XAO Bull

[craft]

For all those naïve optimists like me out there that might be feeling fairly content about long term prospects with the market at 5,000.




A few southerlies here and there requiring a bit of course correction but overall human endeavour to head Nor East seems intact. Long term I think I'd rather ride then fight that trend.

 

[craft]

Nothing seems too disturbing here from a Big Picture Australian Valuation perspective.

 

[kid hustlr]

Nice charts.

Hard to see a capitulation from here given the relatively suppressed levels of the second chart.

Our index is so top heavy - I think this is a factor, perhaps we have a huge period of rotations as the small to mid caps turn to big caps and some of the big caps float away? This could take many years to play out however.

 

[Ves]

Hi craft

Do you have a long term chart of the XAOAI (accumulation index) to go with the XAO chart?

Cheers

 

[craft]

Hi craft

Do you have a long term chart of the XAOAI (accumulation index) to go with the XAO chart?

Cheers

No - only back to Sep 2002.

I believe the base for the accumulation index was =1000, 31/12/1979. so that works out around 11.5% pa compound.

If anybody has the full data set it would be nice to see the chart.

 

[skyQuake]

No - only back to Sep 2002.

I believe the base for the accumulation index was =1000, 31/12/1979. so that works out around 11.5% pa compound.

If anybody has the full data set it would be nice to see the chart.

Yep correct.

Before 1992 t'was the dark ages.


Also, the All Ords Accum index is nearly identical to the ASX200 accum.

 

[craft]

Thanks SkyQuake
.......



A rebased comparison of the capital vs the accumulation index for the data I have. Even over that time frame the significance of the compounding dividend component to the long term return becomes pretty evident.

 

[craft]

Nice charts.

Hard to see a capitulation from here given the relatively suppressed levels of the second chart.

Our index is so top heavy - I think this is a factor, perhaps we have a huge period of rotations as the small to mid caps turn to big caps and some of the big caps float away? This could take many years to play out however.

Hi Kid Hustler

The make-up of the index is interesting - We are really seeing in the indexes the result of a system, designed around stock capital weighting and liquidity etc. How well it really represents the big picture health and return of the wider market and economy at any given time is an interesting question. A lot to be said for adding some breadth indicators to the tool kit.

 

[peter2]

Oh, Lord, it's hard to be bullish
When the market goes down everyday
I can't look at the end of day chart
'Cause it gets worse in every way

The volatility is rising
and it's hard to stick to my plan
Oh, Lord, it's hard to be bullish
But I'm doing the best that I can.

How I envy those investors
Who can handle the draw down, I can't
This capitulation is trying
And it's no good to complain or rant.

The volatility is rising
and it's hard to stick to my plan
Oh, Lord, it's hard to be bullish
But I'm doing the best that I can.


[with my sincere apologies to Mac Davis)

 

[wayneL]

Oh, Lord, it's hard to be bullish
When the market goes down everyday
I can't look at the end of day chart
'Cause it gets worse in every way

The volatility is rising
and it's hard to stick to my plan
Oh, Lord, it's hard to be bullish
But I'm doing the best that I can.

How I envy those investors
Who can handle the draw down, I can't
This capitulation is trying
And it's no good to complain or rant.

The volatility is rising
and it's hard to stick to my plan
Oh, Lord, it's hard to be bullish
But I'm doing the best that I can.


[with my sincere apologies to Mac Davis)

10/10 great stuff

 

[Quant]

Reduced earnings = negative growth of XJO overall .



With reduced forward earnings multiples slide along with Dividend growth , double whammy ( risk), 10y bond yields on the rise exasperates that risk , todays cheap is becoming tomorrows expensive . Historically XJO price earnings are still not on the cheap side . 2012 - 13 was near 13 times , we can go lower and going above 2015 levels in 2016 looks unlikely

aust 10y , will dig up some bond/ stock yield spreads at some stage





Will add a longer term earnings multiple charts when I find one in my archives

Found longer TF charts from May



Longer term Earnings (EPS) chart also

 

[kid hustlr]

Nice.

Apologies for the ignorance quant but are the earnings charts weighted? For example is the P/E ratio of 14 weighted by mkt cap or simply average of top 200?

 

[craft]

Oh, Lord, it's hard to be bullish
When the market goes down everyday
I can't look at the end of day chart
'Cause it gets worse in every way

The volatility is rising
and it's hard to stick to my plan
Oh, Lord, it's hard to be bullish
But I'm doing the best that I can.

How I envy those investors
Who can handle the draw down, I can't
This capitulation is trying
And it's no good to complain or rant.

The volatility is rising
and it's hard to stick to my plan
Oh, Lord, it's hard to be bullish
But I'm doing the best that I can.


[with my sincere apologies to Mac Davis)

Headline act for the ASF Christmas karaoke Party I reckon.

 

[craft]

Thanks for the post Quant, appreciated.

Longer term Earnings (EPS) chart also

View attachment 65294

Longer still.




The long term question seems to me to be one of mean reversion vs sustained slow down in earnings growth.

Short term the market can do anything. Long term I'd argue buying below trend market earnings has a higher probability of long term financial reward then buying above trend -even if it feels (is) wrong in the short run.

 

[Gringotts Bank]

Big problem on the weekly chart. Bear > bull imo.

 

[Quant]

Big problem on the weekly chart. Bear > bull imo.

View attachment 65298

If we pull back to 3 decades of data on a log scale you don't see support under AUG lows till sub 4500 , fundamentals actually support that level " without " the market becoming historically cheap . I look at the earnings data and GDP data and its very concerning for 2016 , the dreaded " R " word rears it's ugly head . With the LIB govt in and reluctant to spend I cant see it being avoided this time , no booking 5% of GDP on the credit card this time . Starting to look inevitable ...

The naming of this thread is the very definition of ' Optimist '

 

[Quant]

Simplistic approach here I know but since 2008 , as you can see from RH column GOVT debt to GDP is up almost 25% at roughly 3% a year . Without the government spending put on the CC we would have already been in ' Recession ' .

With election looming I wonder if Malcolm and crew will pull out the platinum card again to save the day , I actually wonder if it will even help if they do . My super is cash and will be staying that way for the foreseeable future , we live in ' interesting ' times ....

 

[Junior]

Given the top heavy nature of the ASX200, and poor performance from the top 10 or 20. I wonder what this means for passive/index style investors?

Perhaps a better way to invest passively is via something like this:

MVW.ASX

Thoughts?

 

[skc]

The long term question seems to me to be one of mean reversion vs sustained slow down in earnings growth.

Short term the market can do anything. Long term I'd argue buying below trend market earnings has a higher probability of long term financial reward then buying above trend -even if it feels (is) wrong in the short run.

What is the ultimate underlying drivers of the share market chart going in the North-East direction over the long term? To me they are (in no particular order):

1. Inflation
2. Population growth
3. Productivity gain
4. Increased fund flows into market
5. Index rebalancing
(Probably missed something...)

Over the next 25 years... *taking out my crystal ball and giving it a good rub.
1). will be present to some extent.
2). will it continue? We have aging population so population growth must be replenished via immigration which may or may no be embraced by all.
3). should continue (a separate debate as to whether Australia will lead/lag the rest of the world).
4). Unsure about this one... again, with population demographic changes, we might see net outflow in the foreseeable future.
5. should continue

All in all, I don't have enough faith in the direction of the line to just boldly buy and hold through my investment timeframe. I need to rely on generating my own alpha.

 

[shouldaindex]

1 reason to be a long term bull, is that the ASX Total Returns has quadrupled your investment within 10 to 30 years at every moment in history (from around 1900 onwards).

At the same time I don't like the cycle phase for the next 2-3 years. Factors such as Interest Rates, US Market Valuations, US Earnings / Margins / ROE, Australia World Record Years Without Recession, Australia House Prices and Mortgage / Debt to Income Ratio, Bank Bad Debts etc...

I think I'll be an XAO bull in about 2018.