This Bear market

[ralph]

In this bear market as we are seeing a lot of companies sp falling as to be expected of course ,and the oncoming recession driven by rampant Inflation I m h o .
What would everyone's long term plans be !
I am currently realigning my portfolio to be better placed when this market picks up.
I have been buying into Oceania, Asset plus Sanford's and a few other Bargains but every time I do they falls again , of course I surmised this as a possibility so I am holding back now until I can see the light .
Anyone see any light at the end /bottom of the tunnel or is this bear market in for a while yet maybe another three months /twelve maybe .
Any comments anyone on any of the above would be of Interest .

[Beagle]

I think central banks around the world are in for a long fight in regard to trying to tame inflation because its not so much a demand problem, (which they can control through traditional central bank tools), but a supply problem.

Central banks will slam on the brakes with strong and persistent intertest rate increases but I think inflation will be incredibly hard to tame.
Recessions in many countries around the world are inevitable in my opinion. The following well known cliché's spring to mind.
Don't fight the Fed.
Sell in May and go away.

I think the next 3-6 months or so as Central banks lift interest rates a lot are going to be very difficult and I expect a Bear market will become entrenched in many markets around the world.
Lets see the lay of the land in September / October...in the meantime I am expecting a long cold winter in more ways than one !
NZX50 could conceivably end the year below 10,000 because some of the heavyweight index stocks are still on incredibly high metrics despite pulling back a lot already.

I am sticking with a very high allocation to cash and short term deposits, a modest allocation to shares, (mostly growth at a reasonable price or value and staples stocks Utility and REIT) and adding some bonds as opportunities present.
I have been playing "defense" all year and its worked okay. There might be the very rare winner this year who have gone hard and early on energy and resource stocks for example but generally I think 2022 and this Bear market is mostly about capital preservation. That's how I see it anyway. Better times will come back in due course...just have to be patient and play portfolio defense in the mean time.

[ralph]

Agree with all the Beagle And what beat the recessions and cooled the Inflation rates in the 80s & 90s would be a totally different scenario in todays age.
I am going full on defense also now ,I see genesis hit a 1 year low I had that on a buy at that price but have gone on the defense with that and other Bargains now

[clearasmud]

As deposit interest rates rise it will be attractive to move some funds back out of shares for the certainty of a return, never mind that it's still below inflation.

[Beagle]

As deposit interest rates rise it will be attractive to move some funds back out of shares for the certainty of a return, never mind that it's still below inflation.

Good point. Some banks are now offering 3.65% for 24 month term deposits now. Some good quality bond issues over 5.5% lately too.

[ralph]

Good point. Some banks are now offering 3.65% for 24 month term deposits now. Some good quality bond issues over 5.5% lately too.

Yes that is a big Improvement for the bank rates with certainty versus uncertainty .
Do you think king salmon is worth a gamble if it goes down to 10 cps or px1 at the same hmm risky business but with the fun of a gamble

[Beagle]

This dog is too old for risky gambling so those stocks are not ones I follow. Good luck.

[Sideshow Bob]

I frequent a few other investing groups (mainly on FB), I think with the tide turning/turned, we can now start to see who's swimming with no clothes on.....well could see it before, but now they know!!

Many seem to have been invested in speculative, low-grade, high risk investments - and hopefully we aren't "full 1987" that turn off a whole new generation of investors recently come into the markets.

As Beagle mentioned, agree it is about capital preservation - but not many places to hide, with inflation at current levels. Most of us have enjoyed the strong markets over the last X years, and while no one wants to give any back - might be hard not too - or at least returns being less than inflation. Good on those who have played "defence" early and circled the wagons. I still see on some groups the "you don't lose to you sell" rolled out - but hard for alot of new investors to know if/when to cut their losses.

Hard to get excited about term deposit levels, but maybe the best port in the storm (and I have a few small staggered 6 month TD's that reinvesting as they mature). God, I haven't looked at the bond market in years!! I suppose with anything fixed interest, hard to know how much interest rates may increase.

I've always been a big fan of REITS - often quarterly dvvies, PIES, most operate DRP's, exposure to a diversified commercial property portfolio etc. But just see this as a little waiting game - what the impact of rising rates have on price, as many taken a pounding lately. But also on their lending/cashflow, how easily they have the ability to increase leases with inflation, but also the wider economic conditions with occupancies. Need to look harder on their borrowings and current structures, and also quality of management, rather than a cursory look through an AR and buying on yield....guilty!!

As for shares, for me it is about largely keeping powder dry. But looking to buy quality, buy something that you are happy to hold for 10 years. Companies with strong business models, low debt, good operating cashflows, have the ability to increase revenue with inflation, quality management, solid dividends that can be maintained as economies tank etc etc. No different than usual but probably in the last few years found myself holding some random sh1t!! Especially on a slow day at work with money in my online trading accout....!!!

Most shares will be in downtrends, trading under 200 day MA's etc. I'll be trying to maintain discpline, trying not to catch falling knifes, trying not to get smelly fingers (from trying to pick bottoms!! ), not "buying the dip, not buying for a hoped short-term rally - but instead buy at the right value, look for over-sold opportunities and for some sort of confirmation or basic TA of an upward trend.

I'm sure longer term there will be some great buying opportunities and patience will pay off.

We live in interesting times!!

[Beagle]

Great post mate. Patience...often the hardest investment skill to master.

[Sideshow Bob]

Great post mate. Patience...often the hardest investment skill to master.

Thanks Beagle! Absolutely!! The market was there yesterday, will be there tomorrow. There will always be opportunities.