Archive through April 17, 2008

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ody

Member

Post Number: 2352
Registered: 10-2006

Rating: N/A
Votes: 0


Wednesday, April 16, 2008 - 03:14 pm:

JUST A SIMPLE ONE .. . IF YOU HAVEN'T SEEN THIS YET

About agriculture stocks:

http://www.businessday.com.au/agribusiness-stocks-stay-firm/20080416-26ir.html

rdumas

Member

Post Number: 1320
Registered: 11-2006

Rating:
Votes: 1


Wednesday, April 16, 2008 - 04:01 pm:

Hi Ody,

Thanks for responding to my post. One thing that I am sure about is that my post definitely is not motivated by a desire on my part to get back into the market. Your comment that the chances of losing money in a bank like SGB (or in fact any bank) is virtually nil is correct. That is to say that there is definitely a chance of losing money in a bank collapse regardless of how small that chance is.

Once one realises that there is a probability of any event taking place then you have make a judgement as to what effect that event would have on your finances. If one was to get $20,000 for money invested in say two or three banks as compensation for the loss of your entire superannuation capital base then I would suggest then from my own perspective the effect of that event would be catastrophic.

Hence one then has to determine what other places to distribute ones capital in order to diversify. Whilst I own my own home I would not put any further money into property through further real estate investments as it would tie up too large a proportion of my capital in a single investment type. Not only that but I consider property to be too illiquid and has a number of other aspects about it that would cause me to steer clear of it.

I am not really into bonds or similar type products so consequently I then have to go to the area that I know most about and that is equities.

Currently the market is around 19.5% off its all time high. Whilst there is some possibility that it may find its way back down to the January lows (~24% down) I think that the chances are only around 20~30%. Even if the market went down to say 30% below its all time high (small probability, say 5~10%) it wouldn't matter. Presumably you would get some franked dividends which would take some sting out of those figures.

Whilst I would expect some volatility I would not expect the sort of companies that I would choose to totally collapse. As you are aware I tend to pick a large enough portfolio to reduce the effect of any total collapse in a single company as to render it trivial.

You are correct in your analysis of BHP and the materials sector in general. As can be seen from the chart for the materials sector over the last 5 years in spite of a bear market the materials sector has continued to bounce off a long term ascending trend line and shows no indication of this changing any time soon.

I think that you know me well enough to know that I don't buy shares on some vague judgement or as some cop out. The shares that I would buy are those that are fundamentally sound and exhibit superior TA characteristics.

I also would not buy in the expectation that the market will go up in fact on the contrary I would expect it to go down rather than up as I believe that the market is currently riding up on a lot of 'hot air' (read hope). If the market continues to go up then that would be great and nothing would be lost. If the market goes down as I expect then it could lead to the possible 'bust bank senario' which would be a good reason to have some money in equities rather than have 100% exposure to the banks.

I have a preliminary watch list of stocks that are possibles. They are all fundamentally strong and the TA is not bad at all. Just mentioning the Star Stocks (which obviously means that they have fundamentals of the highest quality) here are some samples:

CSL

AAX

ASB

WEB

WOW

This stock's TA is not as good as the others but should continue to perform reasonably into the future.

IMD

There are also a number of others that are not Star Stocks but are financially sound like BHP, RIO and a number of others.

The intention should I go ahead would be to average around 30% of capital into the stocks over a 3 month period. Thus leading (excluding the home) to a distribution of 70% cash and 30% equities.

At this stage I will be considering the above strategy over the next few days before making a final commitment to it. The timing of commencement of the averaging would be during the next down leg.

resillent1

Member

Post Number: 427
Registered: 10-2006

Rating:
Votes: 1


Wednesday, April 16, 2008 - 04:17 pm:

Right, I’m a little more composed now so I’ll have a go at answering Ody’s post in relation to Buffet and productivity.

I don’t want to defend Warren Buffet. I’m sure he could do that for himself. I seem to recall he has quite a clever approach for debating academics.

So this is just my point of view on productivity and the whole general situation at the moment.

Productivity is a measure of the efficiency of converting capital, labour and resources into production. It is about how the pie is made bigger. It is not demand (the appetite for the pie.)

The USA is not facing a productivity problem, that is what the graphs show and what Buffet said. In fact the recession may even increase their productivity, as capital will be more inclined to flow into productive investment rather than non-productive speculation.

They are facing a demand problem because they have used debt to bring forward some of their consumption. Moving the timing of consumption around is a cycle not a detriment to the underlying wealth engine. They are facing downward asset repricing and resulting de-leveraging this is again a cycle not an underlying wealth driver.

Asset repricing is a financial problem, Will it spill over to productivity, possibly. Japan’s productivity has been buffeted by its asset bubble collapse, but is still on the whole improving.

Will the rest of the world pick up USA consumption decline, possibly. China has large foreign currency reserves and unfulfilled domestic demand. Australia has a strong fiscal position, no government debt and infrastructure demand. I’m sure if the focus were taken of the US consumption decline then plenty of alternative opportunities for demand increase would become apparent. How about the investment to combat global warming – what a driver of demand this could be.

USA monetary policy is currently aimed at stimulating demand, which is fair enough considering the impending demand decline. The argument against this is Inflation, but if the decline turns out to be bad than inflation won’t be the problem in a year or so. Japan’s asset bubble recovery has been extended because they couldn’t generate monetary stimulus and they couldn’t inflate their debt away. I think maybe USA took note.

To the extent that US creditors will let them get away with it, inflation and currency devaluation will help the USA deal with both asset losses and debt.

Will the world share the USA’s medicine? If US treasuries remain the benchmark risk free rate and the US dollar remains the peg for other currencies and the currency for denominating commodity prices, then the answer is probably yes. Treasury bond yields are they key for me to this question, if they blow out then America is on its own and it probably faces a Japan sort of experience and the world a deeper slowdown to make the necessary adjustments.

Share markets should probably be viewed in real terms and on a single currency. In this way American markets have been going backwards at a rate of knots since 2000. But on a nominal basis they probably feel they haven’t been doing to bad. This perception will probably continue to be engineered as a means to soften the reality.

Meanwhile global productivity is still growing, if USA consumer demand is substituted than the only impediment to a brighter future is financial blow-ups. Did the fear of financial blow-ups take equity prices below value based on a rational projection of the physical economy? Will there be a financial blow up?

Is the market Insane to rally at this point. I guess a really clever person could make that call, I can’t. I don’t know if there will be financial blow-ups and I don’t know if aggregate equity price represent value, it’s far too hard for me to work out. But I do see a few individual businesses that I believe are priced cheaper than even conservative estimates of their future cash flows and I’m buying them while the opportunity exists. Is it too early – will I get the earnings estimates wrong; will panic push the prices lower? With conservative estimates of perpetual yields over 20%, my criteria for taking on risk is met, so I very selectively buy and see what happens.

My real focus is not at the big picture level, it’s at the business level. Conservative, full cycle estimates on earnings and costs still leave most stocks priced outside my reach. Maybe this says more about the big picture than the rest of the garbage in this post.

Now, I really don’t want to get stuck in another discussion so If you don’t like this post just give it 1 star and save you’re debating for a more worthy opponent.

Cheers.

ody

Member

Post Number: 2353
Registered: 10-2006

Rating: N/A
Votes: 0


Wednesday, April 16, 2008 - 04:44 pm:

RESILLENT: GREAT POST

I wasn't going to write any more today, but I can keep this short. I'd just like to say that, on the contrary, I think your post is excellent: very well argued and constantly interesting, with very much your own ideas. We are not here to agree with each other on everything all of the time, but to produce thoughtful material for our fellow posters to contemplate, be stimulated by, and thus to benefit from. Your post succeeds admirably in such objectives. And to express that further I shall give it 5 stars! (A silly system, though - but still, it may draw other people's attention to what you have to say, which is certainly worth reading.)

ody

Member

Post Number: 2354
Registered: 10-2006

Rating: N/A
Votes: 0


Wednesday, April 16, 2008 - 05:02 pm:

RUDY: ALSO A GREAT POST!

The general idea does not seem bad to me at all. As you say, the risks of such a procedure for investment, if one proceeds your way, are probably not enormous, and at this point, at least, one would think it likely that indeed the 22 January won't be revisited, although there are some appalling things that COULD take us there. But some stocks, in any case, would be more likely to take part in such a fall than others, so one would take that into account. For a number of stocks things really do look quite reasonable at this juncture. I don't mind BHP not being a star stock, for I like its size, the KIND of security that it gives, and the market's great interest in it, which I think is not short-term.

I am not sure that for the truly long term I'd take some of the smaller stocks that you mention - some of these fairly small SD star stocks do have a tendency to be volatile. But you may be right even so, and one does not HAVE to stay put for years on end, anyway.

The part of your post which I like the most is the following, for it seems to me properly cautious and well planned - particularly the idea of proceeding over some time and during one or more down legs. I also like the overall percentage you have in mind. I add that my own consideration would, to be frank, be the pursuit of gain rather than fear that one of my deposits would go belly-up. But I commend this particularly, including the "cooling off" clause:
-------------------------------------------------
The intention should I go ahead would be to average around 30% of capital into the stocks over a 3 month period. Thus leading (excluding the home) to a distribution of 70% cash and 30% equities.

At this stage I will be considering the above strategy over the next few days before making a final commitment to it. The timing of commencement of the averaging would be during the next down leg.

captain_chaza

Member

Post Number: 3152
Registered: 02-2003

Rating: N/A
Votes: 0


Wednesday, April 16, 2008 - 05:41 pm:

PLEASE EXPLAIN TO ME
How you CLEVER guys have missed out on
"ALL THE GREAT SECTORS' ADVANCEMENTS THIS YEAR"

Smells like total incompetence to me?

I can't remember when so much money was to be won in only a few sectors

When are you guys going to admit
that

"You have simply missed the Boat"

Salute and Gods' speed

(Message edited by Captain_Chaza on April 16, 2008)

"While we stop and think, we often miss our opportunity." Publilius Syrus, 1st century B.C.

"I believe the future is only the past again, entered through another gate."
Sir Arthur Wing Pinero 1893

"There are two times in a man's life when he should not speculate: When he can't afford it, and when he can." Mark Twain, 1897

rdumas

Member

Post Number: 1322
Registered: 11-2006

Rating: N/A
Votes: 0


Wednesday, April 16, 2008 - 05:59 pm:

Charlie,

Based on past history I doubt that you will understand any explanation however I'll give it one final go. The materials sector (BHP specifically) has been great from a short term (days to weeks) or long term (years) perspective. From a medium term (say 3 to 6 months) it has been too volatile and would likely to have led to large losses.

Your success depends on whether the stock works in your particular time frame. You obviously work a lot in short term therefore the opportunities have been there for you to take. Good for you.

Now go away and annoy some other thread.

captain_chaza

Member

Post Number: 3153
Registered: 02-2003

Rating: N/A
Votes: 0


Wednesday, April 16, 2008 - 06:16 pm:

PLEAS DON"T HIDE BEHIND TIME-FRAME
excuses only a mother would believe

Please explain to me why you have SIMPLY missed the boat
OR
Don't you see it?

Do you want me to spell out all the Classes of sail/ Sectors you have missed out on

Salute and Gods' speed

IMO You Guys need to be exposed for what you didn't achieve in a perfect storm

(Message edited by Captain_Chaza on April 16, 2008)

stocky

Member

Post Number: 251
Registered: 10-2003

Rating: N/A
Votes: 0


Wednesday, April 16, 2008 - 07:19 pm:

Rudy, you will only know if it fits your time frame after its too late.. you can't predict when this cycle will end.

Hasn't closed above the breakout area.. but its already 1 month in..

ody

Member

Post Number: 2355
Registered: 10-2006

Rating: N/A
Votes: 0


Wednesday, April 16, 2008 - 07:27 pm:

"CAPTAIN CHAZA": COULD YOU PLEASE MIND YOUR OWN BUSINESS??

1. "Charlie", as I understand your name is: why is it so important constantly to comment on other people's investments - which are absolutely none of your business anyway? How does what they do harm YOU? You seem to have an absolute obsession with what Rudy and I do and are compulsive about commenting on it, but why should the issue interest you at all??

2. Why is it that you don't reveal how YOU actually invest, so that others can also - if they felt so inclined - comment on what YOU do, or ask questions about it? You keep that carefully hidden from view. Noone on this thread can judge from your posts what is so masterful about your own investing. For all we know you may have been performing like a genius or like an idiot.

Actually, there is at least one other possibility: that you have invested like a genius and talked like an idiot. I hope for your sake that you can say YES to the former, and some demonstration would do wonders.

3. You just go on and on about the amounts we have failed to make in the resources sector. Have you considered what we have actually lost? I sold BHP when it was almost exactly the same price as today. Big deal!! Meanwhile it has been as low as $31.50, and my money was never at risk of reaching that level. I have already - quite explicitly - made clear to you that I should have invested in BHP at, say, $35, and that I regret not having done so. I have also explained that at one stage I did buy it but "chickened out" when it went down the next day, and that in fact I would have done better to keep it. At the same time, I have avoided losses in a large number of stocks which are currently trading at a much lower level than on 14 December. Several of these have made new lows only in recent weeks.

So, my dear chap/chaza, it is not as though I cannot grasp your points. How often do you expect me to repeat what I have already told you? Why would it be of interest to other readers for me to say it again?

riskpirate

Member

Post Number: 740
Registered: 07-2007

Rating: N/A
Votes: 0


Thursday, April 17, 2008 - 12:48 am:

STOCKY,pardon for entering this site. Have you heard from MOON as we are concerned about him.

captain_chaza

Member

Post Number: 3154
Registered: 02-2003

Rating: N/A
Votes: 0


Thursday, April 17, 2008 - 01:55 am:

My apologies Ody for not patting you and yours on the back for your lack-Lustre performances over the last few weeks

Long live the 8% ers per annum on Bank interest, you say?

Well, all I can say is that YOU could and should have done a lot better in these times

What was your problem?
How could you have been so wrong in so many sectors?

Salute and Gods' speed

ody

Member

Post Number: 2356
Registered: 10-2006

Rating: N/A
Votes: 0


Thursday, April 17, 2008 - 07:03 am: