Credit deflation and the reflation cycle to come (part 9)

[Mandalorian]

2 minutes ago, Mandalorian said:

 

The graphs I post are total return, so they include dividends.

This graph is share prices alone.  Colour code changed on here.

[honkydonkey]

47 minutes ago, Bobthebuilder said:

I would like to see a graph of say the SP500 next to bats over a 5 year period with the divis reinvested, rather than get your capital back every quarter just add to the pot as a tracker does.

Looks like this. sp500 is orange line and that is a BATS chart dividend adjusted

BATS has been an awful trade for 8 years. But that's not necessarily how it's going to be going forward.

Edited April 18 by honkydonkey

[Castlevania]

3 hours ago, DurhamBorn said:

 

I have never had any interest in tracking an index.Its just not for me.

 

This is the thing. I couldn’t invest in a tracker because as a company goes up in value you buy more. I then look at the constituents and you’re buying stuff which I really wouldn’t want to touch. You’re literally buying more as a percentage when they’re expensive with no thought. I don’t like that. I like an element of control. 

[Calcutta]

The s&p is a growth index, the big companies are growth companies, they don't pay that much in dividends as they don't pay out their profits they invest it in growth.

If that counts for the whole index I don't know, don't care, buying an s&p tracker or qqq is betting that tech companies will continue to grow successfully.

Buying shares in a large tobacco company is betting the vaping will take off some more.

Buying shares in Vodafone is betting the company will sort their debts out and governments will force tech companies to contribute to the costs of using their networks.

Commodities run in cycles, commodity mining companies go up and down in value, they're a swing trade essentially. If you think a company or it's underlying commodity will go up in price then you can have a bet on that.

If you think fiat currency will collapse then perhaps some gold might be a good bet, but then you've got to find somewhere to hide it or sell it should shtf.

Dividends are profits. Companies exist to make money. Buy the items you want for whatever reasons you want and there ya go.

This is getting fucking boring now.

 

[Loki]

4 minutes ago, Calcutta said:

The s&p is a growth index, the big companies are growth companies, they don't pay that much in dividends as they don't pay out their profits they invest it in growth.

If that counts for the whole index I don't know, don't care, buying an s&p tracker or qqq is betting that tech companies will continue to grow successfully.

Buying shares in a large tobacco company is betting the vaping will take off some more.

Buying shares in Vodafone is betting the company will sort their debts out and governments will force tech companies to contribute to the costs of using their networks.

Commodities run in cycles, commodity mining companies go up and down in value, they're a swing trade essentially. If you think a company or it's underlying commodity will go up in price then you can have a bet on that.

If you think fiat currency will collapse then perhaps some gold might be a good bet, but then you've got to find somewhere to hide it or sell it should shtf.

Dividends are profits. Companies exist to make money. Buy the items you want for whatever reasons you want and there ya go.

This is getting fucking boring now.

 

My boring PMs are still sat there being boring and such

[Harley]

1 hour ago, Pip321 said:

That’s interesting that you look at fund size, something I hadn’t really considered.

I hold Blackrock Gold and that’s £800m…no problemo.

However I was looking to add Abdn Latin America when it ladders down a bit first. That fund is £85m. I will factor this in….maybe reduce my intended holding. 

https://www.fundslibrary.co.uk/FundsLibrary.BrandedTools/Pru/DataOnline/HtmlFactsheet/9bb44328-81e5-4f21-a4d6-0c510c0f9428?displayThirdPartyFactsheetLink=True&fundType=retirement_account.pru#portfolio-analysis

 

We look (filter for) at other factors too like whether its based on a full replication, sampling, or swaps.  Also the age (over 5 years) and hedging status and currency options.  I'm a broken record but JustETF really is the go to for ETFs, subbed or not.  So many questions, etc posted here have ready answers and so very much more.  The more time you spend with it the more you get out of it.  I'm still finding new things.  I'm happy to offer support.

PS:  There are only four LA ETFs and they are all classed as EM.  It's quite a narrow area and currency controls, market access, etc for the providers to deal with.  There are however 81 EM ETFs which include various weightings to LA.

Edited April 18 by Harley

[Castlevania]

 

3 hours ago, Mandalorian said:

But again.  That £3bn and £5bn a year belongs to shareholders and are already in the share price.  Each time that £5bn is paid out, the market cap would fall by £5bn in the stagnating market.

 

We agree that the UK market is dying.  Lots of fund managers/business leaders are agitating about it but they are pissing in the wind.  Under Labour, the British stock market will only get worse.  People like you and I are the enemy....

How is that different to Facebook or Google spending billions in buy backs to stop their share count increasing after employees cash in their stock options?

 

Edited April 18 by Castlevania

[Mandalorian]

1 hour ago, honkydonkey said:

Looks like this. sp500 is orange line and that is a BATS chart dividend adjusted

BATS has been an awful trade for 8 years. But that's not necessarily how it's going to be going forward.

That's nice.  What software/website did you use for the chart?  The HL one I use only goes back 5 years.

[Harley]

1 hour ago, Mandalorian said:

This graph is share prices alone.  Colour code changed on here.

QED!

[Castlevania]

28 minutes ago, Calcutta said:

The s&p is a growth index, the big companies are growth companies, they don't pay that much in dividends as they don't pay out their profits they invest it in growth.

 

 

Or on share buybacks.

[Harley]

1 hour ago, honkydonkey said:

Looks like this. sp500 is orange line and that is a BATS chart dividend adjusted

BATS has been an awful trade for 8 years. But that's not necessarily how it's going to be going forward.

That chart mixes the currencies.  Click top right and you can rebase all in GBP or whatever.

[Plan-b]

3 minutes ago, Mandalorian said:

That's nice.  What software/website did you use for the chart?  The HL one I use only goes back 5 years.

That's Trading View

[Harley]

1 hour ago, honkydonkey said:

Looks like this. sp500 is orange line and that is a BATS chart dividend adjusted

BATS has been an awful trade for 8 years. But that's not necessarily how it's going to be going forward.

Yep, best to stay away from technical analysis with these charts (TA is the study of price)!  Folk are anti TA here! 

Edited April 18 by Harley

[Mandalorian]

29 minutes ago, Calcutta said:

 buying an s&p tracker or qqq is betting that tech companies will continue to grow successfully.
 

 

Except it's not.  There are 493 other companies in there that will likely continue to grow.

Yes.  The magnificent 7 are something like 25% of the index but there is plenty more in there.  And don't forget the magnificent 7 weren't always big but by owning the index, you purchased them much much earlier and much much cheaper than they are now and benefitted from that stellar growth.  What are the odds of the average punter doing that if they stock pick?

[Calcutta]

5 minutes ago, Mandalorian said:

Except it's not.  There are 493 other companies in there that will likely continue to grow.

Yes.  The magnificent 7 are something like 25% of the index but there is plenty more in there.  And don't forget the magnificent 7 weren't always big but by owning the index, you purchased them much much earlier and much much cheaper than they are now and benefitted from that stellar growth.  What are the odds of the average punter doing that if they stock pick?

I liked it better with the frog pictures.

[honkydonkey]

12 minutes ago, Harley said:

That chart mixes the currencies.  Click top right and you can rebase all in GBP or whatever.

And bottom right ADJ will adjust for dividends

[Harley]

I think we're highlighting the difference between (the real competent!) professional money managers and retail.  This is a huge subject/ball of wax and several posts are only looking at one thing at a time.  Like treating a stock the same as a collective in some of the discussions.  

Edited April 18 by Harley

[Mandalorian]

10 minutes ago, Castlevania said:

 

How is that different to Facebook or Google spending billions in buy backs to stop their share count increasing after employees cash in their stock options?

 

Buybacks increase EPS so that each share is then worth more (though not immediately) - profits divided by a smaller number of shares = a higher profit per share in the next accounting period, which, all being equal should lead to a future (but not guaranteed) increase in the share price.  The shareholders' money spent goes to those who sell their shares - the money leaves the company balance sheet and so the company is worth less than had they not bothered.  it's very much a jam tomorrow strategy for shareholders in my view.

Dividends on the other hand go to those who hold the shares, but decrease the balance sheet by the amount of the dividend paid.  So the share price falls by a similar amount once the dividend is declared.

So to give an answer to your question, they have the same initial effect:  both buybacks and dividends decrease the current value of the company for shareholders but buybacks make next year's EPS higher.  There's your jam tomorrow.

The main factor behind buybacks seems to be that executives' bonuses are often tied to increasing EPS so using company funds to increase EPS gets them that bonus.  It also has the advantage of enriching the crony institutions who sell mass quantities of their shares.  Sod what effect any of this has on the shareholder.

To be honest, I find both buybacks and dividends irritating.

[Mandalorian]

19 minutes ago, Harley said:

Yep, best to stay away from technical analysis with these charts (TA is the study of price)!  Folk are anti TA here! 

Tea leaves and entrails.

9 minutes ago, Calcutta said:

I liked it better with the frog pictures.

[Castlevania]

6 minutes ago, Mandalorian said:

Buybacks increase EPS so that each share is then worth more (though not immediately) - profits divided by a smaller number of shares = a higher profit per share in the next accounting period, which, all being equal should lead to a future (but not guaranteed) increase in the share price.  The shareholders' money spent goes to those who sell their shares - the money leaves the company balance sheet and so the company is worth less than had they not bothered.  it's very much a jam tomorrow strategy for shareholders in my view.

Dividends on the other hand go to those who hold the shares, but decrease the balance sheet by the amount of the dividend paid.  So the share price falls by a similar amount once the dividend is declared.

So to give an answer to your question, they have the same initial effect:  both buybacks and dividends decrease the current value of the company for shareholders but buybacks make next year's EPS higher.  There's your jam tomorrow.

The main factor behind buybacks seems to be that executives' bonuses are often tied to increasing EPS so using company funds to increase EPS gets them that bonus.  It also has the advantage of enriching the crony institutions who sell mass quantities of their shares.  Sod what effect any of this has on the shareholder.

To be honest, I find both buybacks and dividends irritating.

First sentence is completely wrong. They’re buying back exactly the amount to cover stock options of their employees. There’s no change to EPS from a lower denominator.

Edited April 18 by Castlevania

[Mandalorian]

7 minutes ago, Harley said:

I think we're highlighting the difference between (the real competent!) professional money managers and retail.  This is a huge subject/ball of wax and several posts are only looking at one thing at a time.  Like treating a stock the same as a collective in some of the discussions.

Is true.  However, your retail investor has a choice of whether to buy an individual stock or some kind of collective vehicle.  So comparing the outcome of sticking you money in one of the two is valid.

[Loki]

12 minutes ago, Calcutta said:

I liked it better with the frog pictures.

 

[Mandalorian]

5 minutes ago, Castlevania said:

First sentence is completely wrong. They’re buying back exactly the amount to cover stock options of their employees.

Didn't spot the specifics of the stock options in the question.  In that situation then the shares don't get cancelled, just bought and then distributed to the employees instead.  More insider cronyism.  Still something I find irritating.

What I wrote is accurate for a normal buyback though.

2 minutes ago, Loki said:

 

David Hasselhoff or Margaret Thatcher?

Edited April 18 by Mandalorian

[Loki]

Just now, Mandalorian said:

David Hasselhoff or Margaret Thatcher?

 

Show some respect

[CannonFodder]

3 hours ago, Axeman123 said:

AIUI purely the fee, as you say. Any ETF with sub £100M AUM is hanging by a thread just because of the profitability tipping point.

Hmm, that's given me some thought. A lot of the uranium and lithium ETFs are only a few million. Might need to rethink my approach. Getting wound up without notice isn't good.