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The Friary Midnight to Dawn Prayer Room hilarius 3 1 22-Sep-07 12:33 pm

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hilarius

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Thursday, September 20, 2007 - 08:15 am:

Good Morning

Given the amount of unquantified scaremongering that is currently so fashionable a few facts might shed more light and less heat :-

From Alan Wood's Column in today's Australian (Page 16) :-

[in which he discusses the current housing crisis and which he says comes from one political party and the media]

"THE FACTS ARE RATHER DIFFERENT [my emphasis] as emerges from Monday's report from federal parliament's Economics, Finance and Public Administration Committee on home loan lending practices."

"According to Reserve Bank estimates provided to the Committee, there are 5.3 million housing loans outstanding and only 0.22 per cent of them are in arrears by more than 90 days or more. If we look at loans by value rather than the number of loans, 0.4 per cent are in arrears by 90 days or more. This is low compared with Australian historical experience and exceptionally low by international standards."

I think it is time for less scaremongering and more concentration on actual facts

Hilarius

I come in peace to share my thoughts and to shine my candle light on possible long term opportunities

rdumas

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Thursday, September 20, 2007 - 03:50 pm:

Hi Hilarius,

Gee, aren't you frightened that you might be bashed up for saying something positive in this depression ward?

hilarius

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Thursday, September 20, 2007 - 06:23 pm:

Rudy

Had to do something after stepping into poo in the paddock :-)

I come in peace to share my thoughts and to shine my candle light on possible long term opportunities

msparks

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Thursday, September 20, 2007 - 09:24 pm:

That will be a week as alter boy and general dogspotty, 50 hail mary's ,25 our fathers,and a lap around the block picking up dog poo from everyones front yard with no gloves.
tut , tut !

hilarius

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Friday, September 21, 2007 - 03:12 pm:

Dear Friar Resillent

Just to clarify a point I also complimented HC on exactly the same basis as believe you did in the aptly named "Our Daily Bread" thread, that is to say well sourced and comprehensive coverage of his topic

Where I would take issue is with a bias to scare-mongering as distinct from QUANTIFIED AND SUPPORTED reasoning

There is in fact room for opinion pieces but even more benefit from factual analysis

I leave it to others to judge whether HC has got the balance right

For the record my current stance is neither bullish nor bearish ... but rather annoyingly neutral

I even annoy myself with my neutrality :-)

One thing I am learning is to let the market tell me what it wants to do, having spent too many years telling it what I would like it to do

The purpose of the Hilarius Fear and Fundamental Futures which I am about to update in its own Special Purpose Thread (do I hear a round of applause?) was to try to guesstimate what the limits of a fear based downturn might be.

My fascination is in determining when the market is sufficient irrationally exuberant or irrationally pessimistic as to return to some sort of median ... hopefully based on value

I am also fascinated by those who claim that the markets have been totally wrong in the last 11 or so years in pricing too much exuberance into equity values

The suggestion that all the growth that has occurred is about to collapse like a pack of cards because of a few incompetent lenders seems to me to be logically fragile

Yet I can't deny the queues of panic-stricken customers outside the Northern Rock branches, frantically seeking to withdraw their funds

This clearly illustrates the fact that perception can become reality

I shall reflect on these matters further in the quietness of the Friary Garden, where even a little refreshing fragrant cow dung can assist and fertilise the growth of the flowers of knowledge

To make that comment clearer I ask, as Rudy has asked, would the bears please go down to the woods today to have another picnic driving down prices so that those of calmer minds can buy some bargains

Yet I remain neutral ... it could after all be the calm before the perfect storm.

What are the NUMBERS which support the contention of an imminent collapse in the US Dollar ... or is all the talk just the gold bugs getting exuberant?

If I only had a brain, then I could make up my mind

I'm off to see the Wizard, the wonderful Wizard of Oz

Rudy has promised us that we can up while the rest of the world goes down. I hope he is right. Or did I misunderstand?

Here in the garden all confusion can be laid to rest. An end to all mixed purpose threads, I say !!!

Except this one :-)

Friar Hilarius

I come in peace to share my thoughts and to shine my candle light on possible long term opportunities

rdumas

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Friday, September 21, 2007 - 04:24 pm:

Hi Hilarius,

Just some minor clarifications about my current stance in the market. I have not promised anywhere that I can give a 100% guarantee that the market is still in a bull market.

What I do say is that I believe that we are still in a bull market and that we have had a correction (which by the way I suspect has still not ended yet). My current strategy is based on getting into the market initially with 25% of my working capital as near to the bottom of my bull channel as possible. Phase 2 is to add to that investment up to 50% once the bottom has been confirmed and then to add to it as the market moves up the channel possibly starting in November/December.

In the unlikely (in my opinion only) event that I am wrong and we move into a bear market, I will have entered the market with 25% of my funds at a point which hopefully isn't too far away from the eventual bottom of the bear channel bottom. I am happy to be there with that small proportion of my funds earning dividends (thus reducing my paper losses somewhat) until the bear market ends and we move back into a bull market. In the mean time the larger proportion of my funds would be invested outside of equities but be available to take advantage of any opportunities that arise in the equities market.

Should (as I suspect) the market show that it still is in a bull phase, then I will have entered somewhere in the lower half of my bull channel with most of my working funds thus taking full advantage of the run up and the continuation of the bull market.

I hope that I have clarified my strategy and part of my risk management regime. The rest of the risk management relates to portfolio size and stock selection type which I have discussed in previous posts on the Our Daily Bread thread.

hilarius

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Friday, September 21, 2007 - 05:17 pm:

Thanks Rudy

I do understand that you are viewing a balance of probability but are exprienced and wise in considering alternative albeit less probable scenarios, as you discern their (perhaps lower) probability

Also I realise that you are more than capable of adapting to changing circumstances while maintaining your logical strategy. As military people say, there are high level strategies and tactics in the field. I feel you are likely to handle both well.

One part of your earlier analysis that had me a little bit intrigued was the thought that the Australian economy might weather storms in the USA [and Europe?]

The indices which I publish most days suggest that the ASX, UK and USA are moving fairly well together at present

I would expect that ... given the high speed communications we have today (including overnight trading which I am sure happens here) ... the sentiment component of equity prices would tend to synchronise

I know that you are attracted by the value theory of investment, and I am also

The problem is that markets are so often excessively exuberant or over pessimistic that they rarely coincide with real value, though real value always prevails over time ... which I think is your basic approach

I am less willing than you to sit through large retracements and so I watch sentiment with an eagle eye

Aside from sentiment issues there is the question at what point do fundamentals begin to crumble due to such issues as currency price deterioration, commodity cycles etc

Personally I think that metals used productively in Asia will help to sustain Australia, even if sold for cheaper prices

Nevertheless I don't think we are immune from sentiment changes and I hope these enable you to pick up some bargains

My strategy at present is cash is king and real bargains are few, in terms of their capacity to survive downturns

The exception will be stocks with far above average future earnings increases, in my humble opinion

With Best Wishes

Friar Hilarius

I come in peace to share my thoughts and to shine my candle light on possible long term opportunities

hilarius

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Saturday, September 22, 2007 - 01:17 pm:

Learned Master Eblode

After one has sufficient capital and income to cover current essentials and any possible medical emergencies, what use is money?

I would be very interested in your interpretation of one of the most mysterious teachings ... The Parable of the Shrewd Manager ... Luke Chapter 16

With Best Wishes

Friar Hilarius

I come in peace to share my thoughts and to shine my candle light on possible long term opportunities

rdumas

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Saturday, September 22, 2007 - 03:29 pm:

Hi Hilarius,

Regarding our ability to weather storms in the US.

There is no doubt that at times there is a striking correlation between the indices in the US and Australia. There are other times when there has been quite a disconnect. During the latest bull market we have out performed the US markets on a number of occasions. We have just recently gone through a phase where the indices of the two countries have been closely connected but I detect a partial disconnect starting to emerge.

The ability to have a partial disconnect is based on the increase in trading ties that Australia has started to grow with countries other than the US over the last few years.

I agree that currently any shocks coming out of the US definitely has an effect on the global economy as a whole because of the fact that the US is such a large global consumer. We are currently in volatile times because of the large amount of uncertainty still festering around the globe about the liquidity crisis.

My observations on the effect of uncertainty and fear on global markets is that we initially have extreme bearishness usually causing an over shoot in down ward moves on global markets. My observations indicate that as uncertainty diminishes and problems become more clearly defined countries (like individuals) start to re-evaluate their opportunities and risks and look for the way to dig themselves out of the present problem. The one thing that many people underestimate during periods of bearishness is the powerful human spirit that will always cause people dig into their reserves of ingenuity and problem solving capacities to come up with ways of re-building things that have apparently been destroyed by the latest threat.

It is this spirit that has enabled the human species to rebound from the effects of devastating wars and other forms of pestilence. It is the very thing that enables the chart of the All Ords and most other mature economies to continually trend upwards.

In the event of a catastrophe in the US economy, ours (the Australian economy) would initially suffer but would rebound on the back of other opportunities that the companies forming our market would start to focus on in order to make a living and to grow and prosper. It is the nature of the human species. More than at any other time in my memory there are global opportunities for Australia that should give us the opportunities to grow.

We are not victims in this life. We have a large set of skills and resources that gives us the options to move in different directions when we are weakened in a particular area.

It is similar to things that happen at a personal level. If you are in a very poor country living in poverty, the number of options are severely limited. In my particular circumstance whilst I'm not rich, I'm also not poor and in the event of any significant economic problem that I may encounter it may cause me to have to take a different direction in order to maximise my financial health. There may be difficult times for a short period but whilst ever we have a range of options then we have an opportunity to once again regain our economic health. It is equally true of mature countries.