Active manages relies on selecting individual investments, like single stocks, should do well in the remaining months of this year in NZ as stock prices have extended. Not all Asian Pacific region markets will equally perform.New winners could emerge in 2018. Yesterday’s losers could become tomorrow’s winners and today’s winners will become tomorrow’s losers. Funds exposure to overlooked frontier and emerging nations with attractive valuations could do well especially if they target winning investment and markets.
I'm of the thought that we may be turning the corner into something else - at least here in NZ where extreme selectivity is being shown with only a few stocks causing the index to reach new highs. ATM, obviously being the main one. I wasn't investing when other Bull markets reached their peaks but from what I have read extreme selectivity is one of the main indicators that the tide is about to turn.
I have some figures from the most recent market peak on the NZX50, which occurred on 21/3/18. These figures suggest that things may not continue to go up for much longer.
- Only four out of the 50 constituents closed at their 52 week highs on that day. Supposedly less than 10% is not a good sign as this shows that not many stocks are contributing to the rally.
- Only 14% of stocks closed at or within 2% of their 52 week highs on that day. This is down from 38% on the Jan 5 NZX50 peak. Supposedly 30-50% is considered healthy in a bull market. Again 14% is showing extreme selectivity in stocks that are participating in the rally.
- The percentage of stocks above their 200EMA was 52%. This is down from 76% on the Jan 5 NZX50 peak. In a healthy bull market this figure would be 75-90% and they say that when this figure declines to 60% or less it's likely that we are very late in the bull market cycle and the tide could be about to turn.
They also say that weakness hits small caps first, followed by mid caps and then lastly the large caps.
Year to date returns on the NZX indexes are as follows.
- Small cap index down 1.39%
- Mid cap index down 2.73%
- NZX50 up 0.28%
- NZX20 up 0.81%
- NZX15 up 1.59%
- NZX10 up 2.88%
This goes to show the influence that ATM is having on the overall market. Without ATM the NZX50 would most certainly be down for the year.
All of this make me reasonably bearish on the overall NZ market at present, although a selected few stocks may continue with their rises for a while longer yet.
It would be nice to get posters like Hoop who used to line up his/her ducks and that would help give what seemed to be a fairly reliable indication as to whether the market was going to go up or down. If anybody knows Hoop can you please ask that they come back and share their thoughts???
Disc: I have more money out of the market than in the market and because I'm bearish at present I'm not really looking to add positions. DYOR. My numbers could be slightly off and may or may not be relevant. Time will tell.
Very good post. Many of the European markets have had a tough quarter, down on average mid single figure percentage, and the U.S. indices are down slightly with the exception of the Nasdaq which is up very slightly. The really exceptional volatility this quarter has been disturbing to say the least and not least because it coincides roughly with the nine year anniversary of the bull markets inception widely accepted to start in March 2009 with the S&P 500 in the mid 600 range.
The extremely wild volatility is a classic early warning sign of the death of a bull market, bulls throw their heads and horns around wildly before dying, juts like bull markets do.
That said predicting the future is a VERY inexact science and the forward PE for the S&P 500 as noted in my post earlier this week is widely regarded as just 17 aided in no small way by the massive corporate tax cut this year.
So what to do....
Sitting on all cash is expensive in as much as there's plenty of utility type stocks on the NZX that will give you around three times the yield that you'd get on a Heartland Call account at 2.75%. Apart from that even in a bear market often you will find that really good stocks still go up.
All cash only works if the entire market goes down which is pretty rare.
So what am I doing ?
1. Because nobody can predict the market with exact timing and accuracy I'm having a bob each way on this market with just over 50% cash now in my portfolio.
2. Of the shares I'm holding they're predominantly high conviction stocks in an uptrend, SUM, HLG, ATM, (more on that shortly) and defensive positions like REIT ARG, (estimated to be trading at a ~ 10% discount to NTA which will be revalued shortly at an estimated $1.10, currently around $1.06), needs based business's like OCA and gentailer GNE for yield plus a modest position in AIR for yield and because people are likely to continue to travel because its so cheap and the PE is only 9.
What's my strategy if the market starts to turn against thy shares I'm holding ?
1. I'm not married to any of them, leave my pride and emotional attachments at the office door each morning.
2. If there's a breech of the 30 day MA of any stock I am holding in an uptrend including favored stocks like HLG and SUM I'll immediately sell one third. If the shares are still below the 30 day MA three working days later I'll sell more to reduce to half my original position. If within 3 working days it recovers up through the 30 day MA I'll buy back the third I sold.
3. 100 day MA. A breech of that indicator will see me sell my remaining half. ATM breeched the 30 day MA this week so I sold a third late this week. I'll follow the above pre determined path with the rest and the same TA indicators and actions with other high conviction positions in HLG and SUM.
If the market tide starts going out savagely, I will not try and swim against it.
More moderate conviction positions such as GNE, ARG, OCA, AIR, I'll run a 15% stop loss on.
Why am I taking a fairly defensive position ?
The situation with the Nasdaq in particular worries me. I see a day of reckoning coming and feel many of these companies like Tesla trading without earnings and burning vast sums of capital each quarter and failing to deliver on promised production targets are ripe for a MAJOR correction. There's also significant regulatory risk around some of the other FANG stocks many of whom are trading on no earnings or stratospheric multiples. Remember that the NASDAQ lost 90% of its value in the last tech wreck of 2000- 2001 and keep in mind that technology stocks compromise a huge 25% of the S&P 500 index.
Summing up in three words "I'm very cautious" at this point. I hope I'm wrong and the market settles down next quarter but one should be prepared for really serious volatility ahead.
Last edited by Beagle; 30-03-2018 at 09:01 PM.
Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.”
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
Very hard trying to be concerned.
My govt super has been increased,.Monday's payment already in my bank tonight.
Next week HBL's fat divie,which will be added to by a very fat divie from MEL .
Not to be left out HLG and TRA have both increased their divies.
Then in May NZM get in on the act.
Could be said I will be rolling in it,just by buying companies that have the capacity to,and are paying increasing divies..
However, I have sold a lot of my small cap Aussie holdings,using the funds to add to my MEL and TRA holdings.
Try this book to revise on the state of America in 1968.
1968. The Year that Rocked the World.
Author Mark Kurlansky. Published 2005. ISBN 0 09 942962 4
"It was the year of sex and drugs and Rock & roll; it was also the year of the Martin Luther King and
Bobby Kennedy assignations, the Prague Spring, the Chicago DNC Convention, the Tet offensive in
Vietnam and the anti-war movement, the student rebellion that paralysed France, civil rights, the
beginning of the end for the Soviet Union, and the birth of the women's movement."
-Publisher back cover notes.
winner69 said this was the best book ever, so I had a read...........
Working through those to see how close their predictions were.
First: Fiscal Crisis.
2007-2008 we had the GFC. Close but not quite enough to push America over the edge at the time,
Banks 'too big to fail" -but the Fed is still in resolution mode.
Second: Terrorist Act.
911 Twin Towers. Afghanistan is scapegoated and subjected to America's lust for gratuitous violence. https://en.wikipedia.org/wiki/Death_...ound_residents
World wide restrictions on air travel still in place.
Third: Federal Budget, government shut down.
There have been several short term government shut downs over debt limits. Pandemic rescue plan stalled in Washington; https://www.washingtonpost.com/opini...ge-is-stalled/
Fourth: Pandemic. Covid19. The trigger that starts the conflagration? Protests, riots, militia and security forces in streets across the country.
It's entirely China's problem that America cannot control the virus. Totally dysfunctional governance at state and federal
levels can be completely dismissed. https://www.cnbc.com/2020/09/11/us-c...ing-trump.html
South China Sea - China - fear of the loss of hegemony.
Freedom of Navigation provocations were used in the Persian Gulf to foster military intervention.
The USS Stark and USS Vincennes served America well in bizarre incidents to warmonger in the Middle East.
https://en.wikipedia.org/wiki/USS_Stark_incident
"The USS Stark incident occurred during the Iran–Iraq War on 17 May 1987, when an Iraqi jet aircraft fired two Exocet missiles at
the American frigateUSS Stark. A total of thirty-seven United States Navy personnel were killed or later died as a result of the attack,
and twenty-one were injured........................................... ..
Washington used the incident to pressure Iran, which it later blamed for the whole situation. President Reagan said "We've never
considered them [Iraq's military] hostile at all", and "the villain in the piece is Iran".[7][8][9]"
Both incidents show how desperate the USA was to export barbarity and extreme violence.
So. What was not on Strauss and Howe's prediction list?
Well, they didn't predict the Tech revolution, the dysfunction of the old media/fourth estate and explosion of social media.
But fakebook et al, is totally benign, no worries.
Thank you everybody for some useful information. In my view it is time to spend some time to find out quality stocks that are still going for a song.Another way to identify possible stock market presents for 2018 is to look at last year’s worst performers. In other word, there is an overlooked play in the market.
According to link posted by GF, they are expecting the following scenarios.
Looking ahead, they expect key commodity prices to come under pressure, as growth in China slows, and global supply increases in some markets. On that type of scenario, milk prices could stay moderate in 2018.
It seems lamb prices are still going to elevate as solid demand coincides with tight supplies in key exporting countries in 2018. Beef prices are also still remain at historically favourable levels on the back of robust consumer demand even though international beef prices have eased from their recent highs. In short, Agriculture earnings will not drop drastically in New Zealand in 2018
Slower construction growth in China expected to weigh on demand for New Zealand logs.
Wool prices may struggle to improve much against a backdrop of expected slower growth in China.
International demand for specialist varieties of horticulture likely to remain firm.
They expect the Reserve Bank to delay interest rate hikes until late 2019. I also expected the same.
Last edited by Valuegrowth; 01-04-2018 at 04:26 PM.
NZ50 Capital index looking a bit weak of late as we move from a trend-following regime to a mean-reverting regime. Chart shows this
Valuation compression is often not recognised until it’s all happened.
These things don’t happen overnight - it’s a gradual grinding down process.
Many punters feel comfortable that interest rates in NZ will remain low for the ‘foreseeable future’. With divergence in US and NZ rates occurring prospects of higher inflation in NZ increase which means we could see some surprisingly large increases in our interest rates next year (the foreseeable future). I reckon some punters are getting a bit complacent about rates staying low for the ‘foreseeable future’
So future market returns for rest of this year and for 2019 might disappoint ....could even be negative. Just have to keep to be a stock picker strategy but being fully aware there are headwinds
Chart is of NZX50 Capital Index
Last edited by winner69; 08-04-2018 at 08:44 AM.
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
I certainly wouldn't invest in an NZX50 tracking fund at present as I agree the market per se is fully priced.
Without ATM the market would have had about a 4% correction in the first quarter, (read that somewhere...might have been the NBR recently) Plenty of dogs in the NZX50 not the least of which by any means is FBU. Plenty of volatility ahead that's for sure but that won't stop good companies growing.
The trick is finding good companies that will grow regardless of the macerations of overseas markets, trading on sensible multiples and while riding this rollercoaster only buy on the dips and try and ignore the noise.
Last edited by Beagle; 08-04-2018 at 10:39 AM.
Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.”
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
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Originally Posted by BobbyMorocco
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