The top of this cycle for ASX 200, cash is king?

[kahuna1]

Well ...

Maybe its time for a change and was wondering if there was any interest in this sort of a thread here ? Have run a very similar thread for many years .

Basically we will talk about macro economics and not too much on indivdual shares and more about the overall market.

What I mean by market is the market risk ... the overall risk of the market and its cycles and the fact that if the market is going down in any normal cycle correction of say 8-15% the fact is that 85% of shares go DOWN as well. Picking these cycles when the overall market has peaked ... the ASX 200 has peaked ... vs buying willy nilly has proven to be a very valid tool for me over the years. Of course the ability to pick these cycles is not one I have concluded I can really teach very well .... with something of the order of 27 years full time experience in the markets each and every correction has its own foundations.

Sometimes these are driven purely technically ... others by market exhaustion and others driven by the macro side .... others driven by the usual greed or fear.

Anyhow feedback appreciated ... on the thread or send me a PM.

Yes its me :} Before you ask !! The real one.

 

[The Once-ler]

Re: The top of this cycle for ASX200, cash is king?

Yes its me :} Before you ask !! The real one.

I reckon I'll soon pick if your the real kahuna1 from what you post.

So how come you will post here if your going into funds management and will be limited by what you can say?
Isn't that why you are making just one last post on the other thread on the other forum?

That other thread is an amazing lesson about the stockmarket. I just wish I'd took all your advice from the start. Could have made millions. If you post here, or on the other forum, it won't make any difference to me, as I'll read what you have to say where ever you post.

 

[Pivotonian]

Re: The top of this cycle for ASX200, cash is king?

I reckon I'll soon pick if your the real kahuna1 from what you post.

That other thread is an amazing lesson about the stockmarket. I just wish I'd took all your advice from the start. Could have made millions. If you post here, or on the other forum, it won't make any difference to me, as I'll read what you have to say where ever you post.

Please excuse my ignorance, but why should I care who is "the real kahuna1"?

 

[Bigukraine]

Re: The top of this cycle for ASX200, cash is king?

I reckon I'll soon pick if your the real kahuna1 from what you post.

So how come you will post here if your going into funds management and will be limited by what you can say?
Isn't that why you are making just one last post on the other thread on the other forum?

That other thread is an amazing lesson about the stockmarket. I just wish I'd took all your advice from the start. Could have made millions. If you post here, or on the other forum, it won't make any difference to me, as I'll read what you have to say where ever you post.

Maaaaaaaate !
Based on time lines eg you on this site since 2005, big k 2004 and the years he has been on the other forum and guessing you the same if you didn't make your Millions by now you never will !!!!!!!!!!

 

[kahuna1]

Re: The top of this cycle for ASX200, cash is king?

Interesting as always views ....

Its never been about me , why if I could and can pick these cycles and advised people via 2,700 ish posts on another site would I bother event to in the first place ?

One lives one life as they must and its been a journey for me either way. Eventually I tried stopping people put their heads into meat grinders .... tried to stop the devoted faithful in the latest penny dreadful taking all their funds and getting hurt.

Same prior to the GFC ....did the same thing pre dot com on another site only to discover who really owned it.

As a gent pointed out yes I am going in another direction and one I intend to take for the next 20 years of my life. The reasons for my switch will be varied but it comes down to whilst I posted and posted for free sharing 27 years of experience to others .... and helped them make the site what it was .... go there ... send me a PM .... they sadly removed that function without even a hello. If I spent an hour on my long and detailed posts there all mostly original material .... I think at least I deserved something other than what happened.

Anyhow will say bye bye there either way ... but was wondering the question I asked .

Many fall outside the cracks and some other form of a view is all I will be expressing from time to time and not on as regular a basis as I have in the past. Just will be commenting about macros and cycles and when I believe the cycles are changing.

As to millions .... I think if you know who I am or my objectives and why i took a break it was nothing to do with my own fate but that of others which brought me back to posting at all and what has made me decide to go in this new direction. It doesn't mean from time to time I may not take the time as I have in the past and share a view ....

That was the question .... nothing else.

Stay cool

Mark

 

[BradK]

Re: The top of this cycle for ASX200, cash is king?

Welcome mark. Used to read your posts on the other forum.
You think we are at the top of this cycle?

Brad

 

[kahuna1]

Re: The top of this cycle for ASX200, cash is king?

Oh dear,

Here we go again .... Yet another fail at that crucial point for us .... The retracement of the high vs the low and 50% of the total move seen over the last few years from the absolute high to the eventual low. The high being the 6,851 on the ASX 200 seen late 2007 vs the low earlier this year of 3,073 . The technical and very important chart point remains still untested and still intact at 4,963. On another technical point a much larger one also remains intact and that was a 20 year one and the 33% retracement from the low vs the high was also a point very similar to the other one and it was 4,969 on the top.

Neither was tested in any way shape or form of late and we failed to get there. Big picture if I was purely technical is that the rally remains totally intact and the target and eventual target is still this point the 4,963 - 69 levels. Past experience and 27 years of it and studying these technical side sin great depth again suggests until tested at least most of the time ... And I mean 90% of the time the eventual move is to test them. Of some concern is that for a second time failed in this region without breaking it ....

Ho hum .... On that note. Similar technical sides for the USA but it tested and broke the 50% retracement level and went well through there and with last nights drubbing has fallen well below this level vs actually well and truly breaking it.

So from the US side its more of a worry if one was purely technical ... But thankfully I am not.

On the downside there well there are supports the whole way down and 4,600 on the ASX200 followed by 4,500 and the 4,300 levels are all MAJOR supports the bigger of the three 4,500 .
Whilst we are obviously in the midst of yet another mini correction I am not too sure how long it remains intact and for now is just a great buying opportunity for me.

Funny thing about these macro driven corrections more than anything else the violence visited upon the market at times is extreme and illogical but a week or two latter we go what was all that about ? We certainly appear as though we test at lest the first levels of support on the ASX 200 at 4,600 ... But beyond that I don't think longer term for fundamental reasons the bottom is where we are going. Eventually they will test our top and the USA will bounce like a rubber ball back above its own 50% retracement level of 1,121 and go off on its merry way.

Its normal for the market to advance then retreat and a correction of 2/3/4/5% ensues in the middle of the big picture. What started this ball rolling was simply put ... Bank bashing and the fact is if they split banks in the USA and remove them from the proprietary trading sides if one thought out the process longer term it means something positive ... Not negative as the market reacted off the bat. What it would involve would be banks splitting and forming 2 or 3 or more companies from what they are now and the sum of the parts is usually more than the final total. For the USA on their banking side the prices of these assets is not like ours at all time highs but still on the main in tatters so if they say to a big bank there they have to spit eventually it means a positive thing as opposed to the initial reaction. Not going to happen overnight but over the course of 2010 if that the way it goes buying a bank and then getting a pretty vanilla bank and shares in an investment house and shares maybe in a hedge fund eventually vs overseas valuations for these things as opposed to where the valuations of the parts sits in the USA I suspect means they go UP ... Not down in value.

All besides the point at this stage and the USA looking sick ... No so worried unless something changes in a large way and our market despite this having very little to do with our banking side following lockstep in response to the moves in overseas equity markets.

Most recent excuse of the day is that China may raise rates ? Well a few months ago the estimate for the Chinese GDP just released was up 9.6% well out if comes and was it 10.6% or 10.7% ? .... DER .... Its stronger and a positive for the global economy ... Especially their larger trading partners and we are the export hub for them so its not a bad result and any move in rates given the levels of GDP along with some pretty strong credit growth via lending and a CPI at the higher end of expectations to me is expected either way. In essence its noise but the sum of the noise is that its growing STRONGER than expected and the rest is just noise.

Anyhow we shall see where this correction takes us. Markets have a funny habit of doing the unexpected and for me at least the eventual target of the rally in 2010 is somewhere in the region of 5,250 to 5,400 with me favouring the latter in the latter parts of 2010.

My move my own personal one came down to many things and giving for free some other view on the market cycles has been rewarding over the years but I have reached a conclusion after the GFC being my fifth major correction in my 27 year career and its went along the lines of needing to do more and be involved on an individual basis with the course and fates of peoples lives.

My views back in November 2007 were very stark and diametrically opposed to the common view being fed to the average person. To encapsulate it ... it was at 6,750 at the time I doubted we got to 7,000 and I viewed with 25 years full time experience at the time the set of circumstances we found ourselves in to be the worst I had ever seen and was of the view we fell and fell very hard. The exact line I used was about this not being a mere market cycle but a long term turning point and remaining fully invested in the market I suspected would lead to a very large chance you saw long term destruction of your assets and capital by being fully invested. Basically get the hell out of dodge. This view did not change till we were closer to the bottom and then the view changed along the lines to the fair value of the market was 5,000 ish and we went to a vast premium and at that point we were at a vast discount and either the world ended tomorrow or it was time to take the plunge.

Here and what is driving my decision is the fact that I honestly believe as I said at the time we would eventually go back to around fair value ... At the time when I wrote the other piece we were at 3,200 and here we are essentially back near what for me implies fair value at this stage and I don't see this changing much as time goes on. What does scare me ... Not the fact we may fall well below this fair value point or actually go the other side of it ... My move was and is driven by the long term view the market over the coming 10-15 years will look very similar to those in the 1965-1985 period and be sideways as such and for someone investing the markets back in 1965 was lucky to have the same amount intact after inflation in 1985.

I believe we are in for a long term prolonged period unlike the 1985-2007 period but one where things rally fail and basically we end up not much changed over inflation. For someone as I am in my mid 40's and in the peak period of savings if we cant and don't get a decent return on our savings for retirement at the end of the journey we should be with a nest egg at least 10 times our yearly earnings if not more, but with this scenario without making something out of wise and long term strategy unless we were to save OVER 20% of our salary its not possible to see this happening. Hence my decision as such ... Having been a relic of the market and I mean this in a nice way most new things are not so new when you started in 1983 and my own next 20 years will be spent helping those who need help and accept they need help and I will give them my best which is pretty good. Overall objective is to outperform the ASX 200 by a fair margin with as little risk as we can over the years. Sounds fine but if you are like me say at 45 with a stash in super but still 20 years till you retire. Long term performing 5% over the ASX will see you with 2.65 times MORE at the end and the objective of taking 10% on average would see you with 6.72 times MORE than you would have got. Its nice to dream of making a killing in some penny stock and being able to retire ... But to make any return is about RISK and taking risks and trading those risks around ones objectives.

Actually having an objective is also very nice but that's another story. My own mission for the next 20 years is to comment on the macros and cycles from time to time ... Not sure in what form at this stage ..... And my other mission. Do suspect the next 20 years will make the last 20 appear very different. Things over the last 10 years from the Dot Com fiasco to 9/11 to the AUD crash and recovery to new post float highs to the GFC have been interesting but suspect from here ... Where we are basically fair value at 5,000 on the ASX 200 over time yes it gains with inflation but seeing it behave as in the past 10 years let alone 20 years I suspect a pipe dream. In the end it will come down to buying low risk stories with high confidence of them coming true and then having the brains to sell the same stories when they come true and the market which was paying 70 cents in the dollar for a story worth a $1- is willing to pay $1.30 cents in the dollar and because you got the story right the value is now $2- and you take all or at least some of your money and buy into the next 70 cents story.

Sounds like fun to me, my journey either way !!

Take care

Mark

 

[Nero64]

Re: The top of this cycle for ASX200, cash is king?

Hi Mark,

Thanks for posting. It sounds like you genuinely want to share your knowledge and experience with this forum.

So you're saying this minor correction will see us down to 4500-4600 and then see us up to 5400. However longer term say 2-3 years away we might retrace below the 3073 mark?

Used to read your posts on the other forum.

Brad what is the other forum that you speak of?

 

[nomore4s]

Re: The top of this cycle for ASX200, cash is king?

In the end it will come down to buying low risk stories with high confidence of them coming true and then having the brains to sell the same stories when they come true and the market which was paying 70 cents in the dollar for a story worth a $1- is willing to pay $1.30 cents in the dollar and because you got the story right the value is now $2- and you take all or at least some of your money and buy into the next 70 cents story

um, how is that any different to share trading anytime in the last 100 years?

 

[kahuna1]

Re: The top of this cycle for ASX200, cash is king?

Nothing different about stocks for the last 100 years :}

Not a thing !!

Having been around for 27 years now its always the same old ... same old .... nothing changes.

For me nothing could be further from the truth but its a difference and ability to accept at times you are wrong and completely wrong and what you do that differentiates the results.

What I thought was pretty clear about this thread is CYCLES and MARKET cycles as opposed to anything else. If the market is going down and correcting as it does periodically being able firstly to identify WHEN the market is likely to stall and correct is something which is OF VALUE. Reason being is that in any old normal correction the 8-15% sort of one that happens about every 9 months or of late even closer .... The sad fact is that in a normal correction about 85% of ALL stocks go down and normally during these times the ones that perform BETTER over the 12-24 month period actually fall MORE than the market average during the fall and it is quite often they fall 2-3 times the markets correction.

Its nice to say nothing has changed in 100 years and the ability to pick shares that will perform is paramount to any investment strategy longer term. You buy rubbish you end up with rubbish in the end. You pay $1.50 for something worth 50 cents the market is the great leveler on these issues.

To put this I suppose into perspective I will talk about three stocks that I bothered mentioning on the thread on another site during the first two corrections back in 2005. I liked them in varying ways but all three were very large and well diversified .... And having identified value and their stories being excellent even if one part of the story and conclusions I reached was not correct ... During these corrections of 8% and 10% the stocks in question fell between 20 and 25 % .... CSL was one of the stocks and back early 2005 the story was exceptional for CSL and during the first correction ... Market correction these cyclical things I like to look at it went from a peak of $34.85 to a low of $27.25. This was PRIOR to the stock being spilt 3/1 so the stock in reality over the next 2 years QUADRUPLED but during this correction what happened ? The market overall got hammered by 8% or so ... CSL went down 21.8%.Same sorts of stories I had at the time with BHP and WPL and over the years.

Over the years I suppose I have spoken about 100 of the top 200 stocks and each stock I believe not only has its own cycle but one in relation to the market. One I talked about a lot has been BHP and loved it at $20- and below but up near $50- in 2007/8 not amused and back down there loved it ... Now not so much. On the other side outside resources JBH loved it and loved it with a vengeance $3-5- not too amused above $10- and it went to $17- whilst the story got better during the GFC but it fell from $17- to $6.87 late 2008 and love again.

Cycles and value and valuations all play a part in everything but buying into a market in the midst of a massive correction as opposed to waiting till it hurts for either the value to cause you to act anyhow or the market corrects to a level that it is clear its stopped or likely not to go much further sounds nice ....

Going back to CSL in 2005 it was a decent stock even then but emerging as what it is today and a market leader in its industry. The difference being is that the stock TRIPLED and QUADRUPLED in that two year period from 2005 to 2007 and even in the midst of the GFC the lowest point it got to was 3 times the entry mid 2005.

Cycles.

Oh well just a new thread and new ideas for this site and the fact is for me at least have decided either way to embark on a hands on thing for my next 20 years either way. Having worked for institutions for the larger part of my adult life .. I am happy with this new direction and journey I am about to embark on. Most people who trade eventually the numbers are something around the 80-85 % mark that loose money over time and not that interested in traders or the latest get rich fad. They don't need advice or help because sadly they already know it all !. Me with a CV and list of experience and results that back it up ....

As I said its always a learning experience and without ultimate discipline and objectives clearly set out in the end they are a statistic. In this age of Internet paying 0.1% per trade vs a lot more for a full service broker is not a route many take. The difference is having to run your latest idea by someone before you act !! The difference is having a whole organizations research behind you vs your own. The difference is having someone whilst you are watching other things or off working with an eye on things for you and at times giving you some very unpleasant advice to get out or take some profits.

The list goes on and on. It has to be said the difference between a good advisor and a very poor one is something you have to work out. Ask them about their experience :}

Enough ... This is my journey either way and about to embark on it.

On the market and cycles longer term as the gent asked. Well I suspect at some stage we get higher well over this 50% retracement mark latter in 2010 . Obviously the action overnight out of the USA is negative and will be negative on Mondays open. This right now short term noise and suspect we stop somewhere in the 4,500-4,600 region either way. Longer term nothing is going to change and the onward march of things in 2010 I suspect continues and the biggest plus is the fact that many cannot change the course of things during the year. USA cannot possibly cut spending this year and seriously cannot raise rates. Sad fact on the economic side with 10% unemployed and 17% plus underemployed they have seen more people loose their jobs this recession than the total of the last 3 recessions. Second whilst their are some glimmers of light and longer term the fall in the US dollar makes them very much more competitive and they must take advantage of this with both hands on the tiller we have some background stuff going on which lead me to suspect the road to eventual recovery will be long and hard. One is that they cant keep spending this way and its not enough just to raise taxes they need to slash spending in 2011 and onwards.

Second is Obama is in trouble and politically he landed in a total mess and as such the prospect of raising taxes or cutting spending or even raising interest rates when he is slipping in the polls just is not going to happen. This for me underpins the whole rise we have seen of late and if its business as usual or should I say UNUSUAL with rates at zero % this underpins the current market I suspect for 2010. Late in 2010 I do suspect there are three things which will stop it in its tracks and they are the ones mentioned above. It will be much clearer that unemployment and underemployment is stubborn and even if they get some new jobs the numbers sitting on the sidelines will just come back into the labor market and the numbers will not improve much. Secondly the time for the cutting of spending or raising of taxes, both which need to happen sometime soon will be looming over the market and thirdly with such poor underlying fundamentals via the real economy the corporate numbers and future outlook late 2010 will not be that good.

But I suspect its all things ahead for now at least ignoring this blip in the market the underpinning of things via out of control spending and zero rates continues onwards into 2010 and the sad fact that Obama has inherited a mess and with falling polls will leave him with two choices either bite the bullet or play to the voter and its always the second especially when he is already in trouble with some reforms I am unable to see him with the votes or political will to do anything other than the course now set.

Of course this may change in 2010 as it unfolds ... These goal posts have habits of moving over time. I focus on the USA but other countries have similar but different stories some are worse like the UK.

Do love the line used by Gordon Brown in the UK budget statement of 2007 where he said " We will never return to the old boom and bust" . Oh how times change.

Predicting the future with all this going on is difficult but my best guess is we rally for the main part of 2010 and get to the 5,250 if not the 5,400 level on the ASX as the year unfolds. Form there given the negatives mentioned I suspect we run into a brick wall and have some pullbacks latter in the year which will I suspect be one correction and recovery followed by another leaving us at best not far from where we are the 4,700 mark by years end. The positives are huge and so too the potential negatives given we are a million miles from where we visited less than 12 months ago. I cannot see things closing with anything like the gains seen in 2009 and its a stretch to see them being able to hold onto the gains I suspect we see sometime during 2010 as the year unfolds.

Anyhow just a view ...

Take care

Mark

 

[Sean K]

Re: The top of this cycle for ASX200, cash is king?

Mark, thanks for the upddate. kennas

 

[jet328]

Re: The top of this cycle for ASX200, cash is king?

Very interested in a cycles type thread K1. Your 2007 call saved my life-savings.

Up until 2005 I'd always invested in managed funds through my financial advisor. Managed funds were a logical choice, the advisor recommended them and they were the experts doing this stuff all day compared to me reading the business section in the paper for 5 mins a day.
In 2005 the managed funds started to annoy me as 1. they seemed to be underperforming the index quite a bit and 2. they were really tax inefficient (ie. for a 10% gain, 9% was coming as income & 1% as capital gain) for a LT investor.

The FA & I both concluded that as my portfolio, income & experience had grown it was time to go with direct share investment. To cut a long story short, I entered 2005 with a 55% geared margin loan. 55% was very conservative as we weren't going to anywhere near the maximum they allowed you of 75%, 90% is common if you were buying a property and the market would need to crash 30% just to get a small margin call. It was also going to save me tax.

By late 2007(I was a bit of an expert at this stage) I'd been reading your entertaining posts for nearly 2 years and was amazed by your depth of knowledge and uncanny predicting ability. However, I was always big enough to admit that I definitely didn't have this ability and 'trading' wasn't for me, I was a LT investor. When you made that call at 6,750, I thought you were being way over the top and didn't understand the implications of the emerging BRIC countries , maybe we got a bit of a correction but I was a LT investor and it wasn't worth selling for all the CGT.

Luckily a few months later, one of your posts and some hard thinking made me realise I was hoping instead of looking at the facts, didn't want anyone to turn my money making machine off, didn't want to take any losses and taking in only positive news. Took the loss and learnt some valuable lessons.

It makes your stomach churn, thinking about being 55% geared June 2008 onwards. Would have been a complete wipeout. I remember buying OXR at $3.40, compared to the low of $0.40.

A big thanks from me K1, learnt heaps over the last few years from your posts

 

[kahuna1]

Re: The top of this cycle for ASX200, cash is king?

Hi Jet328,

Many thanks for those kind words.

It is always with amazement I look back at some of the moves and views I shared and what actually happened. You mentioned one stock OXR .... Well for me I also had a lot of pets and what was and is lost on most is that there is not only a cycle for the overall market but also the underlying shares and commodities or products they rely on. Fortunately having been around for so long I seem to have developed a tail like a cat in a room full of rocking chairs. It however is confounding and frustrating when someone expresses a view differing with the masses or supposed experts views.

Covered a few on this new site but classics and turnaround which astounded and confused many were the oil views a bull on the other site for many years even to the top suggesting it would go to US$150- but when it got there ... After being bullish realizing that either the world imploded or it went down and down to somewhere near half. Little did I know how hard or fast it would fall other than to sit on my hands as it unfolded.

Hard if not impossible to fall in love at times with stocks and for me having been around since 18 and with 27 years now in its been lessons learnt the hard way as most must. Sadly cant convince or teach this other than those who in the end decide they need advice eventually take it. Even I need and take advice and it sometimes comes in the form of a smack in the head vs my own conclusions regarding any sort of investment or asset class. Sometimes its all right to ride things up on the wave of hysteria but one ALWAYS must be looking for the exit.
Never a uranium fan and the single event which sent the spot price upwards was the flooding of a mine, Cigar Lake, which was almost ready to open and provide 8% of the world supply. Nothing like this to send prices to levels never seen before but my view longer term after this event was unchanged and we fell to sub US$50- levels by 2010. Didn't mean I could see the hysteria and what was in reality happening where hedge funds cornered the tiny spot uranium market and were able to take it 10% at each weekly auction for a period. Hopping on the elevator was fun but risky and I remember sharing a ride for 25% over the course of a month for 5 different stocks but always it was a small proportion of my funds and always recognised as risky on my own part.

Life takes us in cycles and for me its back into the managed side. After starting age 18 as a trainee dealer and ending many years latter as chief dealer of one of the worlds largest banks and then going out on my own its back inside the institutional environment for me but with a difference .... I serve my clients and no one else and whilst I enjoyed my time outside the structured side ... I never really left the institutional side having been involved with large fund managers for many years as well as one of the larger private traders on the outside.

One problem a gent covered on this why the hell would I be going back ? As reader know its pretty lonely being your own boss and only having interaction with a screen most of the day. For me my outlet was giving some general advice for free on various topics and over 10,000 pages of original content .... But in the end I have decided to go the institutional route but not really. In the end I will be working for myself and my clients as opposed to being paid by the institution itself. Life goes round in cycles. I suspect it will be a lot more rewarding than having a discussion with some nameless person via a chat site and trying to stop them buying the worst shares I have ever seen. For me being performance driven my benchmark other than performing for my clients will be beating the ASX 200 index by a decent margin over time and being involved on a personal basis with each of my clients.

Cycles and peoples lives are like individual shares and the overall market or currency or commodity cycles. For me its not full circle but back inside the institutional side but without the political stuff which I have and had little interest in even when I reached the top :}

Wish there was some formula I could impart onto people and get them to pick these cycles and overall rules to get better performance overall out of their investments and obtain their investment objectives and goals. Have devoted some time to this issue and why when I loved a share and its long term prospects say as I did SLX did I sell the lot at just under $10- only to see it a week latter at $13.50 and then take some flack only to be able to re enter the stock well under $3- during the GFC ... Same for so many from my other pet AQA to the IGO story to big boys like BHP which didn't amuse me first time at $50- or WPL near its highs and then get back into them lower.

Not suggesting we see a correction like we just saw anytime soon ... Loosing over 50% from the peak to the low on the ASX was hopefully a once in 20 year event. What I do feel very strongly about however looking forward is that we see some pretty wild swings even going forward as opposed to looking back the last 10 years. This is a very big statement given what we have seen in the last 10 years. Not thinking we see a 50% plus event again but I do suspect some of these corrections I have talked about in the past and dwelt on for many years which usually are 8-15% we see similar tops and bottoms but the scope of these corrections will not be of this order but I suspect we will see MORE larger corrections of the order of 25-33% over coming years than in the past.

Being fully invested in any asset class when it corrects 25-33% as opposed to being only partially invested or defensively invested near the peaks in shares with less volatility to the market moves basically speaks for itself. My own course over the GFC was well spelt out elsewhere but when the advice of the largest fund managers for 2008 was the market goes up 15% ... My own view and backed with my own money was we went down and down 35% if not more. As a result post GFC and two years or so on from the peak the market is down 30% ish and even my own super is UP 65% .

Sadly don't see things getting any easier as time goes on. Having been around for so long and being able to read between the lines the sad fact about some of the companies I asked for an opinion on their accounts were something at best I would call interesting. I do remember the gent who came back to me time and time again belligerent about his views on various things and he was always reminding me of my view on his favorite stock and as it hit new highs he reminded me time and time again. Sadly Babcocks is not around any more and I do hope some things I said maybe gave him pause to question things.

In the end there is no substitute for diversification. One never knows everything and diversification is ones protection against this. Other thing is there is no substitute for quality and as always my favourite stocks have not one thing going for them but 2/3/4/5 different factors and any one of them is worth 25% to the stock so if you get two three or more right your laughing. Last thing I will impart is knowing your own risk appetite and objectives. If you only have a small appetite for risk you NEVER should be holding an investment rated as speculative or highly speculative. Actually knowing this and your objectives and then building something of beauty around this is what investing is about, not much else.

Enough rambling from me back to the study :}

Take care

Mark M

 

[explod]

Re: The top of this cycle for ASX200, cash is king?

Have just had a good read through your thread K1 and like the approach very much. Too late for this ole black duck to make comment this evening but looking forward to the discussions.

 

[kahuna1]

Re: The top of this cycle for ASX200, cash is king?

Howdy,

well what a day that was. What a week and the doomsayers are out in force. Every side we seem to be getting smacked from and if its not an internal issue its an outside one and as such we closed today below the first support I had and suspected we got to on the ASX 200 and actually closed below it. From here there is fairly Major supports all the way down and the big one is not far away at all at 4,500 then another couple about 2% lower than this and whilst technicals are nice its with a grain of salt at times they should be used.

having mentioned some of the factors as to why despite zero interest rates I suspected we ended 2007 basically unchanged at 4,700 on the ASX 200 but thought we rallied over the course of the year and fell back latter in the year its interesting that some of the factors already have been wheeled out already in a steady diet of bad news.

One thing I will say is that the underlying and core reasons I suspect we actually do rally still remain very intact and alive despite many crying yet again the end of the world. Today listening to the financial news in the background one caller who is ALWAYS bearish was wheeled out time and time again predicting we went down 25% from the recent peak so in other words he was seriously calling it to go to 3,900 ish. As always I am amazed these people are given any credibility as it was the very same person when the ASX 200 hit 2,000 was predicting it went to 1,000 and when it high 3,000 it went to 1,500. The high as we know was actually 6,853 on the ASX 200 before we had the correction.

This said I cant rule out anything with 100% conviction but I can point out a few things. What has changed in recent trading days taking us back down to test these supports ? Well on any basis we had a massive rally and some consolidation either Way was in order. the only news of note I took great notice of in the last week was the US fed clearly signalled they are not about to change their interest rate policy anytime soon. conversely and absurd as it is despite anaemic growth over here the RBA is touted to act yet again. I still am of the view they made a mistake in raising so aggressively in the first place and my view given the obvious fragile nature of the markets they may even pause with next months expected rise much to the surprise of many. On the domestic front the proposed new changes to resource rents and taxes again weighing on the commodity sector for now.

Externally China as strong as 20 men again and with rapid rises in real estate and a GDP growth number out of the box well above anyones call from a few months ago has taken steps to tighten lending and is likely to act maybe on interest rates and the currency ... but again this has to be taken into perspective of the big picture and growth there was MUCH stronger.

Other negatives wheeled out over the last 10 days .... hmmm Greece and its debt but yet again they will i suspect flood the country with credit and eventually this threat will pass. USA side its clear Obama is in trouble and looking like a one term wonder and as such he cannot turn off the taps and its actually a positive for the markets rather than a negative and the debt levels are something to worry about in the future and not right now. His proposal of spanking the banks and their proprietary trading sides and taking the risk off the table will i presume when someone actually thinks about it be a positive thing not a negative thing and it will involve Banks splitting into 2/3/4 different entities but no one thought hey the sum of the parts might actually be worth more than the whole right now and the market like the lobotomised dog it is only took the negatives.

Lots of other negatives wheeled out and frankly not too much of great note.

Certainly the market will go where it has to and whilst I suspect we find a base and they actually look at the big picture rather than the negative aspects of recent events the bottom line is .... things are cheap and cheap in anyones language. Banks recently crushed around the globe are now basically guaranteed via the govts and closing prices today for some of the banks here with none of the problems of overseas and fully franked dividends of 7% or more equate to a return of 10%. Same for old telstra and whilst not a fan of them their franked dividend and I suspect limited downside even if the wheels fall off again. Similar bargains speckled around the whole index from Listed investment companies paying decent dividends and records of the dividends going back many years trading at 75% of NAV or NTA .... same for some infrastructure ones in similar straights who have sold assets of late or done issues and their debt levels are positively low vs 2 years ago .... on the larger side some great companies with great pretty much locked in outlooks and improved EPS ect ect again selling at very low multiples and also great dividends.

Maybe we get there as the pet caller of the market was going on about today but then again maybe his current brave prediction is worth about as much as it was each year for the last decade barr one.

Either way building seeming of beauty and with a decent underlying income and in this case a very good one diversified over many sectors and buying things for massive discounts is always for me the way to go.

We shall see however if they can keep up with the negatives and cause full scale panic. I suppose given China's record they do something over the weekend and if the USA is sick again tonight it will be perfect timing to enter the fray as the lemmings jump early Monday.

Have fun

Off to do more study for me ... tonight may be fun and if chian acts the old margin call selling on the open should set the fur flying. Either way not too fussed.

Cheers

Mark

 

[kahuna1]

Re: The top of this cycle for ASX200, cash is king?

Ho Ho Ho ...

And down she goes yet again.

US numbers out last night and they were actually good and for once I believe them ... US GDP is up 5.7% for the quarter and down the market goes. On one side the numbers are positive and actually show the US is recovering to some extent but there always is a problem with number and in the case of the USA and their playing with seasonal adjustments for so long and NOT reporting the real state of affairs they cloud the actual and real state of affairs over there.

Way back in mid 2007 everything was being reported as rosy and out comes a number late 2007 that on first release was reporting the US economy was growing at an astounding rate similar to what we just saw up around the 5% number ... and off we went to the new highs and highs of the cycle back then for the ASX 200 it was 6,853 but underlying these numbers was some just awful assumptions and never seen before seasonal adjustments and clearly late 2007 there was serious trouble in the financial side ... even the next number was almost insane reported as growing strongly despite the fact at the time oil was going nuts and being a very large import into the USA a negative as a drain via higher imports and it should have been a big negative as the price of oil to the consumer via petrol prices had nearly doubled at the time ... but they seasonally adjusted any inflation out of the equation and taken all the negatives off the board and despite the imminent crash of quite a few financial companies they reported the number as yet another massive positive and the end of the correction was heralded and we had one of those insane bounces early 2008 ...

We go forward now two years latter and trying to sift the real state of affairs for the US economy has become not much easier to call ... the largest single gain in 6 years in a quarter was just reported and .... its a matter of trying to work out what it really means.

Well after the buggering and never seen adjustments of 2007 and 2008 late 2008 and 2009 eventually they had to report the reality and we saw some massive downward one off adjustments to GDP and employment and other statistics which had been skewed to an insane absurdity .... so here we are ....

In short they fire bombed their results and reported the actual worst of the worst and the GDP gain has to be viewed as such off this very low base they have and whilst it is a positive and a positive we should make NO mistake about ... NONE the US is recovering and whilst the headline number looks insanely strong its merely a statistical aberration out the other way and whilst the number and underlying facts show the USA is growing and clearly growing its off the fire bombed base they ended up at mid 2009 ... so in reality the headline number looks great ... the sad fact is VERY different.

Market today is reacting I suppose to the possibility that some of the stimulus may be withdrawn over the coming year and the proposed plans to further stimulate things in the USA will not happen .... however the GDP result whilst clearly positive and clearly showing the effects of the US dollar depreciation and the stimulus taking effect is coming off a base that is at bedrock. Bottom line as the US fed said yesterday and its view is unchanged on US rates for a very good reason and that being this time around the economy lost so many jobs its going to take a long time to even approach where they were in 2003. They lost more jobs than in the last 3 recessions put together and the road to recovery is going to be a very very long one.

So as such this unemployment issue I have been prattling on about is not going to go away anytime soon and with 2-3% of the workforce just giving up and headline unemployment in the USA going from 5% to 10% ... any real recovery and sustained recovery is going to take 12 months if not even longer. They basically need 500k new jobs a month for 18 months i suspect even to get back to just the 7% unemployed which still leaves them well short of the 5-6% unemployed they were mid 2002. I just noticed they revised all the official estimates going backwards for unemployment going back to 2003 ..... UPWARDS .... the actual reported numbers from 2007 were all under 5% .... except for the Dec number which hit 5% ... so the last one two years latter added 5% unemployed and another 2-3% who had given up looking for a job.

Either way .... whilst positive, the GDP,I doubt they change a thing and the problem with economics right now is sifting through the rubbish and coming out with a real picture and whilst the GDP number is positive and good if not great positive the USA cannot and will not act to change a thing because even with numbers like this the US unemployment number at the end of 2010 is likely still to be 9.5% still unemployed vs a 5% number two year prior to this. As the numbers show strength more will re enter the workforce and the number will stubbornly stay high. The US fed is aware of this and as is the Govt and as such the knee jerk reaction of doomsayers predicting the taps might be turned off anytime soon are ... at this stage unlikely to happen and so unlikely its almost absurd given the real state of even the reported underlying numbers.

So where does this leave us ?

I suppose they test these supports some more .... is it 4,500 ? Or the next one at 4,340 ish on the ASX 200 ... in some ways this has been a correction and qualifies for a cycle and correction vs the high either way given where we will open on Monday. Given what I suspect is the real underlying picture and its factual the state of the unemployment in the USA and the actual numbers needed to get it to improve are again factual as opposed to being an opinion its a matter of when they take hold with the market and realisation that rates are not about to go up ... the economy will be allowed to grow at this pace for some time before they lift a finger and as such the fates of the companies on the index will go up ... not down ...

So yet again we are trading one way and the clear direction going the other.

Nothing new in this and we shall see where it all ends. Quite happy with some pets I have and being given a franked dividend so high and the real possibility of in the future the chance of a decent capital gain is one I quite like vs the other choices.

One thing I didn't mention about weighing our market down is the old drag from the interest rate side and there have been some quite astounding deals around for the last few months as banks and big banks are prepared to pay over the top for deposits and one bank was offering 6.8% for 12 months only to now be offering 8% for 5 years. With such a great deal being offered on one side its proving irresistible as it should to some to take the choice of decent safer returns vs investing in the market right now.

Interesting how steep our yield curve is .... but in reality if one looks over the ocean the yield curve in the USA is just as steep and 3 months near zero and 5 years 2.3% higher when one equates this back to a corporate or in this case bank over here our cash at 3.75% and likely 4% .... vs 8% for 5 years ... is an astounding deal either way being offered by one of our larger banks. Hence the lack of ability for the market to make any headway upwards when funds are being drained out of the system this way. Conversely on the other side being offered a fully franked dividend of 7/8/9% from the very same sorts of sources effectively I suspect is a much better deal longer term given the rosy outlook for earnings these companies have at present for 2010/11/12.

As per normal a tale of two cities and its heaven for value investors even now ..... and as to constructing something which will be fairly safe no matter what happens ... golly gee getting 8% for some of your assets and 7/8/9% fully franked for other parts with some good prospects for capital growth ... the pickings havn't been this good for many years even when we hit the lows last year the other side of the equation was the sad fact a lot of companies had massive question marks over the size of their debt or leverage and everyone was thinking the end of the world. Now for the decent ones they have either sold assets or paid down debt and reduced the risk to below levels seen for the past 10 years and in the meantime I think we all now realise the world doesn't end anytime soon.

Monday and next week will be interesting with yet another negative lead from the USA and some move out of China tonight or tomorrow a real possibility its a matter of picking the best overall mix and going with it. If you lock into something mixed between the two options and just sat on your behind for the next 24 months the reality is we would have to fall further than we did in sheer panic in 2009 to come out behind and as we creep lower the equation and risk reward is just getting better and better whilst in reality we went to the brink and stared over the cliff 2008 and early 2009 and where we are now in 2010 is 200 metres away from the cliff vs back then.

good luck and back to study for me

take care

Mark

 

[kahuna1]

Re: The top of this cycle for ASX200, cash is king?

despite anaemic growth over here the RBA is touted to act yet again. I still am of the view they made a mistake in raising so aggressively in the first place and my view given the obvious fragile nature of the markets they may even pause with next months expected rise much to the surprise of many.

I wonder if I get a gold star ?

Not really but it was somewhat obvious they were thinking about not acting but only one person was calling a halt today of the economists polled.

We have I suspect found some sort of a base here after the madness of yesterday when people were literally throwing money away as the bears and end of the world callers came out in force.

Goes without saying what the USA does we follow but was impressed with Obama's budget and whilst reversing the Bush tax cuts which at best were idiotic he managed to spend half of them on new programs .... which is not great but a very big step in the right direction to get the USA out of this maze.

Interesting some of the falls of late have been led by various sectors in the USA and yesterday it was the tech side which dragged the US markets down ... over here the small ords and smaller ordinaries especially the resource side which has been torched. At the other end of the market the big players with massive well diversified portfolio's have been left alone both in the rise the last 6 months and so too the retracement.

Usual rules ... none of it new.

Still remains to be seen if this is the actual base and with the scardy cats out rattling their tins around one never knows. Lots of air time to the usual bears at the moment ... and does anyone seriously think the EU can put one of its limbs to one side in the name of Greece ? I dont think so even for a short period of time and as such things are actually getting better not worse on the overall picture and likely outcome ... but in the meantime the market of late has been a one way street of selling.

Of course the usual caveats on this view and some ugly stuff out there but its an aside right now. Biggest one I suppose of a concern is the big Mutual funds now fully invested with near zero cash and if there is any serious sorts of redemptions as we saw in 2008 it will be like a millstone around the market as they dont have the cash to pay the redemptions and are forced to sell to get the cash. Some of the action over here yesterday was of this sort of things as some wishy washy investors pulled their money and there was no choice left for the fund manager other than to sell and cash up to meet his clients needs.

Nothing like this sort of action at the worst possible time and todays super-ball bounce for some was a prime example of this.

Still not out of the woods and the sentiment is very negative whilst for me .... the underlying positives far far outweigh any negative short term sentiment being touted right now. Trying to quantify this I suppose yes I am contrarian to the markets views of the consensus views but since I wasn't asked about the interest rate decision by the RBA today and what my real view was it didn't count.

So I suppose from here we take the lead from the USA and will watch the overnight action very closely from the US as the reporting season contained nothing too nasty over there and quite the opposite as did ours ... their rates are zero for 2010 I suspect and unemployment remains stubbornly high over there .... I dont see any real change to things for some time on that front. More monetary and fiscal stimulus. Over here only having spent 15% of GDP vs 65% on saving things and in a very different state to their economy with employment not having doubled and in fact moving back down .... hence I suppose the reasons behind the RBA moves in the past along with silly housing price growth and credit demand .... but they have paused for a breath of sanity.

Trying to pop an asset bubble as the RBA is trying to prick the housing side ... but using a sledge hammer is never my preferred option. Time sadly for the fiscal side to make it painful to speculate on housing and encourage building without overheating things as opposed to charging every sector of the economy for its problems and sending the currency to the moon.

Oh well ... suspect that was it for the downside either way .... but in this case one never knows since having had to listen to every misery guts on any and every media outlet for the last few days predicting the end of the world ... problem is there is always some idiot predicting a crash .... and since it happened recently it gives them sadly more credibility than they deserve especially since some have been predicting one for decades.

yes yes ... I know I called the same crash in 2008 with some scary accuracy but the difference is in 27 years of trading ... or at the time it was 24 years ... it was the one and only time I saw things that bad falling 35% in short order. Having been around in 1987 it was over in the blink of an eye ... dot com ... easy call and similar but unlike the S+P we here were not tech dominated at the time .... The S+P 500 in the USA was and the NASDAQ golly it fell 75% or so .... we are being told and by some people who are not stupid some quite interesting things right now. A broad based crash from here with zero %% rates and every goverment on the planet bending over backward to ensure the opposite happens. Dot com was a sector that went nuts as opposed to the current suggestions or those at the bottom of the cycle back in march that the world ended :}

As for now ? If you seriously think its going to happen again well all is lost. Me I am very happy to buy a company with a dividend of 9% fully franked and likely even higher as the years go by :} If everyone shaves off their eyebrows and they are prepared to sell my 9% fully franked company down 25% or 33% so I am getting 12% I will use the 9% income to buy MORE. Eventually after a few weeks, months or maybe years they will wake up:}

Stay cool

cheers

Mark

 

[jet328]

Re: The top of this cycle for ASX200, cash is king?

Thanks K1, some top posts there

Trying to pop an asset bubble as the RBA is trying to prick the housing side ... but using a sledge hammer is never my preferred option. Time sadly for the fiscal side to make it painful to speculate on housing and encourage building without overheating things as opposed to charging every sector of the economy for its problems and sending the currency to the moon.

http://www.theage.com.au/business/rba-on-housing-told-you-so-20100201-n7x7.html

Its going to be interesting to see how this is handled as the year unfolds. There is just no way any politician is going to do anything on the demand side and seriously doubt anything happens on the supply side either. If our population is going to increase 400k+ (IIRC) per year, that's a lot of new houses that need to be built each year.

jet328's solution for gutless politicians
-max LVR of 85% on PPOR or 75% if not (It's always going to be the taxpayer backing up the banks, why the average person should be insuring against someone with 30 properties at max max LVR.)
-FHOG only on new homes, existing just adds fuel to the fire and adds nothing to supply (currently should be called the first home seller handout)
-Plans made with the states based on population growth for land release/infrastructure
-negative gearing- losses can be added to cost base but not taken immediately. Current situation is just encouraging speculation, 100% dependent on selling higher to the bigger sucker

Greater chance of the UK balancing its budget though

 

[pixel]

Re: The top of this cycle for ASX200, cash is king?

G'Day Mark,

Wow, am I glad I found you here. Your thread "over there" hasn't been the same without you. Coming to think of it, it hasn't been the same once some of the more "arguamentative" members got stuck in and peddled their pet theories. But I could've lived with that if there only was a workable filter for one person's contributions. Or a watchful mod to nip nonsense in the bud (no pun intended - but on second thoughts... : )

No more rambling from me - I'll enjoy reading your take on the global economy and especially the ASX.

PS: Thanks, Bob; appreciate your e-mail

 

[Gundini]

Re: The top of this cycle for ASX200, cash is king?

Agree with the complimetary postings above Mark, I find your musings refreshing!

Must admit the GFC taught me alot about Gov intervention and stimulus, and how they can save the markets. Unfortunately, it was only half way through the recovery that I worked this out.

While I am cautious re this correction, my new knowledge tells me the Feds will keep those presses rolling.

My economics 101 suggests this is not the best road, but is 101 right?

In desperate time we need desperate measures.

Is it not ironic we got into this mess by living on borrowed money, then, our elected learned financial gurus use the same principle to get us out of this
debarcle?

One thing is for sure and predictable. Somebody has to pay, some day.

Don't know who that will be, but I will probably writing grafitti on the inside of my casket!

For now, I will just go with the flow