Sell Everything

[herzy]

Tech-A, I'm sure you would be the first to recognise the difficulty of technical analysis.

I believe all Ves, SC et al are trying to say is that it is nigh on impossible/very difficult to accurately time markets. Obviously, selling at highs and buying lows (generally) would be great - Obviously, as Julia suggested, recognising the impact of global financial events (specifically) would also be great. But who knows when there is a peak and impending crash (such as $60 at CBA), or just a 5% dip worth riding out? At $26, who knows it's not going to drop to $13? The top and the bottom are very difficult to pick (at least for me).

I don't have much to add, just wanted to summarise how I see the arguments - I see myself as a value investor, but the one thing I struggle the most with is timing: when to sell, when to buy, whether to have a stop loss, whether to average down. Tough questions everyone has a different answer for.

Personally, the easiest way for me to have an approach that I am confident in, is to decide on a price that I think represents good value for a company, with the assumption it will eventually achieve (closer to) fair value. This may be encouraged by a few things (upcoming market releases, etc), and may be affected by external market factors. If the price were to drop another say 30% (assuming no fundamental reason), I would average down, as this now represents 30% greater value than it did before.

If anybody else would be interested in outlining their approaches, I would be more than interested. MOD: please don't delete Ves's posts (with his permission of course).

 

[tech/a]

Herzy

I haven't the time to reply in full ---a tee time is beckoning.
But Julia and I aren't talking about ANY high or low
we are talking of SIGNIFICANT highs and lows.

These are much easier to spot and help dramatically with "timing".

 

[explod]

http://bigcharts.marketwatch.com/ad...rsToggle=false&chartStyleToggle=false&state=9

I have attached the two weekly chart for NST Northern Star Resources. Have held this stock but not at the moment.

This I consider to be now close to a blue chip.

On the chart it is volatile and reflects that of the gold price. But overall it is in a nice uptrend. Its grades of gold to the tonne and output continues to improve, all mines are in Australia (hate sovereign risk) and as it has a few of them it is diversified.

You will also note that on new highs the pullbacks continue to make higher support lines. (Guppy's boxes would look good on it). In my view it is on one now and will rise from here, would set a 5% (always adhere to a stop) stop but feel pretty good that one could hold this to the next top (on the ATR, average trading range) at $1.50 to $1.65.

But, I would be watching and governed also by, the price of gold, what the market is doing, economics (ie. news and the banter on money printing) what I think the company is doing and my gut (intuition) which is really the compilation of everything I have just stated. And note the volume on the chart, huge when it recently dropped into the $1.30 area, for every seller there is a buyer and they soaked it up four weeks back.

So lets watch NST, perhaps someone can suggest another thread to hold the exercise together.

Proviso, I am not qualified to make recommendations or to give advice. If I could I would not recommend it as I do not hold it for the reasons stated in previous posts and my support of this thread "Sell Everything"

 

[Boggo]

Tech-A, I'm sure you would be the first to recognise the difficulty of technical analysis.

I believe all Ves, SC et al are trying to say is that it is nigh on impossible/very difficult to accurately time markets. Obviously, selling at highs and buying lows (generally) would be great - Obviously, as Julia suggested, recognising the impact of global financial events (specifically) would also be great. But who knows when there is a peak and impending crash (such as $60 at CBA), or just a 5% dip worth riding out? At $26, who knows it's not going to drop to $13? The top and the bottom are very difficult to pick (at least for me).

I don't have much to add, just wanted to summarise how I see the arguments - I see myself as a value investor, but the one thing I struggle the most with is timing: when to sell, when to buy, whether to have a stop loss, whether to average down. Tough questions everyone has a different answer for.

If anybody else would be interested in outlining their approaches, I would be more than interested. MOD: please don't delete Ves's posts (with his permission of course).

It is not impossible and sometimes not that difficult.
There are many examples where potential turning points are predictable and there are many methods of highlighting those potential points.
Its not easy and probably works 50% of the time on 50% of the candidates. The trick is being in or out of the candidates where it is working.
There have been quite a few examples just in the last year, this TGA thread (link below) is one recent example. Compare your current chart with the 11th Oct chart and commentary on here and you will see an example of where one of the many methods can predict to within a few cents.
https://www.aussiestockforums.com/f...=18617&page=47&p=732749&viewfull=1#post732749

 

[Julia]

Hey Canoz or Joe or another admin that sees this thread can I please request that my previous posts in this thread are deleted?

I hope you've reconsidered this request, Ves. It has not been an acrimonious argument imo. Rather a fairly reasoned discussion amongst a group of people who undoubtedly are in widely different circumstances. Some of you are very young, yet to build what you will have when you reach retirement age, and some of us have been lucky enough to retire reasonably early. We will, because of these different circumstances, each have a different focus. Mine is on preserving capital as an absolute first priority because I have no wish to return to the work force and am dependent on that capital to generate a living. That is quite different, obviously, from eg yourself who is in the pretty early stages of your career, and earning a living from your work. Others will be at various other points in their lives and wealth building.

To Julia and Explod I am sorry to have started this discussion. I am inable to communicate what I really want to say. I get the concept of selling at the top of the peaks and buying at the bottom again (it's obvious that this is the ideal strategy). But the whipsawing, tax, transactional costs and everything else in between that make the market a zero-sum game convince me that this is much easier to pull off in hindsight.

That's a fair point. When I sold everything, it was not with 100% confidence at all. I didn't know what would happen. We can only make any decision with the information we have at the time and what we believe is most likely to occur in the immediate and longer term future. My decision was made more on the global unfolding mess than any clever analysis of a chart.
Remember that not everyone is paying tax and if your profits are OK, then tax is the last reason not to preserve them imo. To lose a few hundred thousand in profit because you object to the tax involved seems faulty thinking to me.

Maybe it's just the fact that I'm dumb.

You know, and we know, you are not dumb. That's just silly. I'm just suggesting that, instead of being dogmatic about an approach, it's sometimes worthwhile considering some alternatives, or even just broadening that approach to maybe apply more consideration of factors outside of just what you think a company is worth.

Julia I'm totally with you on the selling at the top principal. What I was trying to say in a very non coherent way was that selling everything isn't the best thing unless something insane is going on. I made a few huge generalisations along the way too however!

Thanks, willstor. I guess it depends how we determine what is 'insane'. It's not an expression I'd have chosen, but maybe I'd say 'dramatic' in terms of how the GFC was clearly beginning to unfold.

2. Then there are those that saw the top in November 2007 and sold all, they are out and the money is in the bank. But due to on going problems in the world never repurchased. (Probably more people in this group than the first)

Yep, I fall into this group. Comfortably in cash. If I needed to grow the capital, however, I'd have to acknowledge that this wouldn't be a long term solution. I'm happy with the decision to take high deposit rates when they were available. In so doing I've not taken advantage of the recent rise in the market.
I still can't see any real evidence for confidence in the market. Nothing has been actually solved in the US or Europe. Our Australian economy is faltering and political uncertainty along with fiscal policy is not helping.
All this, of course, just inho. Others will see everything differently.

 

[notting]

I still can't see any real evidence for confidence in the market.

Perhaps some of this confidence comes from the real world fact that there has been a massive and very successful deleveraging process in the listed universe, making most companies far safer to invest in than prior to the GFC reality check.

 

[George Washingto]

Hey Canoz or Joe or another admin that sees this thread can I please request that my previous posts in this thread are deleted?

To Julia and Explod I am sorry to have started this discussion. I am inable to communicate what I really want to say. I get the concept of selling at the top of the peaks and buying at the bottom again (it's obvious that this is the ideal strategy). But the whipsawing, tax, transactional costs and everything else in between that make the market a zero-sum game convince me that this is much easier to pull off in hindsight.

I'm not arguing that it is impossible - I'm just saying it's much harder that people think it is - hence why not many people out-perform the market indices.

Maybe it's just the fact that I'm dumb.

Great post.

Keep in mind the GFC dip was a once in a life time event, so trying to pick the tops and bottoms of much lesser falls will give smaller potential returns, meaning tax, transactional costs etc will take a bigger chunk.

You would also have to factor in the % of picks you get wrong and the losses incurred.

If you are constantly buying and selling the tops and bottoms you are also constantly giving your profits back in tax. The investor who holds will be earning dividends on the governments money.

 

[explod]

Great post.

Keep in mind the GFC dip was a once in a life time event,

Would you care to qualify that George?

As from 1929 through to the mid 1930's many would posture for good economic reasons that 2008 was just the first ripple in much greater falls to come. Some very qualified pundits are also saying that the economic mix has never in history looked so bad as it appears to be this time.

 

[Julia]

3. Then there are those that held CBA all the way through but they topped up on the way down down and then bought even more in the $26 range. They are long term investors looking for income and saw an opportunity to buy more very cheaply. (I am in this group, not the best and definitely not the worst)

I've previously made the point that, for this to have any meaningful impact, you'd have to be constantly sitting on substantial amounts of cash in order to do all this 'topping up'.

4. There are those that had some CBA at the peak in 2007 and still hold them today, price is roughly the same. They did nothing, they did not sell or buy anymore, they just sat back and got paid their fully franked dividends.

Thus missing the chance to considerably increase their position down the track.

5. Then there is the majority of the population who don't hold any CBA at all. This is the biggest group of all.

I'd say much of the population will indirectly hold CBA in their public Super funds.
Most of these would fall in to the category of vaguely becoming aware of how much the market had dropped when it was down about 15% and who watched on - often not even knowing which option their Super was in - until they finally cried that they'd lost half the value of their Super.

Tech-A, I'm sure you would be the first to recognise the difficulty of technical analysis.

I believe all Ves, SC et al are trying to say is that it is nigh on impossible/very difficult to accurately time markets. Obviously, selling at highs and buying lows (generally) would be great - Obviously, as Julia suggested, recognising the impact of global financial events (specifically) would also be great.

There is nothing mysterious about following what's going on in the world and doing a bit of research into the likely repercussions of the credit bubble.

But who knows when there is a peak and impending crash (such as $60 at CBA), or just a 5% dip worth riding out? At $26, who knows it's not going to drop to $13?

A basic chart will make the trend clear. Most trend followers will only buy back in when they can see an uptrend recur. So, again, obviously this means you're going to miss the absolute bottom if you want to get back in with that cash you've released a little below the top.

The top and the bottom are very difficult to pick (at least for me).

Of course they are, herzy, if you - determining yourself as a value investor, whatever that actually means - decline to investigate even a simple trend following approach.

I don't have much to add, just wanted to summarise how I see the arguments - I see myself as a value investor, but the one thing I struggle the most with is timing: when to sell, when to buy, whether to have a stop loss,

This is where a simple trend following approach would help you. You don't have to get involved in complex, esoteric technical analysis, just learn how to follow some basic rules.

Personally, the easiest way for me to have an approach that I am confident in, is to decide on a price that I think represents good value for a company, with the assumption it will eventually achieve (closer to) fair value. This may be encouraged by a few things (upcoming market releases, etc), and may be affected by external market factors. If the price were to drop another say 30% (assuming no fundamental reason), I would average down, as this now represents 30% greater value than it did before.

Well, if you're happy with that approach, that's all that matters I guess.
All that some of us are suggesting is that it's possible to increase your profitability by broadening that approach.
Re the averaging down representing greater value than it did before, Cynic posted this earlier:

Let me see now, HIH, Lehman Bros, Enron, World Com, Freddie Mac, Fannie Mae, GMH. You would of course agree that these were all blue chip stocks once upon a time, wouldn't you?

Then there was a string of companies, all market darlings, in Australia, e.g ABC Learning, who sank into oblivion.
Didn't represent much value then, did they?
(My mind has gone blank on some of the others. Someone will be able to remind me.)

If anybody else would be interested in outlining their approaches,

The reason many do not detail their approach is the dogmatic rejoinder from some people that what is outlined is impossible, that 'value investing' is the only way etc etc. This then leads to ill tempered arguments and no one wins.
It is unhelpful, for example, for So Cynical to repeatedly state that an outlined approach is 'fantasy' when several of us have done it

Keep in mind the GFC dip was a once in a life time event,

Well, that would be a pretty short life. The 1987 crash is not so long ago and there are people still alive today who can well remember the Great Depression after that crash.

so trying to pick the tops and bottoms of much lesser falls will give smaller potential returns, meaning tax, transactional costs etc will take a bigger chunk.

Try to understand that not everyone is paying tax. Anyone who is retired and still paying tax needs to get advice.

You would also have to factor in the % of picks you get wrong and the losses incurred.

Therefore the oft quoted maxim "Cut your losses quickly and let your winners run".

If you are constantly buying and selling the tops and bottoms you are also constantly giving your profits back in tax. The investor who holds will be earning dividends on the governments money.

Again, see above.
Further, if your profits are significant enough, avoiding tax should be less of a consideration than protecting those profits.

 

[George Washingto]

Would you care to qualify that George?

As from 1929 through to the mid 1930's many would posture for good economic reasons that 2008 was just the first ripple in much greater falls to come. Some very qualified pundits are also saying that the economic mix has never in history looked so bad as it appears to be this time.

I meant that you will only have the opportunity to pick the top of a 50% fall, at best a handful of times in your life.

The other tops you pick might only be 10 or 20% drops, which means the other costs Ves mentioned take a much bigger slice of the pie, not to mention the losses incurred when you pick wrong and have to buy back in at a higher price.

Basing your hindsight scenario around picking the perfect top and perfect bottom of the GFC is a bit far fetched.

 

[Julia]

Basing your hindsight scenario around picking the perfect top and perfect bottom of the GFC is a bit far fetched.

Has anyone claimed to do this?
Have you actually read the last several pages?

 

[George Washingto]

Has anyone claimed to do this?
Have you actually read the last several pages?

Using the same principle you're outlining here, you could have sold your CBA when the GFC began, then had all that additional capital available to buy it back in increased quantity (thus also increasing your dividend yield and franking credits) after the downturn was over.

At the end of 2007 it was clear that something was wrong on the chart and in the discussions on ASF, so most of the savvy would have been out of CBA at or before $58.

Just a year later, Ben Benanke said we were saved and the markets looked oversold. It's clear too if we look at the chart so Savvy is back in around $28.

To clarify my points from above, I think trying to pick tops and bottoms based on trends is a good way to lose money. Sure, looking back in hindsight it looks easy to pick up a 50% gain during the GFC, but if it's so easy, why didn't everyone do it?

Unless you are an investing genius holding through good and bad entails much less risk imo.

 

[Julia]

To clarify my points from above, I think trying to pick tops and bottoms based on trends is a good way to lose money. Sure, looking back in hindsight it looks easy to pick up a 50% gain during the GFC, but if it's so easy, why didn't everyone do it?

Unless you are an investing genius holding through good and bad entails much less risk imo.

In the face of such brilliant deductive reasoning, I give up.

And herzy, you wonder why people are reluctant to take the time and trouble to detail their approach.

 

[George Washingto]

In the face of such brilliant deductive reasoning, I give up.

And herzy, you wonder why people are reluctant to take the time and trouble to detail their approach.

Julia, I gather from your posts that you 'picked' the top of the GFC and currently 100% in cash?

Do you plan on re-entering the market? Or hope that the income from your TD's will last for the rest of the your life?

 

[So_Cynical]

I just had a look at the CBA annual report, a touch over 800000 shareholders..now how many do you think did the above or even close to it??

Seriously...its a fantasy that sort of perfect in out and in timing.

RUBBISH

In 2008 I had portfolio in high 6 figures.
It's logged here and on another forum that
I closed the lot a few months before the GFC.
Haven't bought back a portfolio either---yet.

Rubbish hey???

And yet you didn't buy back in, same as Julia didn't buy back in....Bill touched on the subject of personality's and broke the buyers and holders into groups with reasonable accuracy...and now your statement supports my understanding.

Momentum and trend followers are great at protecting capital, running with the pack etc but hopeless at buying value and taking advantage of fear and the falling knife....supports my theory that people cant be true trend followers and bottom buyers, the 2 quality's simply don't go together.

I mean one cannot be super protective of their capital and yet take great risks...one works against the other.

----

The people selling CBA near the top were mostly trend followers that jumped when the $56 support line was broken and the capital preservation aware, the sharp fall that followed was a mixture of panic and stop losses by individuals, punters and managers, and the withdrawal of foreign investors.

 

[Bill M]

I've previously made the point that, for this to have any meaningful impact, you'd have to be constantly sitting on substantial amounts of cash in order to do all this 'topping up'.

Yes I do sit on a reasonable amount of cash (not more than 5 figures though). Generally what I do is bank all dividends, interest and rental income and it builds up over time. I keep it ready for market corrections, share purchase plans, capital raisings or personal emergencies. During the GFC I averaged down into my favourite stocks, many of them in fact. I just kept buying until my cash was almost gone and it had paid off well. Make no mistake, I bought as much as I could with what I had stashed away ready for this time. Here is what I wrote on this forum on 11 March 2009
---

Plenty of good news around for non gloom and doomers. Currently there are plenty of share purchase plans around for those long term holders. Time to get involved if you can.

WES offered at $13.50, today $17.50.......kerchinck!

WBC offered at at $16 wound down to $15.24 and now $16.87.....kerchinck!

CBA offered at $26 todays price $28.61................kerchinck!

next

IAG.......offered at $3 but wait we still have time. Current price $3.22

Plenty of opportunities to make money if you keep your wits about you. Good luck all.

Link here: https://www.aussiestockforums.com/forums/showthread.php?t=8130&page=9&p=407626&viewfull=1#post407626
---

 

[willstor]

If I'd have been in on CBA at the time of the GFC I'd have probably sold at 52ish and bought back at 45 thinking I was smart. I'd then have bought tranche 2 at 38 and 3 at 30ish. Mixed with divs id probably be OK overall however I would only do this on the complete faith that I wasn't risking losing my knickers... During the GFC there was a stage when that seemed possible on all banking stocks!

 

[MrBurns]

In 06' I was surrounded by advisors telling me what shares to invest in, a reasonable 7 figure sum.

I had a gut feel something wasnt right so I didn't and the the market crashed, if I had taken their advice I would have lost half the money.

Since then I've dabbled and lost a little and now have a little in TLS which has been good the past month or 2

I will probably go into TabCorp in the next few months and I was in Bunnings today and I feel that place can only get busier as things get worse so I might go in there too but I'm very wary and don't trust the markets at all, I trust financial advisors even less.

Spoke to a neighbour today who runs a reasonably sized insolvency company, he says dont believe the hype that it's good out there because it isn't ..........and he's very busy as proof.

 

[explod]

Rubbish hey???

and taking advantage of fear and the falling knife....supports my theory that people cant be true trend followers and bottom buyers, the 2 quality's simply don't go together.

Trend following also includes the falling knife, to know when the bottom hits, cant think of the name on the spot, but they made poker machines and hit a glitch about 10 years ago, went down like a stone, purchased some at $1.20 then doubled up at 80cents because I was scared now, sold them all the next day on the rebound at $1.30 and blow me they hit $6 a year later.

What the names of those one arm bandits, too much red ,,Oh I know Aristocrat.

Trend followers have insights you would not read about ole pal.

ps. I had 40 bl..dy g in the bas.ards

 

[Bill M]

Since then I've dabbled and lost a little and now have a little in TLS which has been good the past month or 2

Hello Burnsy, I have a question for you and I am not singling you out so please don't take it as an attack, it is not. You were talking about Telstra some time ago, probably even as long as 2 years ago. Can you tell my why didn't buy Telstra at $2.55 (2 years ago) but you bought Telstra at over $4? Nothing has changed with this company yet you chose to pay 70% more? I can't get my head around this.