I was thinking that too - but effectively you are just tilting towards smaller companies, so this is not much different to buying something like VSO ?
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I was thinking that too - but effectively you are just tilting towards smaller companies, so this is not much different to buying something like VSO ?
First 3 drive Nominal GDP – if anything is missing it would be split between capital & Labour because that pretty much translates GDP growth to earnings growth. Then there are equity distributions and dilutions components to determine EPS growth. 4 is amongst the technical’s that feed into the earnings multiple along with other psychological points no doubt. My view is that the earnings multiples are cyclical. 5. I’m not sure if the index rebalancing aspect adds (or subtracts) anything.
My crystal ball is stuffed so I’ll defer to your crystal here.
I don't have faith in the direction of the line either – nor do I have I have faith that it will end. So I’m stuck with reacting to what I see, and from my long term perspective things aint broke yet.
Not for a second suggesting people should not chase alpha – I certainly try to as a stock picker. Not forgetting only 50% (less costs) of money chasing alpha can ever achieve it and contrary to popular forum opinion it takes works.
I’m really not trying to make a prediction here or convince anyone – just a thread to put some perhaps contrary to popular opinion at this time, bullish perspectives.
But is the inevitable view ever the profitable view? Generally inevitable is priced in already. Its when inevitable doesn't happen that ........
Well its one of those thing that looks inevitable to me , I would suggest its not the case out there in the herd , me being an independent thinker and all . Nothings impossible but only the probable is my concern , opinions are really of concern to those that hold them for they are the ones that profit or loss from them , externally its just noise . I like to support my opinions with some real facts and I have done so , as inputs change so will my thoughts for i'm not in love with an idea if the inputs change .... markets are dynamic and as participants in its shifting of wealth so must we be so ....
Markets are rarely linear
So simple when it is broken into the main components. Earnings, and the multiple on those earnings.
Take the constituents from 1910 of whatever your first chart is actually charting (what it is in 1910?) and I bet you the returns won't be nearly as good. At a guess I'd say 90% of the ASX top 20 didn't exist back in 1910. And they'd never be included if there is no rebalancing.
Still something I am struggling with... i.e. taking the long term perspective. It's very hard. I can only have a portion on my money on this. I am reasonably comfortable with not getting very rich from investing for the long term, but I am very uncomfortable with having lots of exposure to the market when it appears to breakdown in the short - medium term.
Hi SKC
Just to take this a little further. Accept everything you say about the rebalancing producing a higher return then a buy and hold of whatever made up the index in 1910 - you would probably be left tracking nothing today.
But I'm not sure that is the point for me. Its more along the lines is the N/E depicted by the index aided by the selection process of the constituents. ie is it giving me a picture of the underlying environment or is capitalisation as a stock selection process adding (detracting) from the picture.
Across the entire market companies come and go - I think the XAO covers a fair proportion of the market movement ~95% of capitalisation at the moment, not sure if it has always been that high. I,m not sure that what it doesn't capture - the 5% where companies are born and die or just plain small would alter the picture significantly and if they alter it at all what's the net effect.
If 4500 has significance as support then too perhaps does a regression channel of the data. Not forgetting we are in the long term investing part of the forum, the issues around breadth,and index make up and how CAPE type valuations are fairly supportive – I think there is some justification for a long term investor to be paying attention for buying opportunities. IF we end up at the bottom of that channel in 30years we get a compound annual capital growth return of 5% at the regression extension its 6.3% and at the top its 8%. Add to that the current grossed up market dividend yield of ~6%. What’s your cash rusting at?
Of course the channel may not be valid in the future but that can be dealt with if it happens.
Now if you’re not an investor and instead your available money is actually tied up as working capital in a trading business then forget the long term. Or if your financial circumstances dictate you shouldn’t be taking volatility risk, forget the long term but otherwise you have to be careful that you don’t lose perspective of the big picture and let near term noise turn you into a dick for a tick (note for self).
Given that Super should be a 40-60+ year investment if you are blessed with good health and possibly generational if your any good at this game then perhaps given cash's long term track record (worse than bills) maybe you could do with a little more optimism
LOL I am not a pessimist either , I've been proactively managing my super and in 2015 I am 15% outperformance on the average fund , I cashed at 6000 , was in a bear etf for a while (not long enough) currently 100% cash . I like clichés and here's another one , very apt once again ...
found some data on global earnings/ earnings multiples ... XJO is not alone
So you cashed out at the very top and shorted the market. Congrats if true!
Cashed out the last of my stock holdings , I wasn't fully invested at 6000 , if I had been my outperformance of av fund would be closer to 30% , nevertheless I'm pretty satisfied , you will never get every % on the table ...
FWIW selling in April/May on high forward earnings will never backfire on you ....
Yep, I suspected as much.
So what are you trying to say on this thread? A long term optimistic stance is not realistic because YOU have a short term bearish opinion based on analysts forward earning estimates? Or am I missing your point?
Sorry i'm rocking your Bullish boat , in 30 years you will be fine which is great if you like sitting on your hands , I will cease and desist , I actually thought I was adding relevant information that might help explain recent market movements and possibly give some insight where it actually might head and where a value spot to invest may be .
I apologize ..... I will not interfere again
Hmm I do like sitting on my hands......
Not rocking my boat. Your 'opinion' is as welcome as the next persons, just trying to understand what you meant by the realist cliché.
My last entry in ' here ' Hope it helps
http://philosiblog.com/2012/11/23/t...ts-it-to-change-the-leader-adjusts-the-sails/
" I am responsible for what I spoke, but not for what you understood. "
You do answer in riddles. But Hey I think I've worked it out. If I just share your opinions I too can be a realist. I sooooo want to be a realist - maybe one day I could even become a critical thinker too.
twit!
Yep - time for a holiday
Merry Christmas everybody.
Hi Fraa
Flipping the question
Market Pricing.
The index price channel doesn’t hold much significance to me – the channel moves depending on where you start the chart. Though a sustained excursion outside a channel starting when the A$ was floated would have me taking notice so would a sustained level below 2011 Lows.
Earnings.
I take much more notice of earnings – particularly the trend of earnings rather than just current or forecast earnings. I’m not too much concerned with the inflation component no matter what it does – because my measure of investment success is purchasing power (or what my real return is)
If the long term productivity component fell through the floor I would be bearish. I don’t see that happening – in fact I see some innovation starting to slowly come back into our economy after the mining boom and some dud leadership.
If the population component fell through the floor because of war, disease etc I would be bearish.
If the division of profits swung massively away from capital because we got a very socialist/communist style government I would be bearish.
If there was a major fiat monetary crisis AND we reverted to a physical monetary standard I would be bearish.
A property downturn wouldn’t really turn me bearish long term – we’ve had them, they are expected.
Between 1931 & 1951 property value to GDP more than halved. Peak to peak or trough to trough capital growth on the XAO over the same period was around 5%pa. plus whatever dividends were at the time. Peak (1929) to trough (1952) i.e. worst timing you could have managed was still 2.5%pa capital plus dividends.
I’ve avoided banks for some time, probably to my detriment because I think a property valuation downturn will hurt their profitability but I don’t really see a high probability of an economy destroying bust from the banks exploding under a property downturn. In fact the banks more vigorously looking for growth outside of low productivity existing residential property may be good for the economy as it would help facilitate some more productive risk taking.
The biggest thing that would turn me bearish is earnings above long term averages and high earnings multiples based on those elevated earning levels.
Observation not prediction of the long run economy is what would send me bearish.
Sorry no graphs to back up anything here – don’t have the data with me.
Cheers and Merry Christmas
I was thinking that too - but effectively you are just tilting towards smaller companies, so this is not much different to buying something like VSO ?
First 3 drive Nominal GDP – if anything is missing it would be split between capital & Labour because that pretty much translates GDP growth to earnings growth. Then there are equity distributions and dilutions components to determine EPS growth. 4 is amongst the technical’s that feed into the earnings multiple along with other psychological points no doubt. My view is that the earnings multiples are cyclical. 5. I’m not sure if the index rebalancing aspect adds (or subtracts) anything.
My crystal ball is stuffed so I’ll defer to your crystal here.
I don't have faith in the direction of the line either – nor do I have I have faith that it will end. So I’m stuck with reacting to what I see, and from my long term perspective things aint broke yet.
Not for a second suggesting people should not chase alpha – I certainly try to as a stock picker. Not forgetting only 50% (less costs) of money chasing alpha can ever achieve it and contrary to popular forum opinion it takes works.
I’m really not trying to make a prediction here or convince anyone – just a thread to put some perhaps contrary to popular opinion at this time, bullish perspectives.
But is the inevitable view ever the profitable view? Generally inevitable is priced in already. Its when inevitable doesn't happen that ........
True That.
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Well its one of those thing that looks inevitable to me , I would suggest its not the case out there in the herd , me being an independent thinker and all . Nothings impossible but only the probable is my concern , opinions are really of concern to those that hold them for they are the ones that profit or loss from them , externally its just noise . I like to support my opinions with some real facts and I have done so , as inputs change so will my thoughts for i'm not in love with an idea if the inputs change .... markets are dynamic and as participants in its shifting of wealth so must we be so ....
Markets are rarely linear
skc
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So simple when it is broken into the main components. Earnings, and the multiple on those earnings.
Take the constituents from 1910 of whatever your first chart is actually charting (what it is in 1910?) and I bet you the returns won't be nearly as good. At a guess I'd say 90% of the ASX top 20 didn't exist back in 1910. And they'd never be included if there is no rebalancing.
Still something I am struggling with... i.e. taking the long term perspective. It's very hard. I can only have a portion on my money on this. I am reasonably comfortable with not getting very rich from investing for the long term, but I am very uncomfortable with having lots of exposure to the market when it appears to breakdown in the short - medium term.
Hi SKC
Just to take this a little further. Accept everything you say about the rebalancing producing a higher return then a buy and hold of whatever made up the index in 1910 - you would probably be left tracking nothing today.
But I'm not sure that is the point for me. Its more along the lines is the N/E depicted by the index aided by the selection process of the constituents. ie is it giving me a picture of the underlying environment or is capitalisation as a stock selection process adding (detracting) from the picture.
Across the entire market companies come and go - I think the XAO covers a fair proportion of the market movement ~95% of capitalisation at the moment, not sure if it has always been that high. I,m not sure that what it doesn't capture - the 5% where companies are born and die or just plain small would alter the picture significantly and if they alter it at all what's the net effect.
Ok so here’s the 3 decades of data on a log scale.
![](data:image/svg+xml;charset=utf-8,<svg height="50px" width="100px" xmlns="http://www.w3.org/2000/svg" version="1.1"/>)
If 4500 has significance as support then too perhaps does a regression channel of the data. Not forgetting we are in the long term investing part of the forum, the issues around breadth,and index make up and how CAPE type valuations are fairly supportive – I think there is some justification for a long term investor to be paying attention for buying opportunities. IF we end up at the bottom of that channel in 30years we get a compound annual capital growth return of 5% at the regression extension its 6.3% and at the top its 8%. Add to that the current grossed up market dividend yield of ~6%. What’s your cash rusting at?
Of course the channel may not be valid in the future but that can be dealt with if it happens.
Now if you’re not an investor and instead your available money is actually tied up as working capital in a trading business then forget the long term. Or if your financial circumstances dictate you shouldn’t be taking volatility risk, forget the long term but otherwise you have to be careful that you don’t lose perspective of the big picture and let near term noise turn you into a dick for a tick (note for self).
Given that Super should be a 40-60+ year investment if you are blessed with good health and possibly generational if your any good at this game then perhaps given cash's long term track record (worse than bills) maybe you could do with a little more optimism
![](data:image/svg+xml;charset=utf-8,<svg height="68px" width="100px" xmlns="http://www.w3.org/2000/svg" version="1.1"/>)
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LOL I am not a pessimist either , I've been proactively managing my super and in 2015 I am 15% outperformance on the average fund , I cashed at 6000 , was in a bear etf for a while (not long enough) currently 100% cash . I like clichés and here's another one , very apt once again ...
![](data:image/svg+xml;charset=utf-8,<svg height="65px" width="100px" xmlns="http://www.w3.org/2000/svg" version="1.1"/>)
found some data on global earnings/ earnings multiples ... XJO is not alone
![](data:image/svg+xml;charset=utf-8,<svg height="67px" width="100px" xmlns="http://www.w3.org/2000/svg" version="1.1"/>)
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So you cashed out at the very top and shorted the market. Congrats if true!
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Cashed out the last of my stock holdings , I wasn't fully invested at 6000 , if I had been my outperformance of av fund would be closer to 30% , nevertheless I'm pretty satisfied , you will never get every % on the table ...
FWIW selling in April/May on high forward earnings will never backfire on you ....
Yep, I suspected as much.
So what are you trying to say on this thread? A long term optimistic stance is not realistic because YOU have a short term bearish opinion based on analysts forward earning estimates? Or am I missing your point?
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Sorry i'm rocking your Bullish boat , in 30 years you will be fine which is great if you like sitting on your hands , I will cease and desist , I actually thought I was adding relevant information that might help explain recent market movements and possibly give some insight where it actually might head and where a value spot to invest may be .
I apologize ..... I will not interfere again
Hmm I do like sitting on my hands......
Not rocking my boat. Your 'opinion' is as welcome as the next persons, just trying to understand what you meant by the realist cliché.
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My last entry in ' here ' Hope it helps
http://philosiblog.com/2012/11/23/t...ts-it-to-change-the-leader-adjusts-the-sails/
" I am responsible for what I spoke, but not for what you understood. "
You do answer in riddles. But Hey I think I've worked it out. If I just share your opinions I too can be a realist. I sooooo want to be a realist - maybe one day I could even become a critical thinker too.
twit!
Yep - time for a holiday
Merry Christmas everybody.
Hi Craft,
If you do not mind, lets flip the question around - say in the next year some new information (fundamental or technical) becomes available.
Hypothetically, what would the information/news have to be for you to have no view or become bearish long term on the XAO ?
i.e. if the XAO wanders outside of the channel you drew for example ? (i know the channel was not in your first post, just an example), or deviates from the long term trend you drew ?
or if we have a severe property downturn that hits the banks hard ?
Not asking for specifics etc - just wondering how severe the news will have to be to convince you that "things really are different this time".
Thanks
If you do not mind, lets flip the question around - say in the next year some new information (fundamental or technical) becomes available.
Hypothetically, what would the information/news have to be for you to have no view or become bearish long term on the XAO ?
i.e. if the XAO wanders outside of the channel you drew for example ? (i know the channel was not in your first post, just an example), or deviates from the long term trend you drew ?
or if we have a severe property downturn that hits the banks hard ?
Not asking for specifics etc - just wondering how severe the news will have to be to convince you that "things really are different this time".
Thanks
Hi Fraa
Flipping the question
Market Pricing.
The index price channel doesn’t hold much significance to me – the channel moves depending on where you start the chart. Though a sustained excursion outside a channel starting when the A$ was floated would have me taking notice so would a sustained level below 2011 Lows.
Earnings.
I take much more notice of earnings – particularly the trend of earnings rather than just current or forecast earnings. I’m not too much concerned with the inflation component no matter what it does – because my measure of investment success is purchasing power (or what my real return is)
If the long term productivity component fell through the floor I would be bearish. I don’t see that happening – in fact I see some innovation starting to slowly come back into our economy after the mining boom and some dud leadership.
If the population component fell through the floor because of war, disease etc I would be bearish.
If the division of profits swung massively away from capital because we got a very socialist/communist style government I would be bearish.
If there was a major fiat monetary crisis AND we reverted to a physical monetary standard I would be bearish.
A property downturn wouldn’t really turn me bearish long term – we’ve had them, they are expected.
Between 1931 & 1951 property value to GDP more than halved. Peak to peak or trough to trough capital growth on the XAO over the same period was around 5%pa. plus whatever dividends were at the time. Peak (1929) to trough (1952) i.e. worst timing you could have managed was still 2.5%pa capital plus dividends.
I’ve avoided banks for some time, probably to my detriment because I think a property valuation downturn will hurt their profitability but I don’t really see a high probability of an economy destroying bust from the banks exploding under a property downturn. In fact the banks more vigorously looking for growth outside of low productivity existing residential property may be good for the economy as it would help facilitate some more productive risk taking.
The biggest thing that would turn me bearish is earnings above long term averages and high earnings multiples based on those elevated earning levels.
Observation not prediction of the long run economy is what would send me bearish.
Sorry no graphs to back up anything here – don’t have the data with me.
Cheers and Merry Christmas
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Good post Craft. Some food for thought.
Reading the business section...tends to make you obsessed with mining/energy, or property. But they are only components of our economy. On the whole things aren't so bad.
Turnbull has injected some positivity too, which is refreshing.
Reading the business section...tends to make you obsessed with mining/energy, or property. But they are only components of our economy. On the whole things aren't so bad.
Turnbull has injected some positivity too, which is refreshing.
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Good opinion piece in the AFR today by Martin Wolf. Be frightened of wars, inflation and financial crisis. Everything else is just noise in the long run. Personally I'm more worried about ISIS than financial crisis, and I'm not that worried about ISIS. And the beat goes on...
Read more: http://www.afr.com/opinion/why-economic-disaster-is-an-unlikely-event-20160105-gm03iq#ixzz3wQTLqjVo
Read more: http://www.afr.com/opinion/why-economic-disaster-is-an-unlikely-event-20160105-gm03iq#ixzz3wQTLqjVo