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"significant areas .... are far too cheap and which represent generational opportunities..."


JoeDavola

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Just read the latest newsletter from Philip J Milton, an investment manager who was recommended to me by a poster on here. I've pasted the important bits below.

What do the investors here think; as someone who is currently 100% in cash, would this be a good chance to max out a S&S ISA with a FTSE 100 tracker?

The newsletter:

...

there has been so much uncertainty, especially in regard to the UK and what Brexit will bring, good or bad, that it is in ‘prices’ already and secondly, following the attack primarily on value stocks, prices in so many areas are so good that the mathematical probability is now weighed in favour of upside as little or no ‘good news’ is priced into things at all.

 

BREXIT UPDATE – ANYTHING NEW AFFECTING YOUR MONEY & INVESTMENTS?

 

We continue to be buffeted from the head winds surrounding the uncertainties abounding and indeed ahead.  It looks more likely now that actually, Treason May will secure support for her deal and a realisation that if there are things we don’t like through the other side then, do you know what, we’ll sit down and talk about them.  The crucial difference will be that those conversations will be taking place from outside of the EU.  I do not say that from ‘glee’ or ‘resignation’ but simply stating that the greatest ’uncertain’ will have become a ‘certain’ and as resolute human beings, it is amazing how strong we are to adapt and work constructively and progressively with whatever new set of criteria affects us.  One likelihood then is that Sterling will have fewer reasons to be as weak as it has been and the market, especially affecting UK-centric stocks which have been so blitzed, could rebound very strongly indeed.  Remember too the FTSE100 is lower now than when these present levels were first seen in 1999!

There is much angst ‘out there’ at the moment but one curious indicator confounds all that – in the three months to November, one in forty people changed jobs, primarily of their own volition.  That is one of the biggest employment turnarounds since the records have been kept.  The relevance here is that people are leaving secure, job-legislation protected positions, to take on new jobs which start their records from scratch and without any job security for two years.  Whilst inevitably some will be for greener grass which certainly proves not so green when they arrive, it reflects a confidence they are feeling that Brexit will not upset their work expectations and their sense of security for themselves and their families.  This may also be a factor in the increasing wage levels being reported now too (expected to be around 3.5% for 2019 as well) – above inflation although it is suspected that in due time, wage costs themselves will start to push-up prices of goods and services again.

Interestingly too, credit card spending year-on-year is also up – November’s 7.5% higher than the previous year.  Even after allowing for spending trend changes (eg contactless over cash), this also doesn’t reflect a consumer population expressing negativity about its future.

THE MARKETS

Well, what can be said?  Rather than a Santa rally, the markets have been torrid and Wall Street will have threatened to have had the worst December since 1931, the great crash heralding the Depression.  Within the month, it fell by significant daily amounts as well as rallying on one of the lowest volume trading days of the year too to rise by the most points ever seen on one day.  This volatility is not especially helpful, it has to be said, as it confuses investors in terms of the difference between short-term speculation and risk-taking and long-term investment in real assets.

2018 has not taken many prisoners.  To have preserved the value of your money was nigh impossible during the calendar year, with only a few assets coming anywhere close.  Gold pipped-upwards over the last six months but still down on last January’s level (but being priced in US Dollars gave a boost to UK holders too), cash and some currencies and a few share sectors, from global pharmaceuticals to utilities and German Bunds.  Yes, we too have lost overall as ‘balanced’ portfolios suffered losses and not having enough of the compensating things to cover for the declines.  Of course we have had some things which give the appearance of not having noticed any problems at all including, fortunately, several of our biggest holdings but also the occasional stock which has been badly impacted by some unrelated event or sentiment.  We’re still licking our wounds in some areas though and looking at what has caused the declines, not resting on any laurels from the odd improvement.  Do we sell at a loss?  Do we hold or buy more when it falls so much?  These are the crucial questions, the hardest of decisions and the ones where keeping your cool is imperative as panicking is no solution for anyone and neither is an automaton-type approach.  The discipline of ‘balance’ has proven invaluable (as it always should) even if some of the enemies are quiet predators which erode values over a lengthier time – like inflation for example.  We were there at the forefront warning people about the crypto-currency scam (Bitcoin et al) and haven’t suffered at all from the implosion in prices of things like crude oil (though affecting oil companies of course) but even that is now reaching a price level where it is worth buying as a defensive asset again - $40 a barrel is too cheap, $80 is too expensive, all things considered for now.

All we can say, even taking Brexit uncertainties to one side, is that there are too many real bargains out there at the moment.  Indeed, the forward dividend yield on the whole FTSE100 is now just under 5% - a figure rarely seen in the last thirty years; throw £1000 at the stockmarket and expect 5% income in the first year (and regular increases thereafter too) from the dividends paid by real companies making real profits from trading with you and me day-in, day-out, come rain or shine, Brexit or not.  Don’t forget that and don’t panic react in the short-term to others’ selling and their pushing of prices down erratically and irrationally.

OUT ON A LIMB

Yes, I am going out on a limb now.  I am prepared to call the market and say that there are significant areas which are far too cheap and which represent generational opportunities.  This isn’t the ‘eternal optimist’s dream’ but a realist having continued to analyse the data and confidence out there in the real world.  If you have cash spare or have been holding-back, don’t wait to commit it – buy when things are at their apparent darkest as that is when the best value is seen.  And if you don’t have the confidence to do it all at once, do it in phases – we can take direct debits into all accounts for example so you drip-feed into investments.

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I've been sitting on my hands for a year or so but have about ?£70k sitting in cash to go in; tbh I'm waiting for some more panic selling which seems likely as the mood is nervous before I go in.

Does he identify the areas?

As ever with share investing: decide when you are likely to need the money back.  My rule of thumb is that over anything longer than ten years you really can't lose with stock markets and their dividends but you certainly can lose heavily over a couple of years.

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Nah no areas identified.

Be interesting to see how things move before the ISA deadline on April 5th with Brexit due to happen on March 29th...

I'd be putting money away for at least 10 years, so maybe no point trying to time the market.

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longtomsilver

I got my divorce settlement today, £120k and without hesitation I've bought for my own portfolio...

SSE 1,000 shares

VOD 3,250 shares

Centrica 3,500 shares

BAE 1,000 shares

Lloyds 10,000 shares

Nat. Grid 500 shares

Schroders 200 shares

Record CM 10,000 shares

Daimler 125 shares

Marston 7,500 shares

Assura 5,000 shares

Dairy Crest 1,000 shares

SLA 2,000 shares

that's £68k yielding £4k (on paper 6.1%) per annum with £52.5k held back for future projects (I might run my own pub as a retail partner (self-employed), minimum capital input - not a get rich scheme but they do come with accommodation).

I'm relying on the dividends to hold up my portfolio and i'm of the opinion that the FTSE 100 is undervalued however with the markets what they are can see a drop to *6,000 as a possibility, equally the index could charge ahead 1,000 points. Who knows?!

*quantitive easing/currency devaluation has never been priced into the index.

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Potential areas I am keeping my eyes open. Look to the frontiers.

-Gaming, Media

-Crypto (but not yet)

-Vaping (no juniors unfortunately. JUUL is UK founded but privately owned and worth $38bn)

-Medicinal Cannabis (British Sugar / GW Pharmaceuticals)

 

And Gold should have it's turn.

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5 hours ago, JoeDavola said:

Nah no areas identified.

Be interesting to see how things move before the ISA deadline on April 5th with Brexit due to happen on March 29th...

I'd be putting money away for at least 10 years, so maybe no point trying to time the market.

You might as well stick the ISA limit into a stocks and share ISA before the end of the tax year. You don't have to buy shares straight away, you can leave it as cash. Then If you decide not to buy shares you can just take it out again. Keeps your options open.

I dribble money into the market monthly. I'd find your situation of buying in all at once with a big fund terrifying.

 

 

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longtomsilver
5 hours ago, Frank Hovis said:

I've put half the cash into a HSBC FTSE 250 tracker as I've got very little in trackers; it's got a tiny management fee.

VMID and VUKE are my (ex-wife's) trackers. I've balanced the two so it's effectively a FTSE 350 tracker (without the extortionate fees (FTSE 100/250 trackers have much lower management charges)... not scientific but it seems to do the job. 

353FD134-0B9C-4B14-8AD2-E7DCA3CD04AA.png

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My portfolio of eight has jumped a fair bit since mid December rising nearly 10%, hence a low may have gone unless the Brexit impasse gets worse. I have tried to buy shares with assets cover  hence I am not that well diversified. Legal and General and Taylor Wimpey the only shares without sellable assets close to covering the share price. However, I am mainly in cash. Forward dividend on this lot is 7.61% yielding £7,000. My cash holdings  other than NS and I and unexpired fixed bonds are yielding more like 1%. The wife is entirely in cash, other than her pension.

Aviva (12% of holding)

GCP Infr (13%)

Greencoat Wind ( 15%)

Regional Reit (11%)

Standard Life (10%)

Trig (15%)

Legal and General (9%)

TW (15%)

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Democorruptcy
3 hours ago, crashmonitor said:

My portfolio of eight has jumped a fair bit since mid December rising nearly 10%, hence a low may have gone unless the Brexit impasse gets worse. I have tried to buy shares with assets cover  hence I am not that well diversified. Legal and General and Taylor Wimpey the only shares without sellable assets close to covering the share price. However, I am mainly in cash. Forward dividend on this lot is 7.61% yielding £7,000. My cash holdings  other than NS and I and unexpired fixed bonds are yielding more like 1%. The wife is entirely in cash, other than her pension.

Aviva (12% of holding)

GCP Infr (13%)

Greencoat Wind ( 15%)

Regional Reit (11%)

Standard Life (10%)

Trig (15%)

Legal and General (9%)

TW (15%)

So you have ditched Lloyds and National Grid to buy Standard Life?

I bought and sold CNA twice quickly taking profits but only broke even on SSE. I could see a no confidence vote looming, so didn't want utilities when investors might be worrying about Corbyn and nationalisation. Looks like the DUP aren't breaking ranks though and Treesa's safe.

 

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Just now, Democorruptcy said:

So you have ditched Lloyds and National Grid to buy Standard Life?

I bought and sold CNA twice quickly taking profits but only broke even on SSE. I could see a no confidence vote looming, so didn't want utilities when investors might be worrying about Corbyn and nationalisation. Looks like the DUP aren't breaking ranks though and Treesa's safe.

 

Tbh these domestic shares seem to go counter-intuitive to where I would expect. Was very pessimistic about this month but everything has risen in spite of the political turmoil. Buying Standard Life was a bad call and the Life Assurance sector has been my undoing. Seems I should be way down, but I have pulled backed on investment trusts which are riding high and are over half the portfolio. 

 

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Democorruptcy
6 minutes ago, crashmonitor said:

Tbh these domestic shares seem to go counter-intuitive to where I would expect. Was very pessimistic about this month but everything has risen in spite of the political turmoil. Buying Standard Life was a bad call and the Life Assurance sector has been my undoing. Seems I should be way down, but I have pulled backed on investment trusts which are riding high and are over half the portfolio. 

 

Every time Brexit takes a knock Builder shares go up and last night was a big knock. I suppose that also brings in such as Transports, more people coming innit?

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On 07/01/2019 at 11:52, JoeDavola said:

there are significant areas which are far too cheap and which represent generational opportunities

I'll agree with that.  FTSE and PMs have (relatively) been the two most relevant dogs over the last few years.

Just look at what happened to cable after last night's vote - bounced up! - it's all (apart from quite possible black swans) mostly priced in.

My one concern is the inverse relationship between the FTSE and cable - may go down more if cable rises from its lows.

Question is how and when to buy.

I'm buying at technical lows so a "smarter" form of averaging in.  So for example, I bought in March and October 2018, and just staring to dip in again now.

Although I have avoided buying at peaks, I have still suffered some losses (e.g. March was a low but we are now lower).

I switched from looking for daily to weekly lows as I was optimising over too short a time frame.  Maybe I should be looking at the monthly data!

I'm currently using individual high yield stocks in my ISA and ETFs (forming the "Permenant Portfolio") in my SiPP.

I'm limiting each individual share holding to 4% of my portfolio but often double up on sectors (e.g. BP and Shell).

I only invest in stocks in consumer or business "must sort of haves" (for which the FTSE is pretty good).

I'm planning on using inverse FTSE ETFs for short term partial hedging of my FTSE holdings to cover each downleg (maybe one coming soon).

@Crashmonitor, many thanks for your earlier thoughts.  I share a number on your list.  Lots out there right now (subject to fundamental checks).

I used to get calls about the cash I had in my ISA but no longer.

 

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On 09/01/2019 at 18:36, longtomsilver said:

VMID and VUKE are my (ex-wife's) trackers. I've balanced the two so it's effectively a FTSE 350 tracker (without the extortionate fees (FTSE 100/250 trackers have much lower management charges)... not scientific but it seems to do the job. 

353FD134-0B9C-4B14-8AD2-E7DCA3CD04AA.png

 

12 month yield for VUKE is 4.65% which is not bad at all, unless inflation takes off!  Similar with the other FTSE ETFs.  Only 36 (including the dogs) of the FTSE 100 can beat that.  I use such ETFs in my SiPP and then load up my ISA with the more risky higher yielders.  My "bit of this, bit of that" approach.

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24 minutes ago, Harley said:

I'll agree with that.  FTSE and PMs have (relatively) been the two most relevant dogs over the last few years.

Just look at what happened to cable after last night's vote - bounced up! - it's all (apart from quite possible black swans) mostly priced in.

My one concern is the inverse relationship between the FTSE and cable - may go down more if cable rises from its lows.

Question is how and when to buy.

I'm buying at technical lows so a "smarter" form of averaging in.  So for example, I bought in March and October 2018, and just staring to dip in again now.

Although I have avoided buying at peaks, I have still suffered some losses (e.g. March was a low but we are now lower).

I switched from looking for daily to weekly lows as I was optimising over too short a time frame.  Maybe I should be looking at the monthly data!

I'm currently using individual high yield stocks in my ISA and ETFs (forming the "Permenant Portfolio") in my SiPP.

I'm limiting each individual share holding to 4% of my portfolio but often double up on sectors (e.g. BP and Shell).

I only invest in stocks in consumer or business "must sort of haves" (for which the FTSE is pretty good).

I'm planning on using inverse FTSE ETFs for short term partial hedging of my FTSE holdings to cover each downleg (maybe one coming soon).

@Crashmonitor, many thanks for your earlier thoughts.  I share a number on your list.  Lots out there right now (subject to fundamental checks).

I used to get calls about the cash I had in my ISA but no longer.

Had to google what 'cable' meant...learned something new today!

So are you trying to call the 'bottom' of the market for certain FTSE stocks over a certain time window, trying to get a feeling for how that works....what do you mean by a technical low, do you buy when you hit the lowest price in a set time frame?

 

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2 hours ago, crashmonitor said:

Tbh these domestic shares seem to go counter-intuitive to where I would expect. Was very pessimistic about this month but everything has risen in spite of the political turmoil.

 

2 hours ago, Democorruptcy said:

Every time Brexit takes a knock Builder shares go up and last night was a big knock. I suppose that also brings in such as Transports, more people coming innit?

It really does pay to DYOR and not listen to the MSM and other mood music.  For example, despite the noise emerging markets and Asia Pacific have been in weekly bulls (10% and 7% increases, with a year end wobble) since Oct 18!   Reminds me of the old sage who said he really started to make money when he moved out of New York and muted the TV!

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2 minutes ago, JoeDavola said:

Just looking at a ftse100 chart....anyone remember what caused the dip to 5900-ish in 2019?

February 2016 circa 5700...the oil and commodities rout snd financial exposure of banking.

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52 minutes ago, JoeDavola said:

Had to google what 'cable' meant...learned something new today!

So are you trying to call the 'bottom' of the market for certain FTSE stocks over a certain time window, trying to get a feeling for how that works....what do you mean by a technical low, do you buy when you hit the lowest price in a set time frame?

I use technical analysis on weekly price data against stocks preselected according to fundamenatl criteria (e.g. manageable debt, sufficient free cash flow, etc).

No, I can never find a bottom, just a series of lows.  A bottom is only something you can find with hindsight.

There is a trade off - look for lows on the daylies and get in earlier (before it's starts to bounce up) than if using the weekly data but possibly identify better (confirmed) lows with the weekly data.

For example, here is an APD buy and hold ETF (not a preselected stock!) , daily chart:

2068668835_CaptureD.thumb.PNG.92fdb432b3627686932b9c9377685247.PNG

I've guessed at my likely buy points but it would have been likely that the daily chart threw up three buy points whereas the weekly chart threw up one (the last one) in the same period.  The weekly chart would have avoided the loss on the first purchases and bought into the intermediate term bull but would have been months later.  It would have been even clearer on a monthly chart, but even longer to wait.  And the longer you wait, the smaller yield.  Plus I can now just look at my watchlist once per week rather than daily and I value that time saving.  But these are my buy and holds, not trading.  Defo daily data for my trades!

PS: Just checked and the above buy points are illustrative and not the precise ones, but good enough to make the point.

PPS: BTW, many thanks for the newsletter.  Defo worth me following up on as I like the cut of his jib!

PPPS: Whoops (arguably)! https://www.moneymarketing.co.uk/fos-upholds-50k-investment-complaint-against-philip-j-milton/

 

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If you're looking at the FTSE only then personally I wouldn't worry so much about the technicals and trying to time the bottom. Buy an accumulating fund, which is fire and forget. FTSE is much more geared towards dividend paying than say US centric stocks that are more growth focused.

Although not sure why one would only want to be in such a small proportion of the world market.. If one doesn't want to get into timing the market look at modern portfolio theory. Buy regularly, perhaps quarterly, you will buy more of what's cheap and less of what is expensive. Or just go for a total world tracker and be done with it.

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10 hours ago, A_P said:

If you're looking at the FTSE only then personally I wouldn't worry so much about the technicals and trying to time the bottom. Buy an accumulating fund, which is fire and forget. FTSE is much more geared towards dividend paying than say US centric stocks that are more growth focused.

Although not sure why one would only want to be in such a small proportion of the world market.. If one doesn't want to get into timing the market look at modern portfolio theory. Buy regularly, perhaps quarterly, you will buy more of what's cheap and less of what is expensive. Or just go for a total world tracker and be done with it.

This is interesting as it ties in with a recent discussion with Harley on his Harry Browne 25% SIPP portfolio, where I made the same point about a world tracker (over a narrower FTSE) and its greater geographical spread...Perhaps the theoretical reason HB specified the FTSE is that it pays dividends/income (rather than growth) in what is a portfolio set-up geared to late investors/retirees rather than early investors/young~uns?

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38 minutes ago, MrXxx said:

This is interesting as it ties in with a recent discussion with Harley on his Harry Browne 25% SIPP portfolio, where I made the same point about a world tracker (over a narrower FTSE) and its greater geographical spread...Perhaps the theoretical reason HB specified the FTSE is that it pays dividends/income (rather than growth) in what is a portfolio set-up geared to late investors/retirees rather than early investors/young~uns?

I've not really looked in HB's perm portfolio too much. However iirc it was actually based on the US and at a much different time with "normal" interest rates. 25% in Cash and Gold would suggest one is always erring on the side of financial armegeddon

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10 hours ago, MrXxx said:

This is interesting as it ties in with a recent discussion with Harley on his Harry Browne 25% SIPP portfolio, where I made the same point about a world tracker (over a narrower FTSE) and its greater geographical spread...Perhaps the theoretical reason HB specified the FTSE is that it pays dividends/income (rather than growth) in what is a portfolio set-up geared to late investors/retirees rather than early investors/young~uns?

HB prepared his PP the for the US market but UK holdings versions have been suggested.  He said to restrict the holdings to the US market as that is what your expenses (liabilities) are in.  However, this was arguably when international development and investing was smaller than today and of course the US market is a lot larger than the UK market.  So I have expanded my equity allocation to include all geographies, with just a bias to the UK.  I could have gone for a world tracker but like the ability to fine tune my geographical allocations, plus I can possibly reduce institutional risk a bit by holding ETFs from different providers (although I guess I can do that somewhat with the global funds).  Each to their own.

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