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

[Harley]

5 minutes ago, Loki said:

How does this help me buy high and sell low

I don't think any form of studying price will help you there as you probably really shouldn't be doing that!

[Harley]

23 minutes ago, Plan-b said:

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

Sorry, I'm physically tired and a bit on the spectrum or whatever to keep up with the thread twists and turns!  Pizza ovens I get, anything closer and......!  Plus I have invested in these topics (the whole integrated thing, not just TA) from Uni onwards.

Everything in moderation.  It's just people saying TA is bad is like saying food is bad.  There's a far more grown up, nuanced, and beneficial conversation to be had.  But it never happens. 

And I reckon that's 'cause people don't want the brain ache or don't have the required temperament (Mr Market sucks in all types!).  Fine if they're just playing with some play money, else FFS, be professional or hire one.

The most addictive part about studying the markets is to realise it's really about the study of human frailties, as we have seen tonight.  Truth is it's a temptress of a Gordian knot.

The lucky are the ones who avoid the rocks long enough to drop their delusions and give themselves up to the mere probabilistic series of events it is.

Edited April 18 by Harley

[Loki]

2 minutes ago, Harley said:

be professional or hire one.

In my line of work I can't get away with saying "LOL ur building might catch fire LMAO" but anything financial seems to be very much "No refunds" based.  Nice work if you can get it

I might as well just do it myself, and hold myself accountable - that's one more person than I can hold accountable with a pro

[Harley]

56 minutes ago, Loki said:

In my line of work I can't get away with saying "LOL ur building might catch fire LMAO" but anything financial seems to be very much "No refunds" based.  Nice work if you can get it

I might as well just do it myself, and hold myself accountable - that's one more person than I can hold accountable with a pro

Talking to a friend today who's been to see several financial advisors.  Very interested to hear what they had to say.  There clearly was a benefit in those who knew the ins and outs of the rules, possibilities, etc for those where such stuff was relevant.

None of the tax stuff was new to me and the rest (e.g. planning) was not rocket science but probably would be to many others so fair enough.  But then they are not fund managers, traders, etc so that's another lot.  Nice if you've got most of the rare skill set and unique opportunity to do the full end to end.  I wouldn't want to be a standard FA though.

There is a real danger with DIY in not knowing what you should know on a wide range of topics.  Maybe though things are pretty straightforward for most folk, although reading the pension pages in The Telegraph had me a tad worried (both the mistakes people apparently make, and the mistakes the journalists made!).

Edited April 18 by Harley

[wherebee]

45 minutes ago, Harley said:

The most addictive part about studying the markets is to realise it's really about the study of human frailties, as we have seen tonight.  Truth is it's a temptress of a Gordian knot.

 

This.

The only way, in my view, that retail investors can make money is by spotting the delusion of crowds and betting against it at the right point.  professional technical analysis of companies, and speed of trading, along with insider dealing, means that value investing is a bum rush if you're not on the inside with blackrock, JP morgan, etc.  

For me, that means investing in 'hated' areas, as @DurhamBorn calls them, is the only way to make money which will outperform a tracker.  A tracker is fine if you don't want to have your own views on reality, and many don't - in which case, @Mandalorian is on the money that drip feeding into trackers is going to make you more over the long term than any fancy technical analysis or company deep dives.

And sometimes despite being right about hated stocks, you'll still be fucked over by the system - POLY for example, I was right on the long term value, but was utterly fucked over by the broker and regulatory system.

My investment approach is still: find something people hate because they are unthinking sheep (oil/coal/etc), find it as a price which makes sense today, and wait for reality to come knocking.  Uranium is one such example - toxic here in Australia, many superfunds won't invest in Australian Uranium miners, been a cross party agreement on no nuclear for 20+ years.... and this year the liberals said nuclear is the future.  I've already doubled my holdings on Uranium miners for free by trading in and out, and in time it will, I think, outperform any tracker.

TL:DR - bet against the idiots who believe the politicians and media

[montecristo]

1 hour ago, Harley said:

Talking to a friend today who's been to see several financial advisors.  Very interested to hear what they had to say.  There clearly was a benefit in those who knew the ins and outs of the rules, possibilities, etc for those where such stuff was relevant.

None of the tax stuff was new to me and the rest (e.g. planning) was not rocket science but probably would be to many others so fair enough.  But then they are not fund managers, traders, etc so that's another lot.  Nice if you've got most of the rare skill set and unique opportunity to do the full end to end.  I wouldn't want to be a standard FA though.

There is a real danger with DIY in not knowing what you should know on a wide range of topics.  Maybe though things are pretty straightforward for most folk, although reading the pension pages in The Telegraph had me a tad worried (both the mistakes people apparently make, and the mistakes the journalists made!).

How much would that have cost?  If your friend just stuck his money in a S&P ETF  he would be quid's up and saved financial advice fees. 

 

[leonardratso]

games back on, couldnt sleep so had a quick look online.

[Lightscribe]

3 hours ago, wherebee said:

My investment approach is still: find something people hate because they are unthinking sheep (oil/coal/etc), find it as a price which makes sense today, and wait for reality to come knocking.  Uranium is one such example - toxic here in Australia, many superfunds won't invest in Australian Uranium miners, been a cross party agreement on no nuclear for 20+ years.... and this year the liberals said nuclear is the future.  I've already doubled my holdings on Uranium miners for free by trading in and out, and in time it will, I think, outperform any tracker.

TL:DR - bet against the idiots who believe the politicians and media

Case in point, simple really, cylindricals are cylindricals. I’ve been in passive 100% equity tracker for more than a decade when QE was abound and ever lasting lower interest rates were being cut. Where else would you be? Remember the commodities trader scene in the self help therapy group in the Big Short. Ever cheaper money and debt made commodities irrelevant.

But these last 4 years were entirely different. I’ve been in postash, oil, tobacco, gas, coal, energy companies, gold miners and out again. Missed out on tops like postash but 100%ers were enough for me. Inflation comes in waves so move with them accordingly. I’ve been very heavy in PM miners since the end of last year, hit some bottoms which was the aim for this next stage.

My partners portfolio is now 150% (dividends reinvested) up in 4 years. (I’m lagging that in mine due to me always moving first in mine, then tagging further bottoms in hers)

The average return in comparison 

 

That’s without the PM bull run we’re currently facing when this stock market correction takes hold when western money starts coming running. War escalation has a habit of doing that.

Once this second inflation wave is dealt with, (one way or another whatever is left the other side) I’ll be all in a global diversified Vanguard passive once more.

No need for shorter term TA for me (like when I used to trade crypto), because I’m riding the cycle, you could get caught out shorter term in the riptide.

No secret to it, I’ve mentioned on here the exact points on here when i’ve bought and sold.

So far that’s working fine for me.

Edited April 19 by Lightscribe

[Lightscribe]

28 minutes ago, leonardratso said:

games back on, couldnt sleep so had a quick look online.

Yup

[leonardratso]

hmm not much jumping going on, must be some low grade missiles.

[leonardratso]

shows over, BAU.

[Harley]

4 hours ago, montecristo said:

How much would that have cost?  If your friend just stuck his money in a S&P ETF  he would be quid's up and saved financial advice fees. 

 

FFS, you don't know his situation, etc so pure speculation on your part.

[Pip321]

Are we still on with tracker/passive v active investment?

Passive investments have done well and are easy for retail Joe Public….and that might be the case in the future but today, right now I am watching a world madness because it feels like we have inflated assets and whether they pop or are slowly deflated I want to beat the markets during that process because otherwise it feels like it’s going to be very costly. 

If the is thread was called ‘a helpful guide to creating wealth over a lifetime’ then the advice for a 22 year old might be to drip feed into the stock market in a well balanced portfolio over 45 years….retire, enjoy 15 years, get old and die.

Buts it’s not that……this is about it potentially being 1928, the shoe shine boy has just given his stockbroker a share tip and things don’t feel right. The thread is like it’s 1928 and someone is tapping you on the shoulder and offering a bit of a heads up saying ‘wow these good times don’t feel right and then suggesting what might happen in the relatively near future’.

Now often contrarians never feel things are right….but anyone ignoring what’s going on today is a braver man than me. Provoked wars, huge debts, eye watering deficits, unaffordable houses, 700k immigrants last year to fiddle the GDP, only 0.6% of GDP being agriculture against 10% of imputed rents, 50% of people not working, unelected PMs, corrupt politicians……and the media just reporting on misuse of pronouns. 

Daft things about value, bubbles and money…..a tiny $14 bn US company being bought by a Japanese company being reviewed by their government because it presents a risk. US steel if that important surely should be valued at more than $14bn with Microsoft worth $3,000 billion  

This isn’t about where to invest in 20 years time, it isn’t about what has been the best approach over certain periods in the past……. this is suggesting we are at a turning point, things not being right, mainly printing and debt at unprecedented levels. 

After any collapse/slow erosion of wealth….. then I will review the approach. 😉

[montecristo]

1 hour ago, Harley said:

FFS, you don't know his situation, etc so pure speculation on your part.

It's all speculation.

[Harley]

12 minutes ago, Pip321 said:

Are we still on with tracker/passive v active investment?

Passive investments have done well and are easy for retail Joe Public….and that might be the case in the future but today, right now I am watching a world madness because it feels like we have inflated assets and whether they pop or are slowly deflated I want to beat the markets during that process because otherwise it feels like it’s going to be very costly. 

If the is thread was called ‘a helpful guide to creating wealth over a lifetime’ then the advice for a 22 year old might be to drip feed into the stock market in a well balanced portfolio over 45 years….retire, enjoy 15 years, get old and die.

Buts it’s not that……this is about it potentially being 1928, the shoe shine boy has just given his stockbroker a share tip and things don’t feel right. The thread is like it’s 1928 and someone is tapping you on the shoulder and offering a bit of a heads up saying ‘wow these good times don’t feel right and then suggesting what might happen in the relatively near future’.

Now often contrarians never feel things are right….but anyone ignoring what’s going on today is a braver man than me. Provoked wars, huge debts, eye watering deficits, unaffordable houses, 700k immigrants last year to fiddle the GDP, only 0.6% of GDP being agriculture against 10% of imputed rents, 50% of people not working, unelected PMs, corrupt politicians……and the media just reporting on misuse of pronouns. 

Daft things about value, bubbles and money…..a tiny $14 bn US company being bought by a Japanese company being reviewed by their government because it presents a risk. US steel if that important surely should be valued at more than $14bn with Microsoft worth $3,000 billion  

This isn’t about where to invest in 20 years time, it isn’t about what has been the best approach over certain periods in the past……. this is suggesting we are at a turning point, things not being right, mainly printing and debt at unprecedented levels. 

After any collapse/slow erosion of wealth….. then I will review the approach. 😉

Lovely.  It's about spending as much, probably more, time on the question rather than the answer.  Doing that has huge benefits.  People rush in and a bunfight ensues as we see here and on other threads.  Some do it by accident and maybe some do it deliberately because winning an argument on some peripheral forum matters to them.  As I said, Mr Market loves to highlight people's frailties.  Mine too so I'm off for another break!

Edited April 19 by Harley

[Funn3r]

10 hours ago, Mandalorian said:

Tea leaves and entrails.

TA is just not scientific.

Anyone like to borrow my astrology book on how to really do things? Just PM me

 

[belfastchild]

This thread has been an education for me.
I used to use TA to rate things. Tits and ass. Im glad Im now enlightened.

[Alifelessbinary]

15 hours ago, Mandalorian said:

But remember.  The overwhelming majority of active traders fail to beat a global tracker over the longer term.  Mostly because the vast majority of stock market returns come from a small number of companies* (typically 1.3% of companies.)  And as an active stockpicker, what are the odds of you having those specific companies consistently in your portfolio?

 

What's your objective?  To make money or to have a mental exercise aiming to beat the market?  This is why I have an 80/20 serious money/fun money allocation.

 

I just sometimes get the idea what you have on this thread is a bit cult like where:

- some people making gloomy predictions about the future (some of whom have arguably been successful as active investors  - but again, compared to a global tracker, how successful?) making out that certain individual companies are likely to be good investments (- who knows?)

- other people who, perhaps, aren't as well off / aren't as sophisticated an investor / don't have a large capital base "tuning in" and then actively trading with money that has a higher chance of doing well when placed in cheap tracker funds or a higher chance of "doing a VOD" than a tracker.

 

Having money in carefully selected pots is fine as long as you have plenty pots containing plenty money. 

This is why I favour trackers.  Your money is automatically diversified across thousands of companies.  Imagine having the bulk of your cash in BATS and VOD over the last 5 years because some bloke on the internet says they are growth shares. 

 

I generally agree with all your points and have a similar setup of passive investment, with a naughty section of actively managed funds to flex my ego. When I account for all the time I spend 

What I like about this thread is the broad range of knowledge that helps people tweak their personal strategies. The shares chat is actually the least useful stuff, as being a professional stuck in London I had no idea that benefits were so rampently abused. This helped me pivot out of bonds and into gold/commodes. Which has probably made/saved me a six figure sum by the time I retire.

No one should use a single source of information to make important financial decisions. I do consider this thread to be a brilliant resource where a broad range of adults can discuss investing themes.

Yes there’s often a focus on certain sectors or themes I don’t necessarily back (sitting out waiting for a BK), but this thread has always been about surviving a the credit cycles not the optimum investing strategy for most people (passive). This thread was miles ahead of anyone predicting rampant inflation and interest rate hikes. 

Everyone’s an adult here and it’s up to them what decisions they want to take. I’ll pipe up if I think people are spreading duff information. 

VOD at this price point looks like a solid divi payer to get through the next period of inflation. I also thought that five years ago! 

[baffledbyzirp]

12 hours ago, Mandalorian said:

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

The idea that you can't beat the market is nothing new. It has its origins in Francis Galton's wisdom of crowds observations. Possibly you could cite Plato's republic and the notion of democracy. Jack Bogle identified the phenomenon which led him to form Vanguard. Efficient Markets theory resulted in many of the neocon errors of the 80s and 90s. 

The countervailing force is the madness of crowds and mean reversion. Your stated timeframe is 5 years and you compare the S&P 500 with BAT and VOD. Your chosen index is driven by the performance of the MAG 7 which accounts for 30% of the index market cap when I last checked. Furthermore, the gains of the past 5 years are disproportionately attributable to these stocks. If you look a little further into the distance your timeframe would incorporate the GFC (2007-9), the dotcom crash (2000) and the collapse of LTCM (1998). LTCM was run by Harvard professors and Nobel laureates who outperformed the market spectacularly until it became apparent their frame of reference was too narrow.

Your reasoning assumes that pervious patterns dictate future trends. This is assumption has risks attached. Russell called it the problem of induction.

1. Is the UK stock market a complete shit show? Yes. 

2. Has the S&P 500 out performed it over the previous 5 years? Yes.

3. Is the US index overpriced in terms of the PE by comparison to historical norms and the UK? Yes.

4. Are US insiders liquidating equity at an elevated rate since the year end? Yes.

5. Of the 2 markets which has the greatest way to fall? The US.

6. If GBP takes a pounding will stocks with international exposure and income streams represent a compelling proposition? Yes, as per the recent news regarding the considered takeover of BP.

I submit that UK valuations are low compared to the US and that there is a strong case that, if and when the correction occurs, the UK will perform relatively better since we have much less air beneath our feet. I also think that your analysis suffers from base year distortions. Finally the notion that the S&P 500 is diversified is invalid due to the weight of the Mag 7.

Stock pickers get it wrong. It is extremely difficult to beat the market. However, passive investment creates an enormous overhang with everybody on the same side of the boat. At times of fundamental change stock pickers can make a fortune while the rest of the market comforts itself referring to Black Swans. Look at the 12 Bezemer economists who correctly identified the drivers of the GFC and predicted its fallout including, Keen, Roubini, Shiller, Hudson, Godley and the much derided Schiff. When the shit hits the fan it won't be any comfort that your are with the herd.

I am not wrong, I'm just not right yet!

[baffledbyzirp]

Shit, my portfolio went down £3K in the time it took me to write that damn reply! Perhaps @Harleyis on to something. You figure out your strategy and adapt it over time. Everything else is just meaningless politics. In the end someone will be proved correct by the data but at that point we will have long forgotten all this bluster.

[leonardratso]

22 minutes ago, baffledbyzirp said:

Shit, my portfolio went down £3K in the time it took me to write that damn reply! Perhaps @Harleyis on to something. You figure out your strategy and adapt it over time. Everything else is just meaningless politics. In the end someone will be proved correct by the data but at that point we will have long forgotten all this bluster.

was it dividends? £10, left pocket, right pocket, middle pocket etc

Nay looks lie the whole shitshow is in correction+ mode after this mornings misfires, like everything just said shit, go up go up, ah hang on go back go back, tell you what fuckit just got back a lot more.

Bitcoin? halving probably boosting it also in this case.

 

Edited April 19 by leonardratso

[DurhamBorn]

41 minutes ago, baffledbyzirp said:

The idea that you can't beat the market is nothing new. It has its origins in Francis Galton's wisdom of crowds observations. Possibly you could cite Plato's republic and the notion of democracy. Jack Bogle identified the phenomenon which led him to form Vanguard. Efficient Markets theory resulted in many of the neocon errors of the 80s and 90s. 

The countervailing force is the madness of crowds and mean reversion. Your stated timeframe is 5 years and you compare the S&P 500 with BAT and VOD. Your chosen index is driven by the performance of the MAG 7 which accounts for 30% of the index market cap when I last checked. Furthermore, the gains of the past 5 years are disproportionately attributable to these stocks. If you look a little further into the distance your timeframe would incorporate the GFC (2007-9), the dotcom crash (2000) and the collapse of LTCM (1998). LTCM was run by Harvard professors and Nobel laureates who outperformed the market spectacularly until it became apparent their frame of reference was too narrow.

Your reasoning assumes that pervious patterns dictate future trends. This is assumption has risks attached. Russell called it the problem of induction.

1. Is the UK stock market a complete shit show? Yes. 

2. Has the S&P 500 out performed it over the previous 5 years? Yes.

3. Is the US index overpriced in terms of the PE by comparison to historical norms and the UK? Yes.

4. Are US insiders liquidating equity at an elevated rate since the year end? Yes.

5. Of the 2 markets which has the greatest way to fall? The US.

6. If GBP takes a pounding will stocks with international exposure and income streams represent a compelling proposition? Yes, as per the recent news regarding the considered takeover of BP.

I submit that UK valuations are low compared to the US and that there is a strong case that, if and when the correction occurs, the UK will perform relatively better since we have much less air beneath our feet. I also think that your analysis suffers from base year distortions. Finally the notion that the S&P 500 is diversified is invalid due to the weight of the Mag 7.

Stock pickers get it wrong. It is extremely difficult to beat the market. However, passive investment creates an enormous overhang with everybody on the same side of the boat. At times of fundamental change stock pickers can make a fortune while the rest of the market comforts itself referring to Black Swans. Look at the 12 Bezemer economists who correctly identified the drivers of the GFC and predicted its fallout including, Keen, Roubini, Shiller, Hudson, Godley and the much derided Schiff. When the shit hits the fan it won't be any comfort that your are with the herd.

I am not wrong, I'm just not right yet!

The UK market has some incredible bargains in my view,im talking generational bargains.Everything has gone against it the last 20 years.The cycle,the US bubble,crap UK polos,massive move from UK equity to gilts from pensions,retail investing moving into BTL etc.Lots of the companies have also been through investment cycles so pressure on balace sheets.The UK market is losing company after company because they are so under valued.D S Smith my latest to go for 50% more than i paid a few month earlier (and undervalued at the takeover price IMO).Of course we have Labour soon ,but they wont last long,then politics will swing right.Im a contrarian,and im patient,i want the hated areas as long as the cycle should help.

[Alifelessbinary]

7 minutes ago, DurhamBorn said:

The UK market has some incredible bargains in my view,im talking generational bargains.Everything has gone against it the last 20 years.The cycle,the US bubble,crap UK polos,massive move from UK equity to gilts from pensions,retail investing moving into BTL etc.Lots of the companies have also been through investment cycles so pressure on balace sheets.The UK market is losing company after company because they are so under valued.D S Smith my latest to go for 50% more than i paid a few month earlier (and undervalued at the takeover price IMO).Of course we have Labour soon ,but they wont last long,then politics will swing right.Im a contrarian,and im patient,i want the hated areas as long as the cycle should help.

My main concern is that all of the bargains will be snatch before retail investors can really see the true value of the shares. While quick takeover gains are great, foreign ownership or all key companies is a disaster long term.

Unless the politicians start to back the UK market, it’s going to become a basket case. I can’t see Labour trying to help the City even if it does fund the vast majority of socialist projects in the UK. 

 

[ThoughtCriminal]

17 hours ago, Mandalorian said:

But remember.  The overwhelming majority of active traders fail to beat a global tracker over the longer term.  Mostly because the vast majority of stock market returns come from a small number of companies* (typically 1.3% of companies.)  And as an active stockpicker, what are the odds of you having those specific companies consistently in your portfolio?

 

What's your objective?  To make money or to have a mental exercise aiming to beat the market?  This is why I have an 80/20 serious money/fun money allocation.

 

I just sometimes get the idea what you have on this thread is a bit cult like where:

- some people making gloomy predictions about the future (some of whom have arguably been successful as active investors  - but again, compared to a global tracker, how successful?) making out that certain individual companies are likely to be good investments (- who knows?)

- other people who, perhaps, aren't as well off / aren't as sophisticated an investor / don't have a large capital base "tuning in" and then actively trading with money that has a higher chance of doing well when placed in cheap tracker funds or a higher chance of "doing a VOD" than a tracker.

 

Having money in carefully selected pots is fine as long as you have plenty pots containing plenty money. 

This is why I favour trackers.  Your money is automatically diversified across thousands of companies.  Imagine having the bulk of your cash in BATS and VOD over the last 5 years because some bloke on the internet says they are growth shares. 

 

The fact that some on here genuinely think dividends are free extra money like bank interest was the first thing that made me pause for thought**.  They don't actually understand something as basic as that, so are they really in a good position to be making punts on which individual companies are likely to beat the market?  Though ultimately, grown adults can do what they like with their money.  I'm just trying to put across the alternative.

 

* Studies of 'asymmetry' by Hendrik Bessembinder – which looked at global stock market returns between 1990 and 2018 – established that just 1.3 per cent of stocks contributed all of the net gain when compared to the performance of US Treasury bills. https://magazinebailliegifford.com/lessons-from-bessembinder/

** I'm not strictly speaking against dividends as such. I just think they are an irrelevant distraction.  And I certainly don't see them as akin to interest.

And yet, you have STILL not demonstrated that Divis aren't a net gain.

 

[Loki]

13 minutes ago, ThoughtCriminal said:

And yet, you have STILL not demonstrated that Divis aren't a net gain.

 

Even if it's all the same, if you were selling and buying accordingly you'd get trading fees etc every time