Black Monday

[Valuegrowth]

https://www.bloomberg.com/news/artic...-top-officials

[moka]

Growth in risky assets just like we had pre 2008 as investors chase higher yields of up to 15%. Issuance of US Collateralized Loan Obligation (CLO) funds is poised to set a new record and banks are getting ready for another strong year in 2019 as floating-rate loans remain in demand in a rising interest rate environment.
The CLO market, which performed well during 2008’s credit crisis, was boosted by regulators earlier this year when CLOs were made exempt from a Dodd-Frank risk-retention requirement that forced managers to hold some of their funds. The US Court of Appeals for the District of Columbia Circuit, including Supreme Court justice Brett Kavanaugh, ruled in February that CLOs backed by broadly syndicated loans do not need to comply with ‘skin in the game’ rules that were intended to align investor and manager interests.
https://www.reuters.com/article/us-c...-idUSKCN1NZ04J
Fed Chair Jerome Powell said that credit underwriting quality has deteriorated and leverage multiples have increased. Janet Yellen, the Bank of England, US Senator Elizabeth Warren and the International Monetary Fund have also criticised CLO markets.

[moka]

Musical chairs. Just because leveraged loans get packaged into CLOs does not make risk disappear. The credit risk of these loans is simply being transferred to the CLO holders who in turn may buy credit default swaps to further transfer the credit risk to protection sellers. Just like in the children’s game of musical chairs, when the music stops, someone is going to fall on the floor pretty hard. Unlike the children’s game, the effects will be much more painful, longer lasting, and contagious to taxpayer, who have not even been playing musical chairs.
https://www.forbes.com/sites/mayraro.../#7c14eb5b1384

[Brovendell]

My analogy could have been clearer. The point I was trying to make is why would one sell investments because we may have a share-market correction. I own shares in POT, AIA, MFT and RYM among others. These are all high P/E shares. They are also undoubtedly some of the best businesses in NZ. Some posters here say one should sell these shares now as we are going to have a crash next year. We should either go to cash or buy high yield and low P/E shares. If one is a buy and hold investor and has statistically at least another 20 more summers, why do that? The share-market has always recovered and gone higher eventually.
Quality is quality(location,location,location).
As an unabashed Buffett fan, I see that I own a part of some very good businesses (the anchor warp of a POT tug,a toilet in AIA , two spare tyres in MFT and 6 blankets in RYM). These will remain very good businesses through any correction and go on to greater heights.
As I don't need the money for at least 10 years, this is why I am not moving.
Interesting that these 4 companies were my 4 picks for the share competition (with MDZ) giving me a 24th out of 170 place. Putting my mouth where my money is.

[percy]

My analogy could have been clearer. The point I was trying to make is why would one sell investments because we may have a share-market correction. I own shares in POT, AIA, MFT and RYM among others. These are all high P/E shares. They are also undoubtedly some of the best businesses in NZ. Some posters here say one should sell these shares now as we are going to have a crash next year. We should either go to cash or buy high yield and low P/E shares. If one is a buy and hold investor and has statistically at least another 20 more summers, why do that? The share-market has always recovered and gone higher eventually.
Quality is quality(location,location,location).
As an unabashed Buffett fan, I see that I own a part of some very good businesses (the anchor warp of a POT tug,a toilet in AIA , two spare tyres in MFT and 6 blankets in RYM). These will remain very good businesses through any correction and go on to greater heights.
As I don't need the money for at least 10 years, this is why I am not moving.
Interesting that these 4 companies were my 4 picks for the share competition (with MDZ) giving me a 24th out of 170 place. Putting my mouth where my money is.

Great shares,great portfolio.
Your analogy was correct,you are thinking as an owner.The same way Kevin Hickman at RYM, and Bruce Plested at MFT would.
Takes a long time and a great deal of thought to build a portfolio such as yours.
Some very clever sharetraders do well,however I think most long term investors,such as yourself and Warren Buffett, would over time out perform them.
Not needing the money for at least 10 years means you have total financial independence,and bearing in mind most market corrections only last under 2 years,you are clearly"well positioned",and I hope other posters learn from your posts,that long term investing is sensible.

[Jay]

Great shares,great portfolio.
...,and I hope other posters learn from your posts,that long term investing is sensible.

With a rider that those shares are good investments in the first place, which in Brovendell's case they are.

Good post

[percy]

With a rider that those shares are good investments in the first place, which in Brovendell's case they are.

Good post

Agreed, and now you mention rider, Kevin Hickman by hanging onto his RYM shares would be a great deal wealthier than John Ryder who sold his.

[kiora]

"Not needing the money for at least 10 years means you have total financial independence,and bearing in mind most market corrections only last under 2 years,you are clearly"well positioned",and I hope other posters learn from your posts,that long term investing is sensible."
Agreed Percy. That's why its important that an investor always has enough cash/credit to last 2 years ahead without needing to sell unless its an opportune time.

[Biscuit]

.........These are all high P/E shares. They are also undoubtedly some of the best businesses in NZ. Some posters here say one should sell these shares now as we are going to have a crash next year. We should either go to cash or buy high yield and low P/E shares. If one is a buy and hold investor and has statistically at least another 20 more summers, why do that? The share-market has always recovered and gone higher eventually......

These are good companies but they were not always high P/E companies and will not necessarily always be high P/E companies. Even good companies can be over-priced. The markets cycle as do economies. IMHO it is prudent to rebalance the portfolio away from shares, especially high P/E companies and towards cash, bonds etc late in the cycle simply to minimise risk and worry and to maximise the joy of having cash on hand during market routs.

[Brovendell]

This thread is basically about how does one manage investment risk and it concerns me that some posters are selling a whole bunch of shares because they think a crash is coming.
Investment 101 tells you that you cannot time or predict the market vagaries. It also teaches you that diversification is the best means of handling risk.
I am hesitant to do this because, although this is what I do, I don't want to appear as though I know it all. One is always learning and modifying one's approach.
I diversify my portfolio and mitigate risk by constructing a portfolio that is like this:
60/40 shares/term deposits. Rebalance when out of whack by more than 5%
No share or ETF is more than 10% of the share portfolio.
NZ shares: 7 including 1 ETF -50% of share portfolio
Australian shares: 5 including 1 ETF-22% of share portfolio
International shares : 3 broad based ETFs-28% of share portfolio
Term Deposits: Laddered with 5 year terms in 4 banks owned by 3 entities.( Can't be bothered with bonds)

This is my philosophy. It is pretty normal and let's me sleep at night through boom and bust. Computer tracking programmes are not necessarily a good thing.
If you want risk, buy Australian shares. All the share screeners and annual reports don't seem to work for me. We read and get the feel about NZ shares everyday.

I am not going to buy or sell a share for 12months. Timing,huh!