Overall share market direction: Your thoughts?

[See Change]

My position is that we have gone long in the property market over the last four years and I'm not looking at buying any more properties at this stage . One we have some more significant growth we will revisit that , probably in around 1-2 years .

In the mean time I'm looking at getting back into the share market and wanted to get peoples opinions in very fundamental terms of where we are at the moment .

My observation is that the Aussie market has been moving sideways since the GFC . In the last year or so the USA and OS markets have outperformed the ASX which is slightly ironical considering the the australian economy has been one of the stronger economies since the GFC . We're well short of an all time high , where the US , with an economy that still has major issues has reached one.

I remember a period a few years ago , where the ASX lagged the US and then caught up over the following time frame . Are we faced with a similar situation ? When looking at property markets in Australia , I look at the Capital Cities with the lowest 10 year growths ( sydney in the last years ) and target those and have done quite well.

There seems to be significantly less doom and gloom stories around at the moment . I'm not sure if this is deliberate under reporting , but my perception is that people are more positive , or if they're not positive now , they're trying to be. Certainly the property market is quite buoyant and in some areas boiling and this general confidence seems to be spreading through the community.

Any thoughts on other factors which might lead to the ASX breaking out and moving into a consistent up trend ?

In share investing I'm a trend follower , so I'm happy to watch from the sidelines , but I try to get in early .

Cliff

 

[ROE]

My position is that we have gone long in the property market over the last four years and I'm not looking at buying any more properties at this stage . One we have some more significant growth we will revisit that , probably in around 1-2 years .

In the mean time I'm looking at getting back into the share market and wanted to get peoples opinions in very fundamental terms of where we are at the moment .

My observation is that the Aussie market has been moving sideways since the GFC . In the last year or so the USA and OS markets have outperformed the ASX which is slightly ironical considering the the australian economy has been one of the stronger economies since the GFC . We're well short of an all time high , where the US , with an economy that still has major issues has reached one.

I remember a period a few years ago , where the ASX lagged the US and then caught up over the following time frame . Are we faced with a similar situation ? When looking at property markets in Australia , I look at the Capital Cities with the lowest 10 year growths ( sydney in the last years ) and target those and have done quite well.

There seems to be significantly less doom and gloom stories around at the moment . I'm not sure if this is deliberate under reporting , but my perception is that people are more positive , or if they're not positive now , they're trying to be. Certainly the property market is quite buoyant and in some areas boiling and this general confidence seems to be spreading through the community.

Any thoughts on other factors which might lead to the ASX breaking out and moving into a consistent up trend ?

In share investing I'm a trend follower , so I'm happy to watch from the sidelines , but I try to get in early .

Cliff

Overall direction? No idea and plenty of share experts predicting the market

Stock market is forward thinking and way more volatile compared to properties.
you can lose large amount of money very quickly if you don’t have strong foundation...

I think you need some degree of knowledge to be able to make good return from the market
and I think a lot of people don’t have the skills so they just get hammer when crash comes
or get wipe out... I been in a market for a while and I have seen them all..

there is always fear and greed factor in the market, the Fear of Missing out and the Fear of Losing are the two most deadly wealth destruction force...

so what can I do to sleep through the volatility, prepare for doom day and ignore the days to day noise?
I am focus on business that can dance in the storm, run in the bull and grow above inflation

in term of dividend and capital grow...then I just sits and then every so often the market crash I buy more of the same and repeat...

my best years are during the GFC when people said buy and hold no longer works and people abandon the market....

many stock I pick up now has gone up 10 times or more....I hope to repeat on the next crash with a shopping list of all-weather stocks I have at hand.

whether the world economy gone belly up or some major event happen around the corner I don’t really care.....
if you know your stuff and a long time investor massive bad news headlines do works in your favour...

I only care about my business balance sheet, cash flow and future dividend/earning prospect...
if these business doesn't stack up I cut them lose whether it’s in the bear or bull market..

No debt, No leverage...though I use some form of derivatives and people can call it leverage but all my leverage is
backed by real cash position at any given point in time I can come up with the require amount for any scenario..

I always keep a stack full of cash ready to take advantage of random madness that bear down on business I like

sleep easy/drink nice coffee/holiday annually and keep exercise often and the market will take care of my business with dividend cheques come twice a year

Have fun and good luck

 

[VSntchr]

We're well short of an all time high , where the US , with an economy that still has major issues has reached one.

An interesting point to consider is the pay-out ratio of many domestic companies vs their overseas counterparts and the role that plays in achieving growth in the indicies.

I was having this discussion with a friend only this morning so its timely that you brought it up. Craft posted a chart of the XAOAI (or was it XJO?) which showed that we are actually back to GFC levels now!

I havent seen a US accumulation index chart for comparison...but the factor of distributions is one that is commonly overlooked.

 

[Hodgie]

An interesting point to consider is the pay-out ratio of many domestic companies vs their overseas counterparts and the role that plays in achieving growth in the indicies.

I was having this discussion with a friend only this morning so its timely that you brought it up. Craft posted a chart of the XAOAI (or was it XJO?) which showed that we are actually back to GFC levels now!

I havent seen a US accumulation index chart for comparison...but the factor of distributions is one that is commonly overlooked.

IT was XJOAI
https://www.aussiestockforums.com/forums/showthread.php?t=27397&highlight=time+high

And yes distributions definately need to be taken into account, when you look at an investment property you consider rental income on top of capital growth so it is only fair to consider income from shares as part of their performance. It is also alot easier to reinvest distributions for compounding then it is to reinvest rental income from property.

 

[See Change]

IT was XJOAI
https://www.aussiestockforums.com/forums/showthread.php?t=27397&highlight=time+high

And yes distributions definately need to be taken into account, when you look at an investment property you consider rental income on top of capital growth so it is only fair to consider income from shares as part of their performance. It is also alot easier to reinvest distributions for compounding then it is to reinvest rental income from property.

I'm not wanting to get into a share vs property debate though from my perspective I don't consider rental returns on top of capital growth . Rent just helps me hold property while capital growth occurs . any income above that goes into offset accounts where it can pay down debt or build up for another deposit .

ROE , I'm looking at a different view point . I'm aware that if you stay fully engaged in shares you will always be able to find value . I tend to do that in property . There are people who invest in both and depending on the stage of the economy will preference one . I'm not wanting a debate on what style of investing is better or not . In property I buy well located properties when the market is at its bottom and then when the market is taking off ) ie in recent months ) I gear up more aggressively. In shares I tend to wait until
I see a trend starting to emerge and then buy in.

My experience is that there are people on Internet forums who have well formed and thought out opinions on what is happening in their particular area of interest . I'm hoping some of those people might be interested in sharing their thoughts with someone they haven't met before ( or maybe someone they have ) ...

Cliff

 

[Country Lad]

Any thoughts on other factors which might lead to the ASX breaking out and moving into a consistent up trend ?

Can't see that happening for some time. The consistent uptrend has occurred only when the major economies were in sync and performing well. We are now in a different paradigm. I have avoided getting too involved in the question of "where is the market going" because there really is no longer a "market" as such, just many segments performing differently.

The last 12 months are a good example for our market. Different markets and industries have each performed in their own separate way. Just a couple of examples are Consumer Discretionary and Healthcare performing better than the so called "market" and Small Stuff and Digger Uppers under performing. Other market segments are similarly different. And all these performances could change or reverse tomorrow.



Then within those different segments we see a wide variation in performance of companies depending on how well they are handling the economic conditions as well as compared to their competitors.

I have been saying for a long time it has been a stock pickers market. The days of the tide raising all boats have long gone and I reckon won't return till all the major economies have sorted themselves out. That may be never.

Probably the best thing for traders is to look for the better performing companies in the better performing industries. That has served me well so far.

Cheers
Country Lad

 

[burglar]

... general confidence seems to be spreading through the community ...

This week, I walked through David Jones' store in West Lakes!

(Yes. Proud to be a western suburbs boy!

The customers outnumbered the staff!!
It's the first time I've seen this since the GFC.

 

[brty]

Hi Seech,

I was on a different forum a few years ago where you frequented. I always thought your views on the money regarding property and made a fair bit out of property myself. These days I have been concentrating more on shares as well as business. You would know me as a poster that used to have some vigourous disagreements with "property guru's", especially when they thought they knew something about shares.

The single basic premis of successful stock investments is to buy what is going up in price. Very, very simple, yet most people can't do it. I buy a small amount of whatever stock, and add to the position as it goes up. If it goes down then I get out with a small loss.

The methodology of finding the stocks, TA or FA doesn't matter. What's important is to get rid of losers quickly and keep/add to winners. Buying stocks that are going up in price is the easiest way to start adding winners to your portfolio.

There is a thread about the stock MCE that should be compulsory reading, it highlights typical investor behaviour that you need to stay away from. Have a chart of MCE open to see what the price was doing at the time of the various comments.

brty

 

[See Change]

Hi Seech,

You would know me as a poster that used to have some vigourous disagreements with "property guru's", especially when they thought they knew something about shares.

brty

Hi Brty

There was a few of us around especially when it came to " He who must not be named " ........ .... The disaster that could never happen ..... but did..... . Caused a lot of pain and it's still not popular to mention him .

You wouldn't happen to be Bill L ? He was the most vocal , but not the only one by far
.
Cliff

 

[Julia]

The single basic premis of successful stock investments is to buy what is going up in price. Very, very simple, yet most people can't do it. I buy a small amount of whatever stock, and add to the position as it goes up. If it goes down then I get out with a small loss.

+1.

There is a thread about the stock MCE that should be compulsory reading, it highlights typical investor behaviour that you need to stay away from. Have a chart of MCE open to see what the price was doing at the time of the various comments.

brty

Interesting reading and sadly nothing new. For those who don't want to trawl through the whole thread, the following are some of the comments.
Might make a good sticky in the Beginners' Forum.

Not for everyone but this is exactly the reason I do not use stop losses.

With a long term view in mind if a company passes as investment grade for me, a reduction in sp often leads me to consider buying more instead of selling.

I'll be taking the opportunity to top up, I can't see it getting any cheaper.

(4 April 2011)

I'm just curious why people buy MCE at this price?
their fundamental is weakening a fair bit ..

this business is capital intensive and high fix cost
you buying for perfection from here on....

things can go very wrong very fast for this sort of business

and the capital raising was time to perfection .... market sentimental and market darling status....

Just curious that is all

Above is ROE sounding a warning on 29 April 2011

Looks like MCE has copped a bit of a battering this morning down under 5 dollars.

I bought at 4 and 5 dollars last year.

Looks like I should have sold when it hit 9 but I didn't want to pay the large capital gains tax

(23 August 2011)

People can't get out fast enough at the moment

(24 August 2011)

It seems everytime i top up, MCE reaches a new low. needless to say i'm no longer greedy.

(24 August 2011)

Could not resist buying more @ $4.20 today - had to sell something I did not want to sell but I could not let that price go past.

(24 August, 2011) (Last price this Friday 71 cents.)

And the forecast for the next year is for more of the same and based on previous forecasts that probably means they are going to be worse than this year.

Last post in the thread.

 

[CanOz]

Nice recap Julia, you can almost feel the despair...its sad actually. I hope they didn't lose too much.

 

[Boggo]

Interesting reading and sadly nothing new. For those who don't want to trawl through the whole thread, the following are some of the comments.
Might make a good sticky in the Beginners' Forum.

Well put together Julia, and yes, it should be mandatory reading in the Beginners' Forum.

 

[tech/a]

The answer is pretty easy I think.

While money is printed to stimulate economies
Then markets will continue to rise.

The real doom and gloom has passed
The cloud of doom remains.
The optimism of recovery is evident
Highs are being challenged and surpassed.
Lowest lows are a thing of the past.

Most watch
Many pontificate.
Few are involved

 

[So_Cynical]

The single basic premis of successful stock investments is to buy what is going up in price. Very, very simple, yet most people can't do it. I buy a small amount of whatever stock, and add to the position as it goes up. If it goes down then I get out with a small loss.

I dispute your single basic premise and simply call it a strategy that you and many others are comfortable with, some personality's need a mental crutch to lean on, i have had ALL my investment success buying stocks that are falling or have fallen in price.

A recent example below.

I bought Slater and Gordon 22 months ago as the price was falling ($1.76) sold a few last week for $3.80 and a 114% profit...did i do something wrong.

https://www.aussiestockforums.com/forums/showthread.php?t=6931&p=664746&viewfull=1#post664746

https://www.aussiestockforums.com/forums/showthread.php?t=6931&page=2&p=795804&viewfull=1#post795804

~

 

[wayneL]

The answer is pretty easy I think.

While money is printed to stimulate economies
Then markets will continue to rise.

This is the only fundamental (in general terms).

It seems pretty evident to me that this isn't going to stop anytime soon, black swans notwithstanding.

 

[tech/a]

I would also argue So C
That your strategy is nothing more than ANOTHER strategy.
You like all traders are looking for trends to continue in your favor.
Hoping on a trend from a high or a correction.

Your exercise has shown that your idea is no more effective than any other.

 

[So_Cynical]

Your exercise has shown that your idea is no more effective than any other.

Agree, and would point out that i never said it was more effective or silly enough to say/call it a basic premise, i call it a successful strategy among many other successful strategy's...we all need the price to move in our favour to make money.

The real doom and gloom has passed
The cloud of doom remains.
The optimism of recovery is evident
Highs are being challenged and surpassed.
Lowest lows are a thing of the past.

^ That's pretty much how i see it to.

 

[See Change]

Probably the best thing for traders is to look for the better performing companies in the better performing industries. That has served me well so far.

Cheers
Country Lad

Hi Country Lad ,

great to see you're still around . Hope things are going well for you . I always valued your opinion.

We're not looking at short term trading . More medium term / weekly , more on thhe line of what Stevo used to do but will start looking at it from a sector down point of view.

Cliff

 

[brty]

So many questions that need answering in this new thread....

So-c, You have a strategy that has had quite a few trades in common with mine in the past. From my point that being buying 'good' support in an uptrend. The stock that you highlighted here SGH made the money for you when it was going up in price. If you bought it at $1.76 as it was going down in price, you put up with a 19% loss, before it turned around. If you bought it in May '12 at $1.76 as it was going up in price, the percent pullback was much less.

C-Lad, Rotation of bullish and bearish segments of the market has always occurred, but you know that. What I am seeing is that the All ords has just made 5 year highs. This is a bullish sign. A look through history of the All ords, or its equivalent, from wren research, here.....

http://www.wrenadvisers.com.au/downloads/

...shows that a new 5 year high has always been bullish over the medium term, especially if it is below the all time high. This is historic performance going back over 100 years, including the world wars and depression.

Julia,

Thanks for the abbreviated highlights, yet reading the whole thread does have more punch and yes is more time consuming. There were plenty of other occassions while the price fell that people added for both TA and FA reasons. I agree the thread should be added as a sticky and compulsory reading for all beginners, and re read by those more experienced.

Seech, "You wouldn't happen to be Bill L ?"

 

[robusta]

Nice recap Julia, you can almost feel the despair...its sad actually. I hope they didn't lose too much.

+1

I was one of those that lost a shed load of money on MCE, the blame IMHO is on the execution and stock selection not with the strategy of averaging down into outstanding businesses with good fundamentals and solid reoccurring cash flows. I manager to get away with this strategy previously with FGE (I would not repeat that now considering the volatility of the cash flows) and later to a smaller extent with DTL, TGA among others. My latest effort is HHL still dep in the red but I manage to sleep well at night.

The MCE loss while painful to the bank balance added to my knowledge and hopefully future profits.