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

[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.

[Plan-b]

40 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! 

Nah TA is great.

[Harley]

1 hour ago, Mandalorian said:

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

It's been a long road to get to the point where I agree.  I've done so much work in this area and put real money down on most approaches.  KISS for me.  I just want total return (e.g. accumulation fund) charts to work on that are not jerked around by ex div and the like.  Financially, I behave as if I'm in retirement and can see the potential dangers in naturally thinking div investing is the most appropriate approach, especially the way things are going.

Edited April 18 by Harley

[Harley]

27 minutes ago, Mandalorian said:

Tea leaves and entrails.

So never post a chart or talk about price again!  Its's all TA.  You loves just like to define (except ya don't even do that properly) a subset and shitepost about it.  So boring and intellectually tiresome rendering this thread mere (dubious) entertainment.

Edited April 18 by Harley

[Calcutta]

[Errol]

1 hour ago, Harley said:

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.

BRLA is a good non-ETF alternative.

[Loki]

1 minute ago, Calcutta said:

I am the gole fren

[Harley]

53 minutes ago, Mandalorian said:

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.

That was not the discussion topic.  We're too far apart in process and manner to have a meaningful conversation.  If it all works for you, fine.  Let's just leave it there and go our separate ways.

Edited April 18 by Harley

[Mandalorian]

11 minutes ago, Harley said:

So never post a chart or talk about price again!  Its's all TA.  You loves just like to define (except ya don't even do that properly) a subset and shitepost about it.  So boring and intellectually tiresome rendering this thread mere (dubious) entertainment.

There's TA and there's TA.

No issue with using it to compare the returns on two assets.

My problem with TA is when people start getting into doji candles and ichiomoku clouds with a cup and handle in a rising pennant with an inverted head and shoulder pattern nonsense.

Edited April 18 by Mandalorian

[Harley]

27 minutes ago, Errol said:

BRLA is a good non-ETF alternative.

Yes.  We use ETFs to avoid the stamp and/or other fees, especially as we vary our allocations.  Plus we need the data flow.  Then there's the different risk profiles of the instruments, not that I could say one is overall better than the other, just different, although we are thinking we maybe should diversify.

Edited April 18 by Harley

[Harley]

38 minutes ago, Plan-b said:

Nah TA is great.

So not original I don't know why ya bothered.  Just silliness.  But then you loves go all grown up and are fine with this sort of thing!

Oh dear!

[Loki]

1 minute ago, Harley said:

So not original I don't know why ya bothered.  Just silliness.  But then you loves go all grown up and are fine with this sort of thing!

Oh dear!

How does this help me buy high and sell low

[Plan-b]

2 minutes ago, Harley said:

So not original I don't know why ya bothered.  Just silliness.  But then you loves go all grown up and are fine with this sort of thing!

Oh dear!

@Harley I actually do follow TA, to some extent, but never rely on it completely.