Trading Houston 4

Discussion in 'Share Investing Strategies, Theories & Education' started by Tropo, 16th Sep, 2008.

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  1. perky

    perky Well-Known Member

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    My wife tells me the same thing all the time :):rolleyes:
     
  2. Tim__

    Tim__ Well-Known Member

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    Hi Tropo,

    good comments. Let's assume I invest now in the stock market, the market might go down another 10% (maybe), but based on previous historical timeframes and percentages, and based on the growth since the end of the last bear market, it would be reasonable to assume this bear market is all about clearing excess borrowings and asset growth out of the system.

    Therefore from here on in, if you invested now, then even with another drop. the likelihood is that there will be reasonable growth over the next 2-5 years.

    What I am saying is that if markets drop 10-50% regularly, then it makes sense to buy at or close to the bottom of a market, then hold. The next time the market drops 30% (this is assuming no stop losses in place), then in theory you would have still had previous growth.

    In this latest bull market case, in Mar03 the bear market ended, the ASX was around 2600. Now lets assume this is the bottom, or even better, lets assume the bottom is 4300, and you have stayed in the market from 2600 to 4300 over 5.5 years. Your return has been 10% per year. This is completely passive, absolutely no work. If you managed to use stop losses and avoid the bear market completely, and bailed out in Nov07 at roughly 6853, your return would have been nearly 20%.

    I really don't think it takes too much to suggest that if you bought now, held for the long term, that this is something that could work. Obviously if you want to be more active, there is a possibiliy you can make more returns.

    Managed funds over the long term are unlikely to beat passive index funds which will return 10-14%, managed funds are more likely to return sub 10% over the long term, PLUS you will have incurred realised capital gains through distributions, which suck really.

    SO my theory is, invest now using a multi-tiered strategy:

    1) Contribute fortnightly deductions of around $200 into the CFS geared share fund, with the plan of holding through the next bull run (this is money I can afford to sit on long term)

    2) Borrown $50k now, accept that I may incur a temporary 10% or more loss, but use this to buy STW geared at 95% and simply hold through the next bull run

    3) Allow up to $50k for trading in STW using stop losses, which I will compare these returns to no. 2 above

    I can't really anticipae major problems here, if there is an initial and temporary loss, I can afford to hold the position longer term, all I really need to do for no. 2 and 3 is ensure that I get a greater than 10% return over the next 1-5 years to be ahead.

    Does anyone really think the share market is not going to recover over a 5 year period?

    To recover from now 4840 to previous high of 6853 is a return of 42%. I would anticpate the market would recover this over the next 2-3 years, which is a 12-19% return for 2 and 3 years respectively. Even if it takes 4 years to recover, it is still 9% return per year, and that does not include dividends on STW, or include the gearing component in CFS which would leverage returns of double that (and this is saved money not borrowed money in CFS).

    As an example of trading, on Friday I bought $70k of STW, I sell $20k Monday as the market is likely to be higher, and I keep the other $50k of STW for long term.

    Regards,

    Tim
     
  3. Tropo

    Tropo Well-Known Member

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    When music stops, forget the old music. :cool:
     
  4. lorrimer

    lorrimer Well-Known Member

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  5. Tropo

    Tropo Well-Known Member

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  6. perky

    perky Well-Known Member

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    Its now hit that fib - but also last night went beyond (got down to 4225).
    I wouldnt be surprised to see an effort by all of the Reserve Banks / fed / English reserve etc do a drop of interest rates today or tonight to try and stop further rot.
    Tropo , whats the next level?
     
  7. Tropo

    Tropo Well-Known Member

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    perky,
    Sorry, I cannot give you my next level (I am cruising around Sth France at the moment), but from memory it is well below 4,000!! (XJO).

    PS
    French wine is really good!!!:D:D
     
  8. Tropo

    Tropo Well-Known Member

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    We do have a problem as XJO may fall another 200/400 points (possibly ??) so I would recommend French Muscat at the moment.:p:D
     
  9. Tim__

    Tim__ Well-Known Member

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    So what do you think Tropo - dead cat bounce or time to re-enter?

    Tim
     
  10. Tropo

    Tropo Well-Known Member

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    Catching a falling knife is a risky business. I would wait for a confirmation...
    Until than I would recommend 'San Miguel' beer :p:D
     
  11. Tropo

    Tropo Well-Known Member

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    Perky,

    Bad news = I am back...;)
    Good news = XJO may hit 3675/80
    Enjoy....:D
     

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  12. Handyandy

    Handyandy Well-Known Member

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    Welcome back from your hols.

    Why is it good news that the XJO will hit 3675? Is this another fib number? Do any of the resistance levels mean anything in this type of market?

    Cheers
     
  13. Tropo

    Tropo Well-Known Member

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    Only for those who are trying to catch a falling knife it may be a good news...:rolleyes:
    Yes, it’s close to another fibo number but not quite.
    At one stage market will stop falling down at one of those levels.
    Question is at which one? Nobody knows.:cool:
     
  14. perky

    perky Well-Known Member

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    Like you said , catching falling knives is a risky business.
    Perhaps this week may see the last of this bear market correction - end of October and then the USA election happening soon after.
    The $AU may at that point in time start to make a comeback too , at some point the US$ should fall with less money flowing in from the arab countries
    (I read that somewhere the us$ is being propped up in the lead up to the election by some arab countries).
    To me 3500 is possible (and in USA 7500 dow is possible).
     
  15. Tropo

    Tropo Well-Known Member

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    Perky,
    As you know, nothing is impossible in the market.
    AUD/USD may hit 0.5970/60 :eek: (currently at 0.6064)
    Have a good one! :D