






Rainman said:


> Agree.




I need this why?

It will change/changes the T/A?

Coming from 2 F/A's??

If you have one please post it up I cant find one.


----------



## VSntchr (6 June 2016)

tech/a said:


> I need this why?
> It will change/changes the T/A?



As far as I understand - chart reading, is analysing the behaviour of market participants and how they respond to certain levels and patterns. This behaviour is being constructed minute by minute by both fundamental and technical and systematic and mum and pa traders. The fact that certain participants are willing to transact in GMA at a certain level AFTER it has gone through capital return indicates that they are valuing it higher than if they traded at that same level BEFORE the capital return. 
Therefore, the stock holding that level shows a higher level of strength IMO.



tech/a said:


> Coming from 2 F/A's??



I think it's pretty obvious that skc is more than an "FA".


----------



## tech/a (6 June 2016)

VSntchr said:


> As far as I understand - chart reading, is analysing the behaviour of market participants and how they respond to certain levels and patterns. This behaviour is being constructed minute by minute by both fundamental and technical and systematic and mum and pa traders. The fact that certain participants are willing to transact in GMA at a certain level AFTER it has gone through capital return indicates that they are valuing it higher than if they traded at that same level BEFORE the capital return.
> Therefore, the stock holding that level shows a higher level of strength IMO.
> 
> 
> I think it's pretty obvious that skc is more than an "FA".




The only price on offer is the price after the capital return---by either buyers and or sellers 
They have no choice the best price on offer is todays.
Currently its down 9c on light volume.(Today at 10.30 in Adelaide) 
Hardly running to buy this up.

Its just wallowing around.
Which its done for around a year.
Sure its moved up a little but $2.44 to $2.72---Really---Hooray for F/A
Hardly racing towards $4.50

*STILL* not a buy technically.
One day it might be but not today 
or any other day in the last year.


----------



## skc (6 June 2016)

tech/a said:


> I need this why?
> 
> It will change/changes the T/A?
> 
> ...




Lol. While your theoretical T/A may only care about prices on charts... real traders care about money in the bank. You need to change the chart because you are concerned with how much return you get from money you've put up... whether you are trading or investing.

If you don't adjust the chart, you are also say the 2 situations below are the same:

A. Buy 10,000 @ $1, current price = $1.1.
B. Buy 10,000 @ $1, stock count consolidates at ratio of 2:1, current price = $1.50 ($hit, look at the spike of the share price chart!).

This is the price chart of CSL adjusted vs unadjusted. Now tell me your technical picture is the same.






And just in case you don't know... I trade prop for a living with 80-90% of my trades being day trades these days. It'd be a bit slow to use FA alone to do that wouldn't you think? 

May be you can go start a thread and show us mortals how you apply your technical analysis ?


----------



## notting (6 June 2016)

skc said:


> May be you can go start a thread and show us mortals how you apply your technical analysis ?




We have already seen that, hence the long sabbatical.  LOL


----------



## Trendnomics (6 June 2016)

Wow the EGO's in this thread!!!  

Rainman can you please change your alias to "fund/a" - also change your avatar pic to:




http://disney.wikia.com/wiki/Negaduck

https://www.youtube.com/watch?v=YziVpa8oZDg

The similarities in ego size is uncanny.


----------



## tech/a (6 June 2016)

skc said:


> Lol. While your theoretical T/A may only care about prices on charts... real traders care about money in the bank. You need to change the chart because you are concerned with how much return you get from money you've put up... whether you are trading or investing.
> 
> If you don't adjust the chart, you are also say the 2 situations below are the same:
> 
> ...






notting said:


> We have already seen that, hence the long sabbatical.  LOL




Have you got a chart? I cant find one.
But based on the fact it hasn't traded beyond $3.20 I cant see why it would alter the analysis.
You could be right but cant comment until I see one.



*Let me make this as clear as I can.*

Time is an issue for me. I was happy to run the Small caps thread but time did not allow me to be as thorough as I should have been. I'm not the type to back away---I admitted the error. 

As for a number here who insist on sticking in the boot go for it.
I've supported Joe to the Tune of a few Grand which is a few grand less than 99% here.
I've spent countless hrs helping others here who are less fortunate financially than myself.

If you don't want to be involved in anything I post then don't.
But your tedious snide remarks and childish taunting is pathetic.
I've been involved in many threads over the years that has proven
my application of T/A to be spot on WOW, PEN to name a couple off my head.

SKC 
I trade for an interest I don't have to trade, I trade the DAX and FTSE.
I couldn't think of anything worse than to trade for a living. I don't have too!!!
As I'm sure you know I ran a live technical trading thread (System trading) on Radges site for 7 yrs.
Turning $30K to $360K when we shut it down. I've had techtrader Published in Ragdes Book 
Un Holy Grails.Pages 109 to 112 I think.

I'm a technical trader who has made a lot of money trading, I'm not in the least bit interested in Fundamental trading. Nor am I interested in trading for a living.I comment on Fundamental threads with a technical view.


----------



## Rainman (6 June 2016)

tech/a said:


> Have you got a chart? I cant find one.
> But based on the fact it hasn't traded beyond $3.20 I cant see why it would alter the analysis.
> You could be right but cant comment until I see one.
> 
> ...




Tech/a, with respect, you seem to be dodging the key issue with respect to your chart and that is that it does not capture the return that GMA has generated for shareholders holding from September 2015 until now.  Why is that return of no concern to you?

It seems absurd simply to insist on the chart and to ignore the money that GMA has thrown off to its shareholders.


----------



## tech/a (6 June 2016)

Rainman said:


> Tech/a, with respect, you seem to be dodging the key issue with respect to your chart and that is that it does not capture the return that GMA has generated for shareholders holding from September 2015 until now.  Why is that return of no concern to you?




Simple

Its not a technical buy and hasn't been.

If you read the whole thread Like I did 
on the weekend that's all I've said.
Its a group of you and you in particular who
has taken issue that Technically I don't agree with you.

If you make money from it good on you.
If I have to send Joe another Grand So WHAT Ill do it gladly the guys 
running a business and all support to him. I pay $40K a week In wages
Do you really think $1k is a big deal???

I wouldn't be trading it.(GMA) Its done bugger all in a year.
But if you trade this stuff go for it.

SKC I've logged endless trades on the DAX over the years in REALTIME just check the thread ---all technical.

I often pick up $500-$3000 when trading---sure I get some similar losses ---- but I don't trade because I have to. I trade because I enjoy it!
Some guys collect Cars
Some trade (I do)
Some Buy collect houses (I used to)
Some run Companies (I do).

I enjoy everything I'm involved in!

*Technical is quick easy Black and White Right or Wrong.*
That's why I use it.


----------



## Rainman (6 June 2016)

tech/a said:


> ... I wouldn't be trading it. Its done bugger all in a year.




Right, it's done nothing all year but deliver a 22% return.  It takes real chop logic to call that "nothing".


----------



## tech/a (6 June 2016)

Rainman said:


> Right, it's done nothing all year but deliver a 22% return.  It takes real chop logic to call that "nothing".




Christ
Your cherry picking---it delivered at 22% return at some point.
It was also well below $2.44 at some point------

IF you'd bought it at $2.44 and sold it at $3.15 ish and held it all that time yes you would have.

But Im looking at $2.44 when I posted and tonight its closed at $2.69

Stellar!


----------



## Rainman (6 June 2016)

tech/a said:


> Christ
> Your cherry picking---it delivered at 22% return at some point.
> It was also well below $2.44 at some point------
> 
> ...




Tech/a, the bulk of the return has not come from movements in the share price.   Don't you understand that?   

It has come from the capital return and the dividend payments that have been made during that time.  The change in the share price - which you so perceptively point out - has risen only slightly over the same time period.


----------



## So_Cynical (6 June 2016)

Rainman said:


> the bulk of the return has not come from movements in the share price.
> It has come from the *capital return and the dividend payments* that have been made during that time.




So in other words - Dumb Luck.


----------



## barney (6 June 2016)

Can I say for what its worth ...... ASF is a much better place when there is a bit of friction/bravado/ego strutting/passion/contention/healthy disagreement etc etc ..............

Welcome back tech ("duckman"),  and well done "rainman" for taking a contrary position and taking no sh#t!

The place has not been quite the same for a few months since certain "cranky" members have gone awol

Anyway, carry on you guys ... If only we could get TH to come back and stir some additional cr@p as well we would all likely benefit greatly!


----------



## Triathlete (6 June 2016)

Here is my view: 22% is a good return which was generated over 255 days...so around 31.50% annualised.

I took a look at posts 160 and 166 which showed where the possibility was on entering GMA Technically when this discussion first got going.

The two trades back then that were closed out after 41 days have still shown a greater return around 25% if they are calculated over 255 days as well or 36% annualised, the main difference is I did not have to have my money tied up for so long and could have used it elsewhere or taken more trades in GMA if the opportunity was there.

So there you have it Fundies have made money

and the Techies have made money....

That's all from me....


----------



## Rainman (6 June 2016)

So_Cynical said:


> So in other words - Dumb Luck.




Clearly you know nothing about GMA.  

This is the second time in less than a year that GMA has made a special capital distribution to shareholders.  Why does it do this?  

GMA generates a combined ratio of less than 50%.  It does this consistently.  What that means in layman's speak is that it generates excess capital which in its public announcements it has repeatedly said it would distribute to shareholders.  

Therefore, back in September, it was only a matter of time before GMA would make another special distribution.  And I will go further and say that, if it is able to maintain its current combined ratio of less than 50%, it is likely that it will make another capital distribution in another year or two.


----------



## tech/a (6 June 2016)

Triathlete said:


> Here is my view: 22% is a good return which was generated over 255 days...so around 31.50% annualised.
> 
> I took a look at posts 160 and 166 which showed where the possibility was on entering GMA Technically when this discussion first got going.
> 
> ...




Sorry *Tri* but hind site is rubbish.

As far as I was concerned there was/is a bet about where the price is 25/9/16

Id post up if and when it was a technical buy or something of technical interest appeared.
The only reason I'm back on here is Rainman wanted to draw a line and end the wager early.

For me nothing has changed.

I was un aware that I could trade the instrument until then and claim profit---(Which Rainman did 4 days after it reached its high----hindsite easy call 4 days after it happened.) Imagine if I traded with calls 4 days after they occurred!! Entry and exit!

As you know (*Tri*) there are many ways to technically trade this.
As the point has been made that its grossly undervalued then I've been looking for technical entries that indicate a longer term change in sentiment.

*EG*

*Longterm Indications*

A large gap in price not necessarily supported by volume
A gap up without volume may indicate a complete withdrawal of supply.

A high range day with or without volume which holds price above its low over a number of following days.
---Same as the gap.

A number of days with good range and fair volume
Then small consolidations as price continues on Price advances consistently with small retracements.

*Short term Indications* would consist of taking a position near an historic support zone and selling around historic resistance zones. (While this has happened that's not what I was/am looking for).

Of course if you wanted to trade it using CFD's then you could also look for short trades---technically.

There have been and will be short term opportunities technically for GMA.
But as far as I'm aware that's not the discussion---its about being *GROSSLY* undervalued.

Right now its in no mans land neither short or long.

Anyone have an adjusted chart still cant find one----Premium data? I use Just Data for EOD
Ill check Interactive.


----------



## Rainman (6 June 2016)

tech/a said:


> Sorry *Tri* As far as I was concerned there was/is a bet about where the price is 25/9/16... Id post up if and when it was a technical buy or something of technical interest appeared.
> The only reason I'm back on here is Rainman wanted to draw a line and end the wager early.




For the third time, I am happy to let the bet play out until 25 September 2016.  

But at wherever the share price closes on that day the dividends, capital returns and the reduction of the float that have been made during the period must be brought to account in determining what the total gain (or loss) has been for the period.


----------



## skyQuake (6 June 2016)

Rainman said:


> Just to show you how meaningless this chart is: if you had held GMA through September 2015 to now, you'd have earned a 22% return in an environment of 2% bond yields and where the market is down around 3% over the same period.




What? Sept 22 ($1.44 break) to now is about +8%.

Anyways back to the stock - anyone have thoughts on counterparty concentration risk (CBA) ? I believe all that comes out Dec.
Also how exposed is the book to say rising rates/aussie housing downturn? There is nothing out there as far as I know.


----------



## tech/a (6 June 2016)

Rainman said:


> For the third time, I am happy to let the bet play out until 25 September 2016.
> 
> But at wherever the share price closes on that day the dividends, capital returns and the reduction of the float that have been made during the period must be brought to account in determining what the total gain (or loss) has been for the period.




Why

You never knew that was going to happen when the bet was taken.
Nor did I.
You cant change the bet mid stream.
You cant just add bits to suit you.
Price is price.

*The bet was and still is $2.44 25/9/16*

For the Fourth time.


----------



## McLovin (6 June 2016)

skyQuake said:


> Also how exposed is the book to say rising rates/aussie housing downturn? There is nothing out there as far as I know.




Combined ratio ~50%...Guess where that's going in a downturn. The general insurers have CORs in the low 90% to over 100%. This is basically a single event insurer: My opinion is that residential property tanks it's going to be Australia wide. As long as everything is fine in residential property it will toss off cash. If mortgage foreclosures rise well then you better hope the actuaries knew what they were doing.


----------



## skc (6 June 2016)

tech/a said:


> Have you got a chart? I cant find one.
> But based on the fact it hasn't traded beyond $3.20 I cant see why it would alter the analysis.
> You could be right but cant comment until I see one.




You can see the prices here for adjusted vs unadjusted for GMA.

https://au.finance.yahoo.com/q/hp?s=GMA.AX



tech/a said:


> *Let me make this as clear as I can.*
> 
> Time is an issue for me. I was happy to run the Small caps thread but time did not allow me to be as thorough as I should have been. I'm not the type to back away---I admitted the error.




Clearly coincidental that you ran out of time at the precise moment that an error was pointed out.



tech/a said:


> As for a number here who insist on sticking in the boot go for it.
> I've supported Joe to the Tune of a few Grand which is a few grand less than 99% here.
> I've spent countless hrs helping others here who are less fortunate financially than myself.




Thank you for your financial support for the ASF. But when you lose a wager on the forum and pay up to Joe... that's you losing a wager. 

Regardless, your support for ASF has nothing to do with the fact that you talk down others who hold different ways of making money in the market.

You may want to support ASF by making it a more friendly and constructive environment.



tech/a said:


> I've been involved in many threads over the years that has proven
> my application of T/A to be spot on WOW, PEN to name a couple off my head.




A simplest illustration of how TA and FA work. The shares were in a downtrend. The downtrend was created by people selling the stock *who knows the share better *than those who were buying. Those who were buying got their FA wrong. Those who were selling got their FA right. So can people please stop throwing out examples of TLS or Enron as how FA doesn't work and TA is superior. These examples at best only prove that right TA is superior to wrong FA.



tech/a said:


> SKC
> I trade for an interest I don't have to trade, I trade the DAX and FTSE.
> I couldn't think of anything worse than to trade for a living. I don't have too!!!
> As I'm sure you know I ran a live technical trading thread (System trading) on Radges site for 7 yrs.
> ...




Great to see.. although not sure what I am supposed to imply from this. 



tech/a said:


> I'm a technical trader who has made *a lot of money trading*




What is a lot of money? Turing $30k into $360k over 7 years? I guess some might consider that mildly impressive for an amateur. But I think quite a few people will scoff at this comment - Minwa only made about 1/3 of that in a single month (and he uses TA too)... I know TA works in the right hands at the right times so you don't need to convince me of such. 



tech/a said:


> If you don't want to be involved in anything I post then don't.
> But your tedious snide remarks and childish taunting is pathetic.




Agree Rainman is at times just as bad. Everything you say about him applies equally to yourself. And any change in behaviour you wish to see from him... I wish to see from you.


----------



## skyQuake (6 June 2016)

McLovin said:


> Combined ratio ~50%...Guess where that's going in a downturn. The general insurers have CORs in the low 90% to over 100%. This is basically a single event insurer My opinion is that residential property tanks it's going to be Australia wide. As long as everything is fine in residential property it will toss off cash. If mortgage foreclosures rise well then you better hope the actuaries knew what they were doing.




They started shifting away from the higher LVR which will help if we have a 'soft' landing. Time to talk to some actuaries and see if any hedge funds have been talking to them too!


----------



## Rainman (6 June 2016)

McLovin said:


> Combined ratio ~50%...Guess where that's going in a downturn. The general insurers have CORs in the low 90% to over 100%. This is basically a single event insurer: My opinion is that residential property tanks it's going to be Australia wide. As long as everything is fine in residential property it will toss off cash. If mortgage foreclosures rise well then you better hope the actuaries knew what they were doing.




All true.  But property prices in your scenario really would have to tank and plunge mortgagors deep into negative equity, such that GMA's subrogated recoveries would leave GMA with steep unrecovered losses.


----------



## satanoperca (6 June 2016)

skc said:


> Regardless, your support for ASF has nothing to do with the fact that you talk down others who hold different ways of making money in the market.



It was a simple bet, no more, no less, not talking down, a bit of fun, to keep things interesting on the forum. It I was I who questioned Rainman thoughts on this stock as I felt, no T/A but F/A  macro that sooner or later the property bubble in Australia would pop, well the chart told me that the market felt that way to, but mainly due to the fact we are the most overly privately indebted nation in the world with a crap load of land to build on and a pile of debt to go with it to. Thank-you Glen for the ultra low I/R's, how is that inflation going?. Mind you, I only trade on T/A, keeps me impartial. 


skc said:


> What is a lot of money? Turing $30k into $360k over 7 years? I guess some might consider that mildly impressive for an amateur.



You try to be impartial, but still are insulting. “Amateur”. I don’t know about you, but $360K for the average Joe is a lot of money and have you shown in a public forum this type of return. Shucks, you would have laid down $3B and turned it into a trillion. Common, this is getting a little out of hand.
This has to be the funniest observation of human behavior, I simple bet was made, let it play out, a few more months to go and we will see who was right in this situation.


----------



## Rainman (6 June 2016)

skc said:


> ... Agree Rainman is at times just as bad.




Show me one post of mine where I have ever rubbished a stock idea put forward by anyone on this forum because I consider the "fundamental picture" looks bad?


----------



## McLovin (6 June 2016)

skyQuake said:


> They started shifting away from the higher LVR which will help if we have a 'soft' landing. Time to talk to some actuaries and see if any hedge funds have been talking to them too!




Yeah, they only provide info on the LVR at origination, not the current LVR of the insured loan. There's about $192b (total is $320b) in loans insured with an original lvr >85%. Obviously some of those would have moved to lower lvr's given the gains in the property market in the last few years. Still, all that is backed by $2.2b (less $125m if you rip out deferred acquisition costs) in equity and $950m in reinsurance. I'm not saying they're going broke, too hard basket for me, but I reckon the time to buy is after (if ever) the property market blows up.


----------



## notting (6 June 2016)

Bit of humility doesn't hurt anyone.  I know, every time I try to write something!!!





On current action at this stage of the game, I'd be backing the downside if I had to.

Also I've not found Tech/a to be overly mean or nasty.  
Just sharp. 
Hardly anything to worry about, you can just state your alternative reasoning if you have some and time tells.

Punch line - it would be really funny of Joe and Tech/a were the same person. LOL


----------



## skc (6 June 2016)

Rainman said:


> Show me one post of mine where I have ever rubbished a stock idea put forward by anyone on this forum because I consider the "fundamental picture" looks bad?




I said you have at times guilty of _"tedious snide remarks and childish taunting"_. Here are 2 examples.



Rainman said:


> In the interim, I want to watch you squirm.






Rainman said:


> Now stop being a pussy and make the bet.






satanoperca said:


> You try to be impartial, but still are insulting. “Amateur”.




Amateur = non-professional. Tech/a doesn't trade for a living. Doesn't want to, doesn't need to. He's an amateur trader by definition.

If a professional trader made $330k over 7 years he would have averaged a bit under $50k a year. That is not good at a professional level. But it is mildly impressive for an amateur.

The point is... making some or lots of money (by whoever's standard) in the market using one method doesn't mean another method is worthless.


----------



## Rainman (6 June 2016)

skc said:


> I said you have at times guilty of _"tedious snide remarks and childish taunting"_. Here are 2 examples...




Snide and childish I might be but tedious never.


----------



## tech/a (7 June 2016)

skc said:


> You can see the prices here for adjusted vs unadjusted for GMA.
> 
> https://au.finance.yahoo.com/q/hp?s=GMA.AX




Still not a chart I'm visual



> Clearly coincidental that you ran out of time at the precise moment that an error was pointed out.




*Nothing Coincidental* about it--It was and still is a clear decision.
Your pointing out of my error made 3 things crystal clear.

(1) I didn't have the time to devote to accurate recording
Let alone 
(2) Having the time to devote to stock selection and trade explanation
(3) If I was going to do this I had to be able to commit 110% I couldn't so pulled the pin.



> Thank you for your financial support for the ASF. But when you lose a wager on the forum and pay up to Joe... that's you losing a wager.




Well I pay my wagers--I've seen plenty with big mouths and no wallets.(in all walks of life)



> Regardless, your support for ASF has nothing to do with the fact that you talk down others who hold different ways of making money in the market.




Read through this thread I haven't talked down anyone--I've presented my view in the face of a vehement believer in one form of analysis. my point is that Fundamental analysis is just as easily mildly accurate OR plain wrong as any other!



> You may want to support ASF by making it a more friendly and constructive environment.




ASF doesn't seem to have the ability of supporting any counter view to some people.
If I'm attacked I'm not going to roll over like a Puppy who wants its tummy scratched.
You'll find the instigation of attacks doesn't come from this little black duck.





> A simplest illustration of how TA and FA work. The shares were in a downtrend. The downtrend was created by people selling the stock *who knows the share better *than those who were buying. Those who were buying got their FA wrong. Those who were selling got their FA right. So can people please stop throwing out examples of TLS or Enron as how FA doesn't work and TA is superior. These examples at best only prove that right TA is superior to wrong FA.




So those buying stock in ANY down move are the smart ones?
If your a T/A trader trading long you would hardly ever be caught on the wrong side for any length of time.
If you get the F/A wrong you could be sitting there for years and never be right (The Fundamentals of the F/A change---either from internal or external influences).



> Great to see.. although not sure what I am supposed to imply from this.



You don't have to trade professionally to make some decent coin.
99% of members on ASF don't/cant/or don't want to but wouldn't mind making some "Decent Coin"



> What is a lot of money? Turing $30k into $360k over 7 years? I guess some might consider that mildly impressive for an amateur. But I think quite a few people will scoff at this comment - Minwa only made about 1/3 of that in a single month (and he uses TA too)... I know TA works in the right hands at the right times so you don't need to convince me of such.




Yes and like all in business he would have had his bad months. I doubt its the norm---you don't post up the jubilation of something normal!



> Agree Rainman is at times just as bad. Everything you say about him applies equally to yourself. And any change in behaviour you wish to see from him... I wish to see from you.




Go back and read the thread---I'm placid until provoked.



skc said:


> I said you have at times guilty of _"tedious snide remarks and childish taunting"_. Here are 2 examples.




Its hardly good/clever/meaningful debate.




> Amateur = non-professional. Tech/a doesn't trade for a living. Doesn't want to, doesn't need to. He's an amateur trader by definition.
> 
> If a professional trader made $330k over 7 years he would have averaged a bit under $50k a year. That is not good at a professional level. But it is mildly impressive for an amateur.
> 
> The point is... making some or lots of money (by whoever's standard) in the market using one method doesn't mean another method is worthless.




So are 99% of those here.(Amateurs)

There is another metric--Time.

Systematic trading (eventually) takes a few hrs a week.

Discretionary way more that's why I only trade Futs every now and then (Usually when the misses watches 
"Home and Away"). If you want to record everything from trade decision to the trade commentary to everything else then---post something meaningful--that takes even longer. Can get pretty boring as well.

So return for time spent is way better than 9-5 (For the average guy)


----------



## notting (7 June 2016)

tech/a said:


> Read through this thread I haven't talked down anyone--I've presented my view in the face of a vehement believer in one form of analysis. my point is that Fundamental analysis is just as easily mildly accurate OR plain wrong as any other!




I welcome the prickly comment about anything I write.  I don't care how stupid it makes me feel, if there is a better opinion than mine I want to know it.



tech/a said:


> You don't have to trade professionally to make some decent coin.
> 99% of members on ASF don't/cant/or don't want to but wouldn't mind making some "Decent Coin"
> 
> Yes and like all in business he would have had his bad months. I doubt its the norm---you don't post up the jubilation of something normal!
> Systematic trading (eventually) takes a few hrs a week.




Now this is the sad bit.
Like I pointed out at the time, "It was only the beginning"  If you had stuck to your system, spent a bit more time on it and used real money,  I reckon you would have doubled it and still be going strong.  Better than your other business I reckon!.  To save time you could have just said I'm done with explanations I'll just put the trades up.  Up to you.

So you should get Netflix, introduce your wife to breaking bad, game of thrones and house of cards.  That should keep her tied up whilst you make a squillion. (home and away.  How we suffer!)

Personally I think markets are getting a bit like - mums and dads all finally getting in all relaxed and happy to take the yield, pros happy to be selling to them!  

Doubt GMA will be going any where far over the medium term.


----------



## tech/a (7 June 2016)

> Better than your other business I reckon!.




Not even remotely close.


----------



## sinner (7 June 2016)

skc said:


> What is a lot of money? Turing $30k into $360k over 7 years?




I have seen this claimed about the techtrader thread multiple times by tech, but I have never been able to verify.

From my understanding, it was $30k plus $70k margin loan, so the return from trades is actually more like 260% return over 7 years (~15% per annum, after margin costs I assume, otherwise not much better than market return) than the 1200% return that "turning $30k into $360k" seems to imply.

Still an impressive return of course, but should be considered in light of the overall market regime for those 7 years as well.


----------



## Miner (8 June 2016)

some extract from Bell Potter Research
*Genworth Australia is a high-risk play on the Australian housing market,
which is unlikely to crash.*
Two reports attached - apology if they were uploaded in the past.


----------



## tech/a (8 June 2016)

sinner said:


> I have seen this claimed about the techtrader thread multiple times by tech, but I have never been able to verify.
> 
> From my understanding, it was $30k plus $70k margin loan, so the return from trades is actually more like 260% return over 7 years (~15% per annum, after margin costs I assume, otherwise not much better than market return) than the 1200% return that "turning $30k into $360k" seems to imply.
> 
> Still an impressive return of course, but should be considered in light of the overall market regime for those 7 years as well.




Will reply to this query on this thread.

https://www.aussiestockforums.com/forums/newreply.php?p=870168&noquote=1


----------



## tech/a (8 June 2016)

tech/a said:


> Will reply to this query on this thread.
> 
> https://www.aussiestockforums.com/forums/newreply.php?p=870168&noquote=1




OOOPs try here

https://www.aussiestockforums.com/forums/showthread.php?t=1560&page=3&p=909880#post909880


----------



## Rainman (8 June 2016)

Miner said:


> some extract from Bell Potter Research
> *Genworth Australia is a high-risk play on the Australian housing market,
> which is unlikely to crash.*
> Two reports attached - apology if they were uploaded in the past.




Thank you for posting this.


----------



## piggybank (8 June 2016)

Given that I don't have a clue about Financial Analysis (and only slightly more about Technical Analysis) can anyone give me an idea (or two) what the following financial information can tell us about the health of the company - I assume present health cannot be given as the information is only up to 2015? After all I suppose as an outsider, one can only work out the figures twice a year when the company releases the 1st & 2nd half results to the market

Btw, it would be nice if someone who has Stockdoctor in their armoury, could give us their (Lincoln Indicators) opinion of the stock presently

​
Regards
PB


----------



## Rainman (8 June 2016)

piggybank said:


> Given that I don't have a clue about Financial Analysis (and only slightly more about Technical Analysis) can anyone give me an idea (or two) what the following financial information can tell us about the health of the company - I assume present health cannot be given as the information is only up to 2015? After all I suppose as an outsider, one can only work out the figures twice a year when the company releases the 1st & 2nd half results to the market
> 
> Btw, it would be nice if someone who has Stockdoctor in their armoury, could give us their (Lincoln Indicators) opinion of the stock presently
> 
> ...




Ask tech/a.  He knows all about this kind of stuff.


----------



## Triathlete (8 June 2016)

piggybank said:


> Btw, it would be nice if someone who has Stockdoctor in their armoury, could give us their (Lincoln Indicators) opinion of the stock presently
> 
> Regards
> PB




Here you go piggybank...


* Strategic Comment*

GMA is in a Satisfactory Financial Health position (GR1), but fails our management assessment criteria (GR2). While the company's dividend yield is currently well above the broader market we are concerned around the sustainability of this yield and risks generally in the lenders mortgage insurance industry. As such GMA cannot be considered a Star Income Stock.


----------



## tech/a (11 June 2016)

*SKC*

The chart originally posted *IS* adjusted.

In fact it shows GMA is performing far worse than it was a year ago!!

*This Chart Posted 9 mths ago*




*This chart posted last week!*




Clearly adjusted


----------



## piggybank (11 June 2016)

Triathlete said:


> Here you go piggybank...
> 
> 
> * Strategic Comment*
> ...




Firstly, I apologize for not having replied sooner to thank you for your kind reply. However, given that I have never been a user of Stockdoctor (I don't know what the parameters are of their methodology) all I know is that they are very successful in sorting out the wheat from the chaff. 

Secondly, I presume - reading between the lines - that although GMA isn't a Star Income Stock, it isn't a bad stock either and isn't one to necessarily avoid presently? or am I mistaken?

I look forward to your reply.

Thanks once again.

Regards
PB

P.S. Nice chart - as always Tech/a


----------



## Triathlete (11 June 2016)

piggybank said:


> Firstly, I apologize for not having replied sooner to thank you for your kind reply. However, given that I have never been a user of Stockdoctor (I don't know what the parameters are of their methodology) all I know is that they are very successful in sorting out the wheat from the chaff.
> 
> Secondly, I presume - reading between the lines - that although GMA isn't a Star Income Stock, it isn't a bad stock either and isn't one to necessarily avoid presently? or am I mistaken?
> 
> ...




They use a number of parameters, but basically GMA comes under the financial model;

Market cap above 200 mil

ROE; above 14%

EPS; above 14%  

There are a few more parameters but they are some of the main ones. Currently these are not met by GMA

We all have our own way in analysing stocks and then taking a position.
I personally like to use a combination of Fundamentals and then enter and exit based on the Technical signals if it is to become a medium term holding.

If I am trading I do not put to much on the fundamentals as I am just speculating on the price movement

When I take a look at a GMA fundamentals I need to see if the EPS is growing going forward and in the case of GMA this is not the case at this point in time so do not see the price going up any time soon if you were looking at a medium time frame holding. 

I will also add that even if the fundamentals look really good using stock doctor I never take a position unless the chart backs up the fundamentals.

A good example here currently is BKL....it is one of their star growth stocks, undervalued by around 26% to its fair value but the stock has been moving in the wrong direction.

 Once the market begins to support it again then I may take a position for its current value and growth potential but not yet.


----------



## piggybank (11 June 2016)

Triathlete said:


> They use a number of parameters, but basically GMA comes under the financial model;
> 
> Market cap above 200 mil
> 
> ...




Hi Triathlete,

Thank you once again for informing me (and other members) of some of the other parameters stock doctor as to offer. It was very insightful reading on how you (and I presume many other investors do) in the methods/criteria you use in going about purchasing a stock(s).

Anyone care to guess where it will bottom out?


​
Cheers
PB


----------



## tech/a (20 June 2016)

Said Id be back if I found something of technical interest
I have and will post a chart tonight.


----------



## tech/a (20 June 2016)

Technical view




Currently $2.44 looks remote but that maybe different
in a few weeks. Will be dependant on forward trading.


----------



## notting (20 June 2016)

Nice bounce of support today.
Not looking like it's about to collapse.
Still a little oversold in the short term as it's support is also syncing with 200 day moving average.
Would have been a good entry this morning for short term bounce toward 2.80 which it needs to break for medium term if 10% ff dive isn't enough for you.
I should have been paying more attention.


----------



## Triathlete (21 June 2016)

I think that because a dividend is coming up in 59 days and forecast to pay 15.36% and 100% franked is one reason we are seeing interest in the stock at the moment.

So people need to start getting in for the 45 day rule.

Once this passes I think we will see the stock move back down in price.


----------



## Triathlete (21 June 2016)

Triathlete said:


> I think that because a dividend is coming up in 59 days and forecast to pay 15.36% and 100% franked is one reason we are seeing interest in the stock at the moment.
> 
> So people need to start getting in for the 45 day rule.
> 
> Once this passes I think we will see the stock move back down in price.





Update ......DY 8.49% & Grossed DY  12.12%


----------



## tech/a (22 June 2016)

*GMA* triggered a technical buy (For my analysis) today.

It didn't trigger yesterday so the setup for position sizing and risk
can be a little different to that which I suggested.

The suggested setup would be considered conservative.
Using a few ticks below yesterdays low as the stop point would be
considered more aggressive.

Ill post a chart to clarify tonight. 
For all of those who are un interested.


----------



## explod (22 June 2016)

tech/a said:


> *GMA* triggered a technical buy (For my analysis) today.
> 
> It didn't trigger yesterday so the setup for position sizing and risk
> can be a little different to that which I suggested.
> ...






Sudden jump in volume,  next day jump in price and volume maintained.  Yep,  agree,  not sure about that  "un"  though Tech.

On financial fundamentals though,  "brextit",  I'd stand watching till end of the week.


----------



## tech/a (22 June 2016)

Its not something that would be on my radar as a trade.
But I did say that if I saw anything interested related to THIS stock Id post it.
So until I nick off in 3 weeks Ill see what evolves.


----------



## Rainman (23 June 2016)

tech/a said:


> Technical view
> 
> View attachment 67160
> 
> ...




Thank you.  This is useful analysis.  I mean that.


----------



## tech/a (24 June 2016)

My more aggressive trade would be closed now.
The less aggressive one open.


----------



## notting (24 June 2016)

tech/a said:


> My more aggressive trade would be closed now.




You bet!


----------



## Rainman (5 August 2016)

Tech/a, we are still several weeks out from the anniversary of our bet and GMA is up by 25% over the period.  If you include the 22% return to shareholders by way of special dividends and capital returns, the return is closer to 50%.  

Not bad, wouldn't you say, during a time of very high volatility in equity markets as well as a well-publicised campaign of predictions of an imminent property crash in Australia.


----------



## tech/a (6 October 2016)

After 12 mths

Click to expand




Railman's silence indicates a result worse than he would have liked.
This will get him back!


----------



## Wysiwyg (6 October 2016)

tech/a said:


> Railman's silence indicates a result worse than he would have liked.
> This will get him back!



Time can be the Fundamentalists best friend or worst enemy. Only time will tell. Fundamentalists might live longer lives.


----------



## tech/a (6 October 2016)

Wysiwyg said:


> Time can be the Fundamentalists best friend or worst enemy. Only time will tell. Fundamentalists might live longer lives.




TIme certaintly isn't my friend.
I keep getting older.


----------



## craft (6 October 2016)

tech/a said:


> I don't know if the stock price will finish above $2.44 in a year---nor do you.
> *But Ill bet I don't lose as much and or make more money out of the trade than you do.*
> That---is my bet.---I can do that by taking a trade today!!!---yeh yeh you can average down.
> 
> ...






tech/a said:


> Ok I'll play
> $1000
> it's lower than $2.44 in 12 mths.
> If I lose Joe gets a grand.
> ...






Rainman said:


> Done.




Since this date GMA has paid shareholders 79.8cents in capital returns and dividends and 19.6cents in franking credits.

That's a 40.7% return on $2.44

24th was the 12 month anniversary. It closed at $2.71 on the 23rd or $2.68 on the 26th


----------



## craft (6 October 2016)

tech/a said:


> Technical view
> 
> View attachment 67160







> Technically A buy above today’s high with a stop at $2.52 is a lower risk opportunity




Triggered 22/6 @ 2.70
Stopped 28/6 @ 2.51

19 cent loss on $2.70 = 7% loss in 6 Days


----------



## Wysiwyg (6 October 2016)

IMO.  As long as Interest Rates are low, the capital return and exceptional dividend payments makes GMA an interesting prospect. However it appears Aussies are at all time highs with personal debt.


> Australia is singled out by the IMF in its latest Fiscal Monitor report as one of a handful of developed countries where debt continues to rise.



Employment incomes with a to-be significantly reduced resource market (coal phased out) and significantly reduced manufacturing industry (see China/Asia) will place mortgage payments under pressure. Under pressure due to lower non resource/manufacturing full time employment incomes. It doesn't come naturally to look too far ahead. Week to week, month to month is about as far as most extend. A que sera sera future.


----------



## tech/a (7 October 2016)

craft said:


> Since this date GMA has paid shareholders 79.8cents in capital returns and dividends and 19.6cents in franking credits.
> 
> That's a 40.7% return on $2.44
> 
> 24th was the 12 month anniversary. It closed at $2.71 on the 23rd or $2.68 on the 26th




That is an amazing return well above anything else I've seen!
WOW.


----------



## InsvestoBoy (25 October 2016)

Hello AussieStockForum people,

I noticed in the news the other day an article about Genworth Financial being bid:

http://www.nytimes.com/2016/10/25/business/dealbook/china-oceanwide-genworth-financial.html

and I remembered there is a Genworth on the ASX.

Does anyone know if they are related?


----------



## Rainman (26 October 2016)

InsvestoBoy said:


> Hello AussieStockForum people,
> 
> I noticed in the news the other day an article about Genworth Financial being bid:
> 
> ...




Yes, they are. Genworth Financial Inc (NYSE:GNW) was the parent company of GMA.  It has since sold down its stake and now owns, I think, somewhere around 40% of GMA.


----------



## Rainman (26 October 2016)

Wysiwyg said:


> IMO.  As long as Interest Rates are low, the capital return and exceptional dividend payments makes GMA an interesting prospect. However it appears Aussies are at all time highs with personal debt.
> 
> Employment incomes with a to-be significantly reduced resource market (coal phased out) and significantly reduced manufacturing industry (see China/Asia) will place mortgage payments under pressure. Under pressure due to lower non resource/manufacturing full time employment incomes. It doesn't come naturally to look too far ahead. Week to week, month to month is about as far as most extend. A que sera sera future.




Everyone is a macro forecaster these days.  

While equity investors don't want to be completely tin-eared when it comes to macro forecasts, they should demand compelling evidence before they let macro forecasters have the final say on their equity investments.  

As Buffett noted, there is always a large section in the local graveyard reserved for macro forecasters.


----------



## Rainman (27 October 2016)

Wysiwyg said:


> IMO.  As long as Interest Rates are low, the capital return and exceptional dividend payments makes GMA an interesting prospect. However it appears Aussies are at all time highs with personal debt.
> 
> Employment incomes with a to-be significantly reduced resource market (coal phased out) and significantly reduced manufacturing industry (see China/Asia) will place mortgage payments under pressure. Under pressure due to lower non resource/manufacturing full time employment incomes. It doesn't come naturally to look too far ahead. Week to week, month to month is about as far as most extend. A que sera sera future.




As luck would have it, I came across this quote by Charlie Munger today which sums up perfectly the little to be gained from investing based on macro calls:

"_Warren and I have not made our way in life by making successful macroeconomic predictions and betting on our conclusions...  Our system is to swim as competently as we can and sometimes the tide will be with us and sometimes it will be against us.  But by and large we don't much bother with trying to predict the tides because we plan to play the game for a long time...  It's kind of a snare and delusion to outguess macroeconomic cycles...  Very few people do it successfully and some of them do it by accident.  When the game is that tough, why not adopt the other system of swimming as competently as you can and figuring that over a long life you'll have your share of good tides and bad tides_".


----------



## Rainman (17 November 2016)

The former parent and still largest shareholder of GMA, Genworth Financial Inc (GNW), offers an attractive merger arb opportunity at present if anyone is interested.  

An offer of USD$5.43 has been made for the outstanding shares of GNW.  The spread based on the most recent closing price of GNW is around 25%.  The deal is expected to close mid next year but requires state regulatory approval which appears to account for the wide spread.


----------



## skyQuake (17 November 2016)

Rainman said:


> The former parent and still largest shareholder of GMA, Genworth Financial Inc (GNW), offers an attractive merger arb opportunity at present if anyone is interested.
> 
> An offer of USD$5.43 has been made for the outstanding shares of GNW.  The spread based on the most recent closing price of GNW is around 25%.  The deal is expected to close mid next year but requires state regulatory approval which appears to account for the wide spread.




All the Chinese SoE based deals have been blowing up left right and centre on account of the govt trying to stop outflows. Check out the Syngenta/ChemChina - US$43B deal that is going nowhere fast.


----------



## Rainman (17 November 2016)

skyQuake said:


> All the Chinese SoE based deals have been blowing up left right and centre on account of the govt trying to stop outflows. Check out the Syngenta/ChemChina - US$43B deal that is going nowhere fast.




The offer for GNW has come from China Oceanwide Holdings.  China Oceanwide Holdings is not a state-owned enterprise and it has a solid history of completing acquisitions in the U.S.


----------



## skyQuake (18 November 2016)

Rainman said:


> The offer for GNW has come from China Oceanwide Holdings.  China Oceanwide Holdings is not a state-owned enterprise and it has a solid history of completing acquisitions in the U.S.




They still require Chinese govt approvals, though the discount seems to be attributed to US approvals:
Anbang Insurance Group’s takeover of HRG Group’s Fidelity and Guaranty Life - deal was announced about a year ago and still no approvals


----------



## Rainman (20 November 2016)

skyQuake said:


> They still require Chinese govt approvals, though the discount seems to be attributed to US approvals:
> Anbang Insurance Group’s takeover of HRG Group’s Fidelity and Guaranty Life - deal was announced about a year ago and still no approvals




What approval from the Chinese government does Oceanwide require in order to purchase GNW?  Please provide a link to your supporting source.   

The issue holding up Anbang's offer to take over FGL is due to the New York regulators requiring further information about Anbang's shareholder structure.  Angbang decided to pull its application: http://www.cnbc.com/2016/06/01/reut...g-pulls-fidelity-acquisition-application.html.  It is unclear whether it will resubmit it.  

But Anbang's decision to pull its application was not due to any issue with the Chinese government withholding (or withholding conditionally) approval for the deal.


----------



## ukulele (10 January 2017)

GMA made a 52 week high today. Some good strength the past couple of months, perhaps a strong profit result in the coming weeks. Or perhaps buy the rumour, sell the fact.


----------



## Kryzz (13 June 2017)

Buyers keep seem to be coming out in droves around the 2.80 region for GMA here


----------



## So_Cynical (6 November 2017)

Miner said:


> *Re: GMA - Genworth Mortgage Insurance Australia IPO*
> 
> 
> The issue got fully subscribed with *issue price about $2.65.* The promoters hold large amount of stock holding and going to be traded from *25 May 2014.* Interesting time of listing .




3 and a half years later and the SP has gone next to nowhere, biggish swings in between of course but a slight disappointment for long term holders i would think, dividends have been good, SP just keeps bouncing off the 2.70/5 level, lower highs though, not a good sign.

A turning point approaches one would think, a break up or break down.
~


----------



## Miner (9 November 2017)

Good chart SC. Glad to see you have been tracking GMA . I am waiting for a break to re-enter after taken off with profit on GMA some times back.


----------



## satanoperca (7 March 2018)

Ouch, watch out below $2.23.

Where is Rainman with his wonder FA analysis of the bright and outstanding company.

Looks to me property will go the same direction


----------



## Joules MM1 (7 February 2019)

dont hold this but i liked the chart for a buy of the low zone on a monthly basis so stuck it in the ASF year competition

if you want to get your price up get big mac bank to down grade its target !!





https://www.aussiestockforums.com/threads/tipping-competition-for-full-cy-2019.34408/


----------



## rnr (26 May 2019)

The current consolidation happening at $2.60 which is just below the higher resistance of $2.66 caught my eye. Perhaps there is also the possibility for a Cup & Handle pattern to form as price action advances (oh, and yes, I am aware of the serious leak near the left hand lip of the cup).


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## greggles (30 October 2019)

GMA pushing through to fresh highs today following the release of their 3Q19 earnings:






It looks like GMA is reaping the benefits of improving property market conditions around the country with a nearly 30% jump in its third-quarter underlying net profit.

It's been an outstanding 2019 for GMA and with the current low interest rate environment and the property market tipped to improve even further, there could be more gains to come for GMA.

Certainly one worth watching for property market bulls.


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## So_Cynical (30 October 2019)

100% turn around in 12 months, who says bottom picking doesn't work.


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## tech/a (30 October 2019)

So_Cynical said:


> 100% turn around in 12 months, who says bottom picking doesn't work.




Well it works if I see posts from May at least looking at it as a trade.
Greggy did have a look but then the stock fell asleep again.

Bottom picking in Hind-site is wildly successful.


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## satanoperca (30 October 2019)

Thanks, another great short for me again. GMA is built on a house of cards, but the cards have no sound fundamentals.

Unless we go negative interest, then I am am long safes and guns


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## peter2 (12 November 2019)

Another mortgage company that has gone gangbusters after the last Fed election shock Lib Coalition result.  This is a note to mention that today is the last day to earn the special div (0.242). It goes XD 13/11/19.







This chart shows perfect setups for me. Break of long consolidation (post Fed election) and several BO-NH setups as price made new yearly highs.
Disclosure: I've sold today as the price will fall when it goes XD.


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## Zaxon (16 November 2019)

peter2 said:


> This is a note to mention that today is the last day to earn the special div (0.242). It goes XD 13/11/19.



I look forward to being showed in cash from all those people who didn't save up a 20% deposit for their house.  I hope GMA has provided you...er...your lender an excellent service.


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## satanoperca (19 March 2020)

Getting smashed, I wonder why, as the fall out is going to hit them very very hard, expect to be under a dollar with 3 months, current $1.53


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## Dona Ferentes (24 June 2020)

peter2 said:


> .. price made new yearly highs
> .
> Disclosure: I've sold today as the price will fall when it goes XD.



Probably an exit that couldn't be bettered. Spot on about the election boost, too!






Genworth is in the process of launching a new 5 year Subordinated Debt (T2) Bond that will pay BBSW + 5%, or about 5.38%pa. Part of the note sheet has the following:

_"Genworth is one of the main players in the mortgage insurance market, providing cover for lenders against non-payment of mortgages by their borrowers. The company is very well capitalised, with a Prescribed Capital Ratio (PCR) of about 1.69x under their worst case Covid-19 assumptions (10% unemployment by Dec 2020, 2 year recovery). This measure of insurer solvency is comfortably above the minimums set by APRA to ensure the business has the necessary capital to meet expected claims.


Genworth has a sound balance sheet of good quality, liquid investments to meet payment obligations to policyholders and creditors. As of 31Mar20, it had cash and investments of AUD3.1bn, of which more than 80% was held in cash and highly rated fixed-interest securities (rated  A and above). The company also benefits from strong earning capacity within its insurance operations, and had an insurance margin of more than 35% in 2019._

Addressing fears of a housing downturn triggering an increase in defaults, some commentary includes:

_The risk to the business is large defaults and sale prices below the loaned amount in the residential housing market. My view is the key risk to this is therefore unemployment, as borrowers tend to pay the mortgage before any other cost and if they are still employed then will continue to do so. Job losses from the COVID pandemic seem to be concentrated in the young and lower income demographics, not those most likely to own a house._


_Therefore I would suggest that the actual fallout from the virus will not be as detrimental to Genworth as might be initially assumed. Additionally, the figures above already include the company's provisions for COVID losses. As a listed entity, Genworth also has the ability to raise equity capital to support the balance sheet.
_
It's not all good news:
_Genworth have just lost NAB as a major customer (approx. 12% of gross written premiums/GWP). This leaves CBA as their only major bank client with approx. 60% of GWP, so a heavy reliance on one customer. However it is important to understand the insurance business when thinking about this ï¿½ if they lose their new business, then all that happens is the old policies continue until expiry and their risk is of loss on those policies. They are, as above, very well capitalised to support this, and the business would slowly wind down until all policies are complete, and then the excess capital will be returned, i.e. the bonds will be paid off._


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## satanoperca (12 August 2020)

Ah, my market darling that has fallen on hard times.





Glad, I didn't buy into this one at the start of the year, 50% drop, oh crap I did, actually that was a short.


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## Joules MM1 (22 December 2021)

for the 2022 comp

nice channel








						TradingView Chart
					






					www.tradingview.com
				





> mortgage - to be  "engaged until death"



everyone needs insurance - especially lenders
printing 2.350's today
and according to:


> MorningstarTM Quantitative
> 21 Dec 2021
> Undervalued
> Fair value *$2.91*


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## frugal.rock (22 July 2022)

Food for thought...


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## frugal.rock (22 July 2022)

Nice caution for the unwitting. 🧐😩



Zaxon said:


> I hope GMA has provided you...er...your lender an excellent service.


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## divs4ever (22 July 2022)

i look at this , and look at this , and wonder when ( or if ) the property  bubble will  burst ,

 sadly this company  will be a plaything  in the greater government policy swings , but that might be fantastic for skilled traders  ( and i ain't one of them )


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## System (18 November 2022)

On November 18th, 2022, Genworth Mortgage Insurance Australia Limited (GMA) changed its name and ASX code to Helia Group Limited (HLI).


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