Trading Houston 3

I agree, there is no need to panic, all is ok.
Now where is that exit door?....

 

Now where is that exit door?....


For investors = Dec 14.2007 ~ Jan. 07.2008 ....IMHO.

 

Maybe I've just got it all wrong, but I'm still a bit surprised by some of the 'sky is falling' scenarios. Assets go through various cycles all the time. The reasons they go up and down are incredibly varied, but we do know they regularly go up and down.

IMHO, we need to know what type of investors we are and then stick to a game plan.

I know there are certain 'trading' type investors who 'stop loss' everything and sell if an asset falls anywhere near purchase price as this preserves their capital and they only buy anything if it's solidly on the rise. I appreciate this is one investment style that some like and that's fine and may work in a number of cases. Indeed the reduced negative cashlow implications of this style of investment has a number of advantages. It is however, ONE style of investment.

Others take a different approach...... they research an asset type, decide that although it's a good long term investment, it may well go up and down in value over the short to medium term, but they don't necessarily sell when an asset price drops. Indeed, depending on certain criteria, they may even buy more. This approach can also work well for many.

IMHO there's a BIG difference between the two though. If you come anywhere near the second type of investor, you have to be especially cognisent of CASHFLOW. Cashflow is the life blood that will allow you to hold your assets during the inevitable ups and downs that occur while holding quality assets over the long term. Too high a leveraged position and/or not enough cashflow and you line yourself up to crystalise losses at exactly the worst possible times.

Has Sydney property been a good investment over the last 30 years? It's been brillant! But in many areas, you probably haven't seen big rises since about 2003/04. Historically this isn't necessarily unusual, it's just part of the various investment cycles. I've had one property that probably hasn't moved much for 3 or 4 years but it went up about 50% very, very quickly just before that time.

In short, there are times when I may need to cashflow an asset through various cycles without necessarily seeing brilliant growth every six months. But if I'm of the opinion that it's a good quality asset, that will appreciate over time, my priority becomes how I best cashflow the holding of the asset.

What about the sharemarket? We've just had a reasonable fall at the beginning of the year of about 20-25%.

Is this unusual? How many times has the market fallen by this amount or more in the last 40 years? Plenty of times! Historically speaking, unless we have plenty of cash reserves, we should almost be anticipating the need to handle 25-35% falls in the stockmarket if need be without having to crystalise losses.

Was there any warning signs that the market was getting well and truly overheated? Have a look at any ASX Chart for 10 years or longer and you'd see 2003-2007 was very unusual.

In short, if we're going to Margin share purchases in a normal market, and we don't have big cash reserves sitting on the sidelines, then IMHO we should have our LVR's no more than 50-odd percent to allow for that 30% drop that may occur. If the market is showing signs of being very overheated and may result in an even bigger drop, LVR's probably should be below 50%.

As investors, we often take those first tentative steps getting a financial education, hopefully followed by some action that leads to us obtaining some more assets, but somhow in our wide-eyed optimism we forget many of the basics of how to KEEP some of these new assets.

Whatever tools we may choose to use, whether it be Stop losses, Cashflow or something else, learning to KEEP our assets after we've obtained them should be one of our highest priorities.

My 2 cents.......

 

I'm pretty much a buy and hold type of investor (with property & M/Fs).

My knowledge and experience with shares is very basic which is why I choose managed funds (hopefully, the fund mgr's know what they're doing). Whilst I expect share prices/markets to fluctuate, I sometimes question my decisions (on holding) when I hear/read talk of " oh, you should have sold out last month".

At the end of the day, I have held my mngd funds (main one being navra) and just hope that the worst of the market "drop" is behind us, but who knows.

 

Hi Sim.

Yes, I intend holding on to Navra fund long term.

Not overly concerned re margin loan as I tend to pay margin loan down regardless of what market is doing so have a buffer up my sleeve there. Suppose I just get a bit disillusioned when I see the value of my holdings going south.

Yep, I realise Alans' post was in reference to traders (which I am definately not).

Thanks again, you have a way of putting things in perspective.

 

Excellent post by Alan a few up. The two funds I have (Navra and CFS geared share) I have because I think they are managed well, and long term they will perform well. I hold CFS for growth, and Navra for income. I dont have any interest in "trading" the funds, funds are too hard to time into and out of. When I have some small debts out of the way, and I've saved a buffer into ING direct I'll start paying regularly into the two funds. Buy and hold and dollar cost averaging is definitely my plan re shares and funds.

 

U.S. stocks tumbled

July 9 (Bloomberg) -- U.S. stocks tumbled, sending the Standard & Poor's 500 Index into its first bear market since 2002, on growing concern the biggest mortgage finance companies may not weather the housing slump.

Bloomberg.com: Investment Tools

Bloomberg.com: Worldwide

 

Current (weekly): DOW, SHANGHAI,NIKKEI, XJO.
Horizontal lines represent 50% and 61.8% retracement levels.

 

Tropo,
Is it your belief the asx200 is in wave 3 ?
If so, that 4300 level is very much on the cards - although a short term a rally to around 5500 is probably going to happen at some point soon (I hope).

David

 

Hi David,

Wel.... I do not like what I see on my charts, so IMHO 4300 level (I’ve got 4280) is a real possibility.
Personally I do not follow Elliott stuff but it seems that 3rd wave may be in play.
At some stage of the game market will go back up possibly to 5320/5440/5560? (approx).
It seems that at the moment XJO is on the way to 4757(very important level).
Temporary rebound may give you an opportunity to put down some 'dogs' if you do have some.
Happy Trading and stay !!

 

Mate, no matter what the bigger picture financial situation, a happy wife is worth way more than the $100K ;-) Plus now you will have the joy of being told to paint the ceilings next weekend.

 

XJO

XJO = second ’leg' down in play.
Enjoy...