# Correction or fall?



## princeplanet (3 March 2013)

Been noticing more and more talk of an inevitable downturn in the market after the latest bull run. For the non noobs reading this, where do you stand on this? Time to get out? Reduce? Some stocks (maybe banks) more than others?  I've set up stop losses, but I'm afraid a big sudden drop will crash right through them.  I'm nervous because the GFC took 55% of my life savings (thanks to my ex FA), and I'm still down around half of that so I'm keen as hell to max this uptrend, just don't want to risk the good gains made in these past few months.....


----------



## chops_a_must (3 March 2013)

My opinion: too many "experts" are telling us the market is overvalued/ run too hard/ due for a correction, etc etc for it to fall just yet.

But then again, opinions are like ***holes.


----------



## Iggy_Pop (3 March 2013)

My view is we will get a few bumps but we are at the start of a longer term bull market. Time will tell

Cash will come in at any dips in the market


----------



## CanOz (3 March 2013)

I can't recall what the exact stats are but we're getting close to "sell in May and go away"... Seasonality has an edge.

The Market probably won't drop 5% in one day...its a process of rotation. I'm still fully vested in my Super...but got the finger on the trigger too...

From Jason Leavitt's site 

You don't need to be a Technical analyst to read these charts...
CanOz


----------



## tinhat (4 March 2013)

To me, investing in shares is about managing risk. This is not something I have been great at doing but something I am hoping I am getting smarter at.

I'll use CBA for example, the largest shareholding in the SMSF. Great income stock. I think it's overpriced at the moment but I can see how it could go higher, if there is enough demand for the stock. The SMSF has to pay a pension, so it needs income. So, selling a good yielding stock like CBA is a hard decision to take. Yet, I decided to take my profits off the table last week and go a bit more into cash just for the moment. The price has run up quite hard. There might be a small correction soon or the price might keep going up. What exposure to risk do I hold at the moment and do I want to maintain or decrease my exposure to risk? I personally figure that there might be a good chance to re-enter the stock at a lower price sometime over the next six months before it goes ex-div again. No GST due to the SMSF makes the choice a little easier. I could be completely wrong though - but its more a question of managing risk.


----------



## tech/a (4 March 2013)

Some good points here.

I'm afraid I don't support the Bull Market theme.
In May the USA will again reach it's debt ceiling.

It's pretty clear that at some point it will have no choice but to stop printing money.
It is widely tipped that May is likely to be when that decision made.

If that occurs or even rumor of it occurring I'd would not be wise to be long.

I would also advise reading how over crowding in the market is likely to cause a collapse of the house of cards
To an extent never seen. When the saviour ( The Fed ) close the unlimited Banks doors--- 
There won't be any rescue for many!

So if risk mitigation is your mantra there is a grim reaper at the door of world economics---- in MAY.


----------



## McLovin (4 March 2013)

"Money printing".



> The Fed is strictly forbidden from adding net financial assets to the private sector. Its role with regard to the private sector is limited to conducting asset swaps of exactly this nature, buying and selling financial assets and paying for them with electronic credits on its balance sheet ledger.
> 
> ...
> 
> It’s the same thing again with the helicopter picture in the post I wrote quoting Ben Bernanke’s 2002 speech saying “The government has a printing press to produce U.S. dollars at essentially no cost“. *It’s not literally true that the Fed is actually just throwing money from a helicopter. That’s what the fiscal agent does.* Whenever the US government spends, it adds net financial assets to the private sector without a corresponding debit. When the US government taxes, it takes out net financial assets from the private sector without a corresponding addition. *It is the fiscal agent that prints money and it is the fiscal agent that would create helicopter money if it ever came to that. I guarantee you, real helicopter money getting into the hands of people who would spend it on goods and services or to reduce debt would have a MUCH bigger impact than QE dollar for dollar. **Real helicopter money is not coming. More likely is a giant Hoover to suck up private sector money rather than drop it out of helicopters.*




http://www.creditwritedowns.com/201...anks-printing-money-to-solve-this-crisis.html

From my simpleton point of view the Fed is trying to maintain low interest rates and is doing so by doing what it does every day but on a vastly increased scale.

The debt ceiling is little more than a nominal amount that a bunch of lawyers (read: politicians) have created. It has no real bearing on the US economy unless they decide to play chicken when it comes time to raising it.

The biggest risk to the US economy is that debt/GDP cannot continue to increase.


----------



## tech/a (4 March 2013)

> Whenever the US government spends, it adds net financial assets to the private sector without a corresponding debit.




This presumes the Govt has a surplus to pay cash for the asset---it doesnt its adding to debt.
Its just using its giant credit card.  Bonds on issue!



> When the US government taxes, it takes out net financial assets from the private sector without a corresponding addition.




And doesnt every tax payer know it regardless of where they reside.



> The debt ceiling is little more than a nominal amount that a bunch of lawyers (read: politicians) have created. It has no real bearing on the US economy unless they decide to play chicken when it comes time to raising it.




It has increased from a few trillion to around 17 trillion in around 10 yrs so that has no real bearing????
Another say 10 trillion ---no problems?



> The biggest risk to the US economy is that debt/GDP cannot continue to increase.




Its a massive risk to western economics not just the USA.
What an exciting time to be alive!!


----------



## McLovin (4 March 2013)

tech/a said:


> This presumes the Govt has a surplus to pay cash for the asset---it doesnt its adding to debt.
> Its just using its giant credit card.  Bonds on issue!




You've completely missed the point of what he's saying. And I mean completely and utterly.


----------



## McLovin (4 March 2013)

tech/a said:


> It has increased from a few trillion to around 17 trillion in around 10 yrs so that has no real bearing????
> Another say 10 trillion ---no problems?




I guess it depends how you look at things. Over the last decade, America fought two wars that cost somewhere between $4-5 trillion. At the same time there were tax cuts (how absurd to have tax cuts while fighting two large wars!) that cost somewhere between $1-2 trillion. If you back those two items out you end up with debt that is somewhere between $5-$7 trillion lower than where it is today, and that's ignoring the worst recession in 80 years. 

As long as they can stabilise their debt/GDP they'll be OK. On the + side, America will apparently be energy independent and even possibly a net exporter of oil within 10 years.

Of course this has now drifted well off the topic of the OP.


----------



## craft (4 March 2013)

McLovin said:


> The biggest risk to the US economy is that debt/GDP cannot continue to increase.




Total US debt (private+business+financial+public) to GDP is falling.  Governement is not expanding it's balance sheet fast enough to stem that tide - the Hoover is winning. Yet the money printing urban legend rolls on regardless.


----------



## tech/a (4 March 2013)

McLovin said:


> You've completely missed the point of what he's saying. And I mean completely and utterly.




OK

It buys Bank Bonds to release capital to banks.
Which is fine as long as the bank doesnt do a Freddie Mac.
All of a sudden your asset isnt an asset but a liability and the bond is worth jack.
It has a liability in the money it gave in return for the Bond it recieved.
If it cant get re paid!!!

With a banking system which needs Govt intervention to stop it collapsing
the idea that the Fed can continue infinitum with this idea is ---urr flawed at best and suicidal at worst.

Black swans occur and it will only take one to un hinge the whole "system".
Came pretty close in 2008.


----------



## Ves (4 March 2013)

tech/a said:


> OK
> 
> It buys Bank Bonds to release capital to banks..



Nope - don't think this is right is it?

My understanding of the latest Q/E ("Operation Twist") is that they are buying-back longer-term government bonds and simultaneously selling some of the shorter-dated issues it already held in order to bring down long-term interest rates.

Are we talking about something different?  This stuff confuses me at the best of times.


----------



## princeplanet (4 March 2013)

errr, so I take it you guys are a little pessimistic about the future   But which future, near, far or somewhere in between?  Another 1% + fall going on today. Is this the start of the big decline, or just another bump?  I know, I know, no one has the crystal ball, but am just interested to read the musing of those on this forum with more experience and knowledge than myself about such things....


----------



## tech/a (4 March 2013)

Ves said:


> Nope - don't think this is right is it?




Thats the way it reads to me!



> *So what happens is the Fed decides it wants to buy a bond. Using the Federal Reserve Bank of New York’s trading desk, the Fed makes a trade. It receives bonds that its bank counterparty owns and gives its bank counterparty money credit of equivalent value. The key here is that the money used to purchase these bonds was created as an electronic ledger entry solely for the purpose of acquiring the bonds.* The Fed ‘printed money’ and conducted a swap of that money for existing financial assets. That’s what quantitative easing is.




Electronic or physical--still creating money from ---WHERE?



> My understanding of the latest Q/E ("Operation Twist") is that they are buying-back longer-term government bonds and simultaneously selling some of the shorter-dated issues it already held in order to bring down long-term interest rates.
> 
> Are we talking about something different?  This stuff confuses me at the best of times.




We are talking of gigantic economic policy. So broad that most of us have only a passing understanding of "some" aspects of the full situation.--Im one of them.
Even so Im more than happy to enter into discussion--be proven wrong or add some snippet that maybe of help to someone. 



> Is this the start of the big decline, or just another bump?




Right now a bump.
But from May on wards may end up being a dip which could end up being a cavern which could end up being a canyon.
The only way a canyon will appear is if all the cards alighn and a black swan even appears which causes a chan reaction which even the Governments of the world wont be able to throw enough money at it to stop it imploding.

It can happen ask the Japanese/Germans/Greeks etal.
When it happens to the worlds largest economy------

Mitigate risk---is my suggestion.


----------



## McLovin (4 March 2013)

tech/a said:


> OK
> 
> It buys Bank Bonds to release capital to banks.
> Which is fine as long as the bank doesnt do a Freddie Mac.
> ...




I think you should probably have a look at the Fed's balance sheet. They're certainly not buying "bank bonds". They have agency guaranteed AAA rated MBSs on their books which are also guaranteed by the US government, and the record for prime mortgages during the GFC is impressive. The overwhelming majority of assets on the Fed's BS are Treasuries. This is pretty much how every central bank in the world manipulates interest rates, they're just doing it on a grand scale.



tech/a said:


> With a banking system which needs Govt intervention to stop it collapsing
> the idea that the Fed can continue infinitum with this idea is ---urr flawed at best and suicidal at worst.






The point of QE is to lower interest rates to encourage borrowing/lending, not to save the US banking system. Why can't they continue to swap liabilities? It's not like they can't undo it.


----------



## tech/a (4 March 2013)

Ill get back on this Mc L Im tied up on tenders sorry---


----------



## McLovin (4 March 2013)

tech/a said:


> Ill get back on this Mc L Im tied up on tenders sorry---




No need to apologise.


----------



## craft (4 March 2013)

Sinner

What happened to your post? I read your linked article and then your post had disappeared. I agree with the push, pull on the rope analogy in that article and exactly for the same reason, I see no logical basis for concern in the size of the Fed balance sheet. 

The underlying demand issue I give lots of credence too and my point is that, that is driving an actual decrease in total money creation – the reverse of what everybody seems to be fixating on.

Please fill me in on my big gap in understanding - because it must also be a 'blind' gap for me.


----------



## Julia (4 March 2013)

tinhat said:


> To me, investing in shares is about managing risk. This is not something I have been great at doing but something I am hoping I am getting smarter at.



Thanks for your example re CBA.
Could you discuss your attitude to risk a bit more?  eg if the signs of GFCII became as obvious as they were the last time, would you still keep your current holdings?  Take out the profit?  Sell everything with the intention of buying back more cheaply?


----------



## princeplanet (4 March 2013)

Hmm, that was quite a fall today, another one like that and I'm gonna start feeling toey! ...


----------



## sinner (4 March 2013)

craft said:


> Sinner
> 
> What happened to your post? I read your linked article and then your post had disappeared.




Sorry craft I made a decision to not talk about this stuff on ASF and deleted it.


----------



## So_Cynical (4 March 2013)

McLovin said:


> "Money printing".
> 
> The biggest risk to the US economy is that debt/GDP cannot continue to increase.





Watching the box on the weekend a US based Aussie economist pointed out that US Govt issued bonds are paying next to nothing in yield and yet are in demand....the Govt is having no trouble finding buyers of Bonds that yield almost nothing.

Conclusion is that the world is happy with this situation...so it can continue for a substantial time into the future.


----------



## tech/a (5 March 2013)

So_Cynical said:


> Watching the box on the weekend a US based Aussie economist pointed out that US Govt issued bonds are paying next to nothing in yield and yet are in demand....the Govt is having no trouble finding buyers of Bonds that yield almost nothing.
> 
> Conclusion is that the world is happy with this situation...so it can continue for a substantial time into the future.




*Truth is the world have met at many summits and understand the ramifications if funds cannot be raised.
No yield or no economy ---- *

That goes for any Govts bond issues.
Not just the worlds biggest economy.


----------



## sammy84 (5 March 2013)

Many are still underestimating the US at the moment. 

Shale gas has changed the whole landscape. It's cheap to extract and the US has huge reserves. By some estimates the US is now a net exporter of gas. Europe barely started investing in the technology to extract shale so they are a long way behind. 

Add that unemployment is at sustainable levels (whilst slowly declining) and there are no more wars in the horizon. Things may not be rosy but they are by no means dire.


----------



## tinhat (5 March 2013)

Julia said:


> Thanks for your example re CBA.
> Could you discuss your attitude to risk a bit more?  eg if the signs of GFCII became as obvious as they were the last time, would you still keep your current holdings?  Take out the profit?  Sell everything with the intention of buying back more cheaply?




Hi Julia, I wasn't involved in the share market during GFC except that I got the task of taking over the family SMSF around about the bottom of the market. Up until then my mother had been listening to her accountant and her old bank manager (family friend) who said - hold tight and don't worry. I hand't wanted to put my super into the family SMSF while my father was running it and had my super with Australian Super fund.

So no one was at the helm of the SMSF during GFC I. I consider the post tsunami mini-crash up to mid-2012 as the GFC II (the european debt crisis versions one and two). It was for me anyway, I didn't do a very good job of capital preservation, especially with the mining stocks. Can you believe I still own MCE shares - I don't even consider them part of the portfolio anymore.

And here we are on a nice bull run. Some of the portfolio management decisions I am taking are to do with personal circumstances. I need to pull some money out of the market because we are still throwing money into building a house. I've been delaying that while we have been on this current bull run.

With regard to CBA, I think there may be other opportunities. As I mentioned, perhaps buying back in on a pull-back. But I am also thinking that now that it is ex-div, waiting to see if there is an opportunity to enter one of the other three of the big four, because they all don't go ex-dividend until early June and CBA goes ex-div again early August. I am considering a strategy to move some money between CBA and the other banks to do a bit of dividend chasing.

I don't have any stop-loss conditional orders in with my broker at the moment.

Looking at CBA, if it pulls back but turns around before or at $64 I would think about putting a little bit more back in with a target of $70 otherwise, I would probably consider $58 my stop loss for total liquidation. If the price gets to $70 I would probably sell off quite a bit more.

BHP is only just worth the $35 it is trading for at the moment. I sold down last week. If BHP gets to $38 I will sell some more. If it gets to $40 I'll be all out.

I've taken profit on CBA, BHP, RCG, ILU and HZN in the last two weeks. I've done some short term trading for the first time in a long time too and taken some positions, such as in FGE with short term priced targets.

Anyway, this is a bit of a ramble. I'm not really answering your question. Let's put it this way, I think the market will go higher but I'm not willing to bet everything on that outcome. The XAO might get to somewhere between 5200-5400. I think 

Your question is interesting. Where would I put a sell signal onto the XAO that signalled sell everything? The 200 day moving average is below 4500. That is a long way away! I would probably look for a 10 week MA, 30 week MA death cross to sell everything that wasn't a long term income stock. But right now that death cross would show up a long way away from where we are so that might be too loose. Does anyone else have ideas on where they would place a sell everything stop loss on the XAO?


----------



## Iggy_Pop (6 March 2013)

When the 10EMA crosses the 30EMA using a weekly chart on the XAO

Suggest back testing this and it does give a rough guide. There are many other approaches to try to find the top. Nobody knows where this will end and you cannot just give a number. 

My opinion only and I get it wrong on many occassions


----------



## qldfrog (6 March 2013)

Iggy_Pop said:


> When the 10EMA crosses the 30EMA using a weekly chart on the XAO
> 
> Suggest back testing this and it does give a rough guide. There are many other approaches to try to find the top. Nobody knows where this will end and you cannot just give a number.
> 
> My opinion only and I get it wrong on many occassions



I use similar EMA(Close,10) crossing  MA(Close,15))and seems to trigger at more or less the same time as Iggy_pop one
But I stay in, I just tighten stop loss


----------



## chops_a_must (6 March 2013)

I'm even more bullish for the main reason stated above.

We've been getting big running gap ups on the markets.

Markets and heavyweights are breaking out.

And we've got a whole heap of people still cautious and out of the market.

Not to say I'm not going to sell with a hint of a move.

But it's a great time to move out of some under performers IMO.


----------



## Julia (6 March 2013)

tinhat said:


> Up until then my mother had been listening to her accountant and her old bank manager (family friend) who said - hold tight and don't worry.



In line with the majority of 'experts' throughout Australia.  There were a few exceptions, eg *Satyajit Das*, whose lucid views first sparked my concern about the coming debacle.


> I didn't do a very good job of capital preservation, especially with the mining stocks.



Does that mean you now regard capital preservation as a priority?



> Looking at CBA, if it pulls back but turns around before or at $64 I would think about putting a little bit more back in with a target of $70 otherwise, I would probably consider $58 my stop loss for total liquidation. If the price gets to $70 I would probably sell off quite a bit more.



OK, so an active strategy of protecting your profits.



> Anyway, this is a bit of a ramble. I'm not really answering your question. Let's put it this way, I think the market will go higher but I'm not willing to bet everything on that outcome. The XAO might get to somewhere between 5200-5400. I think



Not a ramble at all.  Just the sort of comment I was looking for.  Thank you for interesting and comprehensive response to my question which I do not mean to be intrusive.



> Your question is interesting. Where would I put a sell signal onto the XAO that signalled sell everything? The 200 day moving average is below 4500. That is a long way away! I would probably look for a 10 week MA, 30 week MA death cross to sell everything that wasn't a long term income stock. But right now that death cross would show up a long way away from where we are so that might be too loose. Does anyone else have ideas on where they would place a sell everything stop loss on the XAO?




I'm interested that you, Iggypop and qldfrog have all nominated a point on a chart as the trigger to sell everything, ie a purely technical signal.

Thinking back to my decision to sell everything at the start of 2008, I was certainly conscious of having already given back some profits, but probably even more influenced by the increasing ferocity of what looked like all the ingredients of a global storm.  Never believed the glib assurances of so many 'experts ' and talking heads here that Australia was 'decoupled' from America's sub prime mess, and that was before we all became aware of the proliferation of all those dodgy derivative products which emanated from the bad mortgages.

Even as the market fell away, perhaps largely out of self interest, we heard day after day 'advisers' telling people to hang in there, their dividends were still safe etc etc, and the market would quickly recover.  Well, hmm, we're still waiting for it to get anywhere near the previous highs.

So I have little faith in all the economists et al who are currently telling us it's all upside from here, that confidence has returned etc etc.  On what basis?  Some marginal improvements in figures from the US?
Whilst Europe is still a basket case and parts, eg Italy, a political farce?

To me, the GFC was a logical event.  Perhaps I'm just constitutionally negative but I cannot see the foundation on which the current global rally is built.  Certainly, in Australia the fall off in interest rates has led to cash seeking a more profitable home in high yield good quality stocks, but is that alone enough to explain the rise in the last few months?  I'm not convinced.


----------



## tinhat (6 March 2013)

Julia said:


> Does that mean you now regard capital preservation as a priority?




Capital Preservation can be a motherhood statement. As can "noone ever goes broke taking a profit", "the trick to profiting in the stock market is to know why you bought a stock and staying disciplined". No once car argue with these statements, but do we know how to adhere to them or even how to implement these objectives? It's quite easy as a novice to get caught in your emotions and caught in the headlights.

Capital preservation would have to be the number one objective when investing for all of us surely. Yet by investing in stocks we know we are taking on risk with an expectation of receiving a premium return so we are willing to risk fluctuations in the market value of our capital with the expectation that we will be able to manage the risk and take corrective action when needed. Its not as easy to do in real time though because we (or at least I) cannot predict the market.


----------



## tech/a (6 March 2013)

Let me be a little cynical

Smart money selling into dumb money.
The big guys can't do it in a bear market.
They can now!


----------



## qldfrog (7 March 2013)

As Julia and probably you tech/a, I do not see much reason behind the current rise but maybe a default one: no real other choice as RE is stagnant as best and cash does not return much.
debt still there,western powers going down, climate change here( whether or not man induced, that does not really matter: more floods, fires and cyclones hit on economies) and cheap oil not so cheap anymore
The problem is: what do you do?
 I always remember not taking the first Telstra share offer awhile back, after arriving in australia: I had worked in telco, telstra was not worth that amount, yet th erest is history, I was right but lost money (or did not make money)
however good (and right) your reasons not to, sometimes it makes $ sense to follow the lemmings...
So the question becomes when to jump out to avoid the inevitable fall ...

Not really worth much as advice but I often go and participate in runs I see unjustified (Linc lately f.e.) makes some  money and get out quick.
But risk is high..


----------



## McLovin (7 March 2013)

tech/a said:


> Let me be a little cynical
> 
> Smart money selling into dumb money.
> The big guys can't do it in a bear market.
> They can now!




Except the big guys are all having net inflows at the moment. As they have a mandate to be invested and not sit in cash it's more likely they are buying, not selling.

Reporting season wasn't bad, in fact it was probably much better than was expected. No one is saying the world is fixed, it's just not as bad as it was made out to be.


----------



## tech/a (7 March 2013)

McLovin said:


> Except the big guys are all having net inflows at the moment. As they have a mandate to be invested and not sit in cash it's more likely they are buying, not selling.
> 
> Reporting season wasn't bad, in fact it was probably much better than was expected. No one is saying the world is fixed, it's just not as bad as it was made out to be.




Stay long 
Keep risk in mind
Hedge


----------



## McLovin (7 March 2013)

tech/a said:


> Stay long
> Keep risk in mind
> Hedge




Don't get me wrong, I'd like a bit of pullback. I'm twiddling my thumbs, with a pile of cash and nowhere to put it.


----------



## skc (7 March 2013)

McLovin said:


> Don't get me wrong, I'd like a bit of pullback. I'm twiddling my thumbs, with a pile of cash and nowhere to put it.




PM'd you my bank account details. Going to the casino tonight...

Seriously though... even with some pull back it's hard to find something to buy.

It's one thing to trade the momentum, it's quite another to just buy something with PE 20x and hope the E catches up over the next 2 halves.


----------



## McLovin (7 March 2013)

skc said:


> PM'd you my bank account details. Going to the casino tonight...
> 
> Seriously though... even with some pull back it's hard to find something to buy.
> 
> It's one thing to trade the momentum, it's quite another to just buy something with PE 20x and hope the E catches up over the next 2 halves.




I agree.

I even found myself looking at an antique furniture auction catalogue this morning. There was a lovely hutch that caught my eye, and a shiny panther.

I might have to take one of my long bike rides out to La Perouse this afternoon.


----------



## Klogg (7 March 2013)

McLovin said:


> Don't get me wrong, I'd like a bit of pullback. I'm twiddling my thumbs, with a pile of cash and nowhere to put it.




Well, that makes me feel a little better. I only started last year in Jan and I've always found something to buy until now... Cash is also piling up for me.

Good to know my thoughts aren't too far off the experienced value-investors...


----------



## Julia (7 March 2013)

tinhat said:


> Capital Preservation can be a motherhood statement.



  I see it more as a purely practical and necessary measure, given that I'm dependent on that capital to generate an income.


> As can "noone ever goes broke taking a profit", "the trick to profiting in the stock market is to know why you bought a stock and staying disciplined".



Re the latter maxim, I'd prefer "be prepared to change your plan if circumstances change".



> Capital preservation would have to be the number one objective when investing for all of us surely.



You'd imagine so.  But it is apparently not for many people who profess a disregard for what their capital is doing as long as the dividends keep coming.  I do not get this, but it's not uncommon.


----------



## Julia (7 March 2013)

McLovin said:


> Don't get me wrong, I'd like a bit of pullback. I'm twiddling my thumbs, with a pile of cash and nowhere to put it.



That will be my dilemma at the end of this month also when a three year term deposit matures.  Certainly won't be renewing the TD at current rates.


----------



## tinhat (7 March 2013)

McLovin said:


> I agree.
> 
> I even found myself looking at an antique furniture auction catalogue this morning. There was a lovely hutch that caught my eye, and a shiny panther.
> 
> I might have to take one of my long bike rides out to La Perouse this afternoon.




It's dangerous, having cashed out a fair bit from the market I was just looking through here before I thought I'd check back in here.



Julia said:


> ... many people who profess a disregard for what their capital is doing as long as the dividends keep coming.  I do not get this, but it's not uncommon.




Up until a few weeks ago I was professing to everyone here that the SMSF would not be selling any CBA and yet I've been selling down over the last couple of weeks. I'm trying to position myself to tweak a bit more performance out of the portfolio and the fact that it ran so fast has made me think that it might be a good time to cash up. I sold some more CBA yesterday - I have now sold down about 50% of the holding. The pessimist in me says that if I am selling the price will go the other way!

That said, I consider it a legitimate strategy to hold for the long term. You could have bought CBA at the top of the market in 2007 and with dividends and franking credits you would be well ahead. I would consider holding a stock like CBA through the cycle to be a legitimate strategy and one that I would expect to yield superior returns than say term deposits or preference shares or corporate bonds.


----------



## McLovin (7 March 2013)

tinhat]It's dangerous said:


> That will be my dilemma at the end of this month also when a three year term deposit matures.  Certainly won't be renewing the TD at current rates.




Have you considered the bond market, Julia? Someone was discussing Sydney Airport inflation protected bonds a few weeks ago that were yielding around 6%, iirc.


----------



## tech/a (7 March 2013)

Some pretty general statements here.







> As can "noone ever goes broke taking a profit",




Of course you can 10 wins X 15% profit and 3 losses x 60% ---  Keep that up.



> "the trick to profiting in the stock market is to know why you bought a stock and staying disciplined".




You sure about that?
Im pretty sure Total profit exceeding Total loss will be the only way to do it.
But what would a duck know?


----------



## tinhat (7 March 2013)

tech/a said:


> Some pretty general statements here.
> 
> Of course you can 10 wins X 15% profit and 3 losses x 60% ---  Keep that up.
> 
> ...




Thus the quotation marks. I was quoting the "wisdom" one often hears. Although you are a trader, I hear what you are saying and it applies just as much to medium or long term investors - cut your losses early.

I sometimes read through Colin Nicholson's newsletters. I don't think he has released anything much to the non-subscribing public but reading his stuff introduced me to the Coppock indicator. His approach, as I understand it says  "Wait for the turnaround in the Coppock indicator on a monthly chart and buy into the market before the Coppock crosses above zero". The current bull run seems to have followed this script.

After this reporting season my watchlist has never been longer - the problem is that most of the stocks are above what I would be willing to pay.

As for opportunities, I'm keeping my eye on copper and gold prices and related mining stocks. At some point will an opportunity will present it self. when? I need tech/a or So Cynical to teach me their bottom picking techniques.


----------



## CanOz (7 March 2013)

Volume is dropping off, we're near the top of the range on the monthly....


----------



## tech/a (7 March 2013)

> I need tech/a or So Cynical to teach me their bottom picking techniques.




Trading and investing is pretty easy.
Its the nature of the Human race that makes it complicated
The general consensus is that the more complicated it is the better prepared and the more likely I am to profit.

Well I'm sure that's WRONG.

To pick a bottom you need a bottom to pick
The same with a top.
They will present themselves clearly enough---but not crystal clear.
I'm looking for "a" top it may not be 'the" top.
So when I get a signal I short the index. I do this on fast moving days in my direction.
I've set myself 3 times so far and have been stopped at B/E 3 times.

Not to worry as when I do get it right it will be a very good position trade.
If I had a large portfolio Id be doing exactly what I doing to hedge it.

Oh the next one will be on the FTSE and I might even short the DAX ---- tonight.
That turn around today---looks good.
HSI turning??


----------



## Julia (7 March 2013)

tinhat said:


> Up until a few weeks ago I was professing to everyone here that the SMSF would not be selling any CBA and yet I've been selling down over the last couple of weeks. I'm trying to position myself to tweak a bit more performance out of the portfolio and the fact that it ran so fast has made me think that it might be a good time to cash up. I sold some more CBA yesterday - I have now sold down about 50% of the holding. The pessimist in me says that if I am selling the price will go the other way!
> 
> That said, I consider it a legitimate strategy to hold for the long term. You could have bought CBA at the top of the market in 2007 and with dividends and franking credits you would be well ahead.



Sure.  But it would be one of few you could say that about.


> I would consider holding a stock like CBA through the cycle to be a legitimate strategy and one that I would expect to yield superior returns than say term deposits or preference shares or corporate bonds.



Yes, unless you sold out near the top and then bought back in after it had its substantial fall, allowing you more stocks/more dividends/franking for the same $ value.




McLovin said:


> Have you considered the bond market, Julia? Someone was discussing Sydney Airport inflation protected bonds a few weeks ago that were yielding around 6%, iirc.



Thanks for the suggestion, McLovin.  The bonds I've looked at have seemed less attractive than the underlying share.  For a 6% yield I'd probably prefer eg NAB et al.


----------



## chops_a_must (8 March 2013)

Meanwhile, Japan has been going spastic.

Sideways for us is healthy IMO.

Still no reason to fight the trend.


----------



## qldfrog (8 March 2013)

Julia said:


> Sure.  But it would be one of few you could say that about.
> 
> Yes, unless you sold out near the top and then bought back in after it had its substantial fall, allowing you more stocks/more dividends/franking for the same $ value.
> 
> ...



if looking for income: the Healthscope notes II are released this month 10% or around pa (but unfranked) and quarterly payment
I bought some notes version I at $94 a couple of year ago and sold some yesterday at $106 (to reinvest in version II and postpone the expiry date)while getting 11% on face value...
But not risk free and DYIR....


----------



## Julia (8 March 2013)

qldfrog said:


> if looking for income: the Healthscope notes II are released this month 10% or around pa (but unfranked) and quarterly payment
> I bought some notes version I at $94 a couple of year ago and sold some yesterday at $106 (to reinvest in version II and postpone the expiry date)while getting 11% on face value...
> But not risk free and DYIR....



I've just looked through the prospectus for these.  I've tried to look at a chart for the performance of HLNG but Etrade isn't bringing this up.  Any suggestions for where I can find charts?


----------



## sinner (8 March 2013)

Julia said:


> I've just looked through the prospectus for these.  I've tried to look at a chart for the performance of HLNG but Etrade isn't bringing this up.  Any suggestions for where I can find charts?




barchart does. 




I think it would be very important to work out the implied yield, priced at $108 is a significantly lower yield than 10% surely.

Using a tool like this: http://www.indiainfoline.com/Personalfinance/calculators/InvestmentGuide/Implied-Bond-Yield.aspx


----------



## McLovin (8 March 2013)

qldfrog said:


> if looking for income: the Healthscope notes II are released this month 10% or around pa (but unfranked) and quarterly payment
> I bought some notes version I at $94 a couple of year ago and sold some yesterday at $106 (to reinvest in version II and postpone the expiry date)while getting 11% on face value...
> But not risk free and DYIR....




I had a look at this the other day...This should is a huge red flag (and probably explains the interest rate)



> . Interest will be suspended if the Debt Service Cover Ratio is equal to
> or less than 1.10x (or would be after the payment of interest on Notes I
> and Notes II). This ratio tests whether the Healthscope Group produces
> enough cash to service its debt obligations (including the payment of
> ...




If you're still not convinced check out the level of cash flow being diverted to service debt...~$300m in cash from ops, ~$170m spent on interest.

The debt issue is being used to repay senior debt.



			
				Julia said:
			
		

> I've just looked through the prospectus for these. I've tried to look at a chart for the performance of HLNG but Etrade isn't bringing this up. Any suggestions for where I can find charts?




Won't the chart just tell you what's happened to interest rates over the period?


----------



## Country Lad (8 March 2013)

Julia said:


> I've tried to look at a chart for the performance of HLNG but Etrade isn't bringing this up.  Any suggestions for where I can find charts?


----------



## Julia (8 March 2013)

sinner said:


> barchart does.
> 
> View attachment 51253
> 
> ...



Thank you, Sinner.



McLovin said:


> I had a look at this the other day...This should is a huge red flag (and probably explains the interest rate)
> 
> If you're still not convinced check out the level of cash flow being diverted to service debt...~$300m in cash from ops, ~$170m spent on interest.
> 
> ...



Having read in the prospectus what you have pointed out above, I wanted to see what volume, liquidity is like, as well as the price.
Too much potential downside here for me.


----------



## sydboy007 (9 March 2013)

Some shares in my SMSF have had a big run up.  Are they over valued?  Hard to say, but even with a 33% and 26% increase they're still both paying 8.7% and 8.5% grossed up.

Since I've not held them over 12 months I'd face a definite 15% tax bill on selling them.  Do I think the market will fall by more than 15%.  Once again hard to say.  At the moment I don't think so.  The US does seem to be slowly getting back onto it's knees.  US companies are very lean and mean now.  Certainly US stocks are running on lower PEs than OZ, though most pay quite low div yields.

I deal with the uncertainty by having a 1/3 of the SMSF in an ILB, another 20% ish in hybrids and the rest in higher yielding shares.  I'm 26 years away from tapping into the money so a bit of volatility wont kill me.

I do wish I had some spare cash to tap into the market should there be a 10%+ fall.  Suppose if that happens I'll do the investment outside my super.


----------

