Scary stuff

Actually i reckon this thread is just plain confusing...

One Day it's forecasts of ASX at 7000 by years end.
.
Next its a Crash of Gigantic Proportions
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Next its all just a miss-understanding and/or stirring to get 'bites'
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Next its "actually all is fine" during this 'bounce in the market'
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Whats Next???




DaveJ


I am 100% sure the market will go either UP or Down!... Or is that down then up?

 

Guys,

One final post before I down tools for the weekend and probably until mid next week. I normally don't post of a night time or on the weekend, but believe it or not, I was agonizing over this thread on the way home from work and wondering why it was getting such mixed reception. I particularly was concerned about Glebe's final post, as he is one of the good guys here who I hold in high regard. Then it finally dawned on me that members felt my musings here were somehow incongruent with my stated strategy. So I thought I better spell it out once and for all and then leave it at that.

Firstly, my strategy is a by-product of my present beliefs. My beliefs, as I've stated several times currently are as follows:

1. The ASX is in good shape based on projected corporate earnings and is priced at reasonable PE multiples.
2. The global economy remains in good shape due in large part to strong US consumption driving Chinese exports.
3. The Australian property market is over-priced on historical yield levels but demand and supply suggests it still might rise slightly over the mid term.

As a result, I have adopted a leveraged strategy that is aligned to these beliefs. I have leveraged into both property and shares to try and maximise my returns whilst the good times last.

Having said that, my beliefs are based on my current understanding and are open to challenge as that understanding changes. Specifically, I do believe that the global economy is not impervious to the threat of recession or even depression. However, presently I believe this to be improbable but not impossible.

My intent in this thread was to test other's views on the probability of that threat. Nothing more and nothing less. In doing so I was challenging my current beliefs. As, unlike Dr Lobster and others, I intend to adapt my strategy to the environment that I perceive we are operating in.

For example, should my belief change from the global economy being possibly at risk to being probably at risk, or worse still virtually assured of a major recession, then I would act accordingly. I know some here would argue that you can't see that coming, but I disagree. I, like many others, foresaw the dot-com crash and acted before it occurred. I was leveraged highly into shares at the time making nice profits, but interpreted the inflated PERs to mean that markets were over-heated so sold everything and parked my net worth in the safety of cash. That helped preserve my capital significantly and allowed me to place a $300K deposit on my PPOR a couple of years later. As such, I understand the importance of capital protection as much as capital growth and want to remain alert to the risk on my investments.

If I were to perceive significant risks were likely to impact my investments then once again I could sell down and ride out the storm in cash. We have seen the property cycle in Australia and most western countries play out recently. We have now recently also seen a good run at the equities cycle. With both markets being quite exposed and with risks to the global economy being numerous, I am not alone in considering the cash cycle as being the next logical place to invest my money at some point in the not too distant future.

So, in summary, I want to stress that my observations and my actions are in no way incongruent as Glebe alluded. My actions at present are completely in line with my current beliefs. But, as stated, those beliefs are receptive to change should sufficient case be made to the contrary. My intent here was to stimulate discussion on the potential of a global recession / depression as I consider this forum to be populated by intelligent like-minded investors that also want to understand what environment they are investing in.

It appears I might be in the minority in considering that you can foresee the onset of a negative investing environment globally, and that most intend to ride out that eventuality. I accept that too as an appropriate strategy if your time line is long term and your cash flows strong, but I have a different approach. One that is governed by my current beliefs and results in me adapting my strategy as I perceive the environment I am investing in changes.

If you have an alternative strategy then that is fine, but I believe that in no way invalidates my personal strategy of remaining adaptive to the market environment on a macro scale.

Have a great weekend and I'll check back in some time next week.

Regards,
Michael.

 

"It appears I might be in the minority in considering that you can foresee the onset of a negative investing environment globally, and that most intend to ride out that eventuality. ".

The issue there is that you have soaked up all the expert information that you can. The problem with that is the old jokes along the lines of putting 2 economists/lawyers in a room and ending up with 3 opinions, 1 of which is "maybe". I too soak up all that stuff and end up with a headache, thats why (for better or worse ?) I send off part of my investment monies to the likes of Navra and Platinum - thats my long term buy and hold. The rest of my equity exposure is a mix of blue chips that I am in and out of (which I really should stop doing because that is what my Navra funds are doing) and a few speccie miners - gold and uranium (aussie coy's that have reasonable assets overseas in countries that might actually let them dig the uranium out of the ground if they find some).

To bring this back to the topic and your latest posts ... Yes, on the weight of all the information we have the US economy is in serious denial ( but the experts have been saying that for a few years ). Thinking ultra long term exposes you to 1000 voices and 1000 opinions. I personally can't deal with that - I just hope that Kerr Neilson and Steve Navra can, and look after the funds I have given to them to invest of my behalf.

As for the rest, and this is on topic IMO, I wouldn't/couldn't "predict" with any confidence more than 1 -3 months out. What I am fairly sure of is that next week on the ASX is going to be ugly (starting tonight - but I'm writing this instead of watching the Dow opening)..will continue into early - mid september, then ramp up for futures expiry, after that down, down, down and recover into Nov/Dec.

 

Didn't someone use monkeys and prove that this was not possible?

If you're going to take such an 'active' approach with your investing, why bother with managed funds at all?

You can't control the fund manager, no matter how great your 'love' for them is, and regardless of what you post about them or their funds on this small forum. Eg. "I think the fund manager should...etc. etc." - wishful thinking!

All you can really do is pray and hope !

GSJ, bad guy .

 

Hi Michael,

I can understand what you are coming from because I was too traded a lot during the dotcom boom. But if you sold your banks, woolworths, BHP etc (blue chips) would you been happy with the decision now?
Timing the market is as you know very difficult even for "experts".
Another example, if the fall on the market that we experience two weeks ago continued until today, would you have sold? What happen then if the market bounce back with a vengeance two weeks later? Will you buy back at higher prices?

I am not critising your strategy that might well work in different circumstances. What do you think?

 

Mortgage Meltdown

Four Corners - 17/09/2007: Mortgage Meltdown