Which one do you use? Technical or fundamental analysis?

[Value Hunter]

Re: Which one do you use? Technical or fundamental analysis

VH

I'm not debating your point, don't need to - your doing a good job of that yourself as all I did was point out that the link you posted pointed to a different driver of current underperformance.

And there is also a bit of a contradiction in this post in bemoaning both the high payout ratio and the failed attempt to invest. If a company can't deploy its incremental capital to economic advantage then they should return it.

I agree with what you are saying that companies should payout cash to shareholders rather than invest it badly. I am just pointing put the fact that markets like the U.S. that combined a lower payout ratio with a high incremental return on equity have done better than ours. If you look at the return on equity of the S&P500 compared to the ASX 200 and also compare the dividend payput ratios this becomes obvious.

I think in Australia most of the very large companies should pay a high dividend because their reinvestment potential is limited (we are a small economy and most of our large companies are not internationally competitive) because they will end up squandering the funds if they have a low payout ratio.

 

[cynic]

Re: Which one do you use? Technical or fundamental analysis

Are you postulating that in the U.S. and Europe zirp and other such policies have been 100% responsible for differences in earnings per share growth of different country stock market indexs? If that is the case then how come in Europe different stock markets within the Euro currency have performed differently in terms of earnings per share growth and total shareholder returns? How come Japanese companies have done poorly in terms of increasing their earnings per share despite more than 20 years of low interest rates? Your argument does not stand up to scrutiny.

In fact much has been written or said by international value investors such as Hunter Hall, Platinum Asset Management and others about Japanese management culture (albeit slowly improving now) being the cause of persistent low returns on equity of large Japanese corporations.

I don't need to postulate it! The correlation was visible in the price action/reaction to Central Bank announcements by the major indexes and related currencies.

It seems that others may have been too busy examining eps and obsessing about muppets to notice!

 

[galumay]

Re: Which one do you use? Technical or fundamental analysis

The correlation was visible ...

Sorry to be a grammar/logic nazi, but correlation is not causation!

 

[cynic]

Re: Which one do you use? Technical or fundamental analysis

Sorry to be a grammar/logic nazi, but correlation is not causation!

Quite true!

However, causation does often give rise to correlation!

One doesn't need a genius IQ to understand what happens to currencies and stock indices when interest rates are lowered and fiat monetary supply increased!

 

[galumay]

Re: Which one do you use? Technical or fundamental analysis

Quite true!

However, causation does often give rise to correlation!

One doesn't need a genius IQ to understand what happens to currencies and stock indices when interest rates are lowered and fiat monetary supply increased!

Well, yes - but thats an entirely different argument!

If "A" causes "B" then there will be correlation between "A" and "B".

If there is correlation between "D" and "E" then on its own it tells us absolutely nothing about cause.

 

[cynic]

I don't need to postulate it! The correlation was visible in the price action/reaction to Central Bank announcements by the major indexes and related currencies.

It seems that others may have been too busy examining eps and obsessing about muppets to notice!

Galumnay, perhaps in your eagerness to highlight the distinction between correlation and causation, you may have neglected to notice my inclusion of the word "reaction" in my original post.

 

[galumay]

Galumnay, perhaps in your eagerness to highlight the distinction between correlation and causation, you may have neglected to notice my inclusion of the word "reaction" in my original post.

Truth be told Cynic, I am just a little bored on a Sunday arvo and a bit of banter fills in the time! (Its certainly nothing personal.)

So when I read this i am paraphrasing that he is asking whether you are postulating that "A" caused "B" _

Are you postulating that in the U.S. and Europe zirp and other such policies have been 100% responsible for differences in earnings per share growth of different country stock market indexs?

To which you replied,

I don't need to postulate it! The correlation was visible in the price action/reaction to Central Bank announcements by the major indexes and related currencies.

To which my slightly bored and under-occupied mind responded, the correlation that was visible does NOT mean "A" caused "B". Correlation is just correlation.

Sorry for the off topic discussion and the slightly wankerish and pedantic approach. I will put the laptop down and go back to reading my book!

 

[cynic]

Truth be told Cynic, I am just a little bored on a Sunday arvo and a bit of banter fills in the time! (Its certainly nothing personal.)

So when I read this i am paraphrasing that he is asking whether you are postulating that "A" caused "B" _



To which you replied,




To which my slightly bored and under-occupied mind responded, the correlation that was visible does NOT mean "A" caused "B". Correlation is just correlation.

Sorry for the off topic discussion and the slightly wankerish and pedantic approach. I will put the laptop down and go back to reading my book!

Thanks for clarifying your position.

Reaction is just reaction.

A word that can be readily understood to strongly imply a response to the presence of a causative influence and/or event.

Both reaction and correlation were included in the same sentence within my post for a reason.

Like yourself, I also enjoy banter.

Unlike yourself, I do not claim to be apologetic for being a grammar/logic nazi.

Do enjoy your book!

 

[Value Hunter]

Although as a long term investor I am personally not a fan of trading I do admit a lot of traders have superior portfolio/money/risk management than a lot of (a lot but not all) investors.

As an investors I try to implement the cut your losers and let your winners run strategy. I am, very good at letting winners run but not as great at cutting losers quickly enough. As a value/fundamental investor I define a losing investment as a company whose intrinsic value is falling and a winner as a company whose intrinsic value is rising (based on the premise that price follows value over the long term).

I wonder as a trading strategy, how successful would you be if:
1) You threw darts at a board to select 10 different random stocks and put an equal amount of money into each.
2)You implement a 30% trailing stop loss so that if a stock falls more than 30% from your purchase price or the most recent high after you purchased the shares you sell it.
3)You let all positions run until they hit their trailing stop loss. You then sell and put the money in the bank.
This strategy means losing stocks would not fall too much whereas a lot of winning stocks will give you a good ride before you get stopped out (if you have a tighter stop due to volatility you are unlikely to catch any multi-baggers)

I suspect that by taking full advantage of the upward long-term bias of the stock market and the positive mathematical asymmetry of returns that over time you would outperform the market.

 

[cynic]

Although as a long term investor I am personally not a fan of trading I do admit a lot of traders have superior portfolio/money/risk management than a lot of (a lot but not all) investors.

As an investors I try to implement the cut your losers and let your winners run strategy. I am, very good at letting winners run but not as great at cutting losers quickly enough. As a value/fundamental investor I define a losing investment as a company whose intrinsic value is falling and a winner as a company whose intrinsic value is rising (based on the premise that price follows value over the long term).

I wonder as a trading strategy, how successful would you be if:
1) You threw darts at a board to select 10 different random stocks and put an equal amount of money into each.
2)You implement a 30% trailing stop loss so that if a stock falls more than 30% from your purchase price or the most recent high after you purchased the shares you sell it.
3)You let all positions run until they hit their trailing stop loss. You then sell and put the money in the bank.
This strategy means losing stocks would not fall too much whereas a lot of winning stocks will give you a good ride before you get stopped out (if you have a tighter stop due to volatility you are unlikely to catch any multi-baggers)

I suspect that by taking full advantage of the upward long-term bias of the stock market and the positive mathematical asymmetry of returns that over time you would outperform the market.

Here's my perspective,others might disagree:

Given that the presence of the number zero typically arrests downward descent, and the sky is the limit, the idea of a looonnngggg term upward bias seems reasonable at first glance.

However, the reality of life, is, that most things will perish at some stage. So the true long term bias might actually be mean reversion (excluding dividends). If so, then the use of stops for risk management, may backfire by causing the trader to sell lower after having bought higher.

The trailing stop may be seen by some as a technique for cutting losers and letting winners run.

In any market where this approach might potentially work, the percentage distance chosen for the stop will usually be critical to success.

That's my verbose way of saying maybe, maybe not, and to take care when building strategies based upon assumptions.

 

[Wysiwyg]

In any market where this approach might potentially work, the percentage distance chosen for the stop will usually be critical to success.

Uh oh For every percentage loss then greater gain has to be made to compensate.



Stop placement is critical in my opinion and percentage stops are least effective due to average price range variations. People want to profit - the majority (of money) wins, so if support (long) or resistance (short sell) "zones" are broken then exit in my opinion. They are places where money agrees or disagrees. Low risk v reward.

 

[cynic]

Uh oh For every percentage loss then greater gain has to be made to compensate.

View attachment 66896

Stop placement is critical in my opinion and percentage stops are least effective due to average price range variations. People want to profit - the majority (of money) wins, so if support (long) or resistance (short sell) "zones" are broken then exit in my opinion. They are places where money agrees or disagrees. Low risk v reward.

In this instance my inclusion of the word "percentage" was influenced by the post to which I was responding, however I do recognise that, in so doing, the intended meaning of that paragraph has been undermined.

Thankyou for bringing this oversight to my attention.

 

[Wysiwyg]

In this instance my inclusion of the word "percentage" was influenced by the post to which I was responding, however I do recognise that, in so doing, the intended meaning of that paragraph has been undermined.

Thankyou for bringing this oversight to my attention.

That is fine mate. I have a strong natural lean toward black and white perspective. This helps me with the modern day thieves that are more word orientated. No apologies for digressing.