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  1. #1231
    Speedy Az winner69's Avatar
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    Heaps more jobs .......bad news and markets weaken

    Then the good news .....service sector weakest for long time with consumers not spending as expected ..... And the markets recover

    It's all still going to plan

    http://www.nzherald.co.nz/business/n...ectid=11167222

  2. #1232
    Speedy Az winner69's Avatar
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    Phew ....that was a close call. Better than expected jobs data could have been bad, really bad. But as this guy said it was a number that appeased ordinary joe as well as Wall St ..... "US Jobs Stronger than Expected, but not Enough for Fed to Taper," was the title of a note from Brown Brothers Harriman.

  3. #1233
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    It's either a Goldilocks job number (not too hot, hot too cold), or we're seeing the beginnings of a polarity change, where good economic news now makes the markets stronger.

    If market participants no longer fear the taper, then we'll need companies in 2014 to show stronger earnings through stronger revenue growth, rather than better profits because of cost cutting measures and refinance savings.

    I'm wondering about debt limit early 2014. Are we going to avoid the fiasco of another Government shutdown.

  4. #1234
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    Quote Originally Posted by boring View Post
    It's either a Goldilocks job number (not too hot, hot too cold), or we're seeing the beginnings of a polarity change, where good economic news now makes the markets stronger.

    If market participants no longer fear the taper, then we'll need companies in 2014 to show stronger earnings through stronger revenue growth, rather than better profits because of cost cutting measures and refinance savings.

    I'm wondering about debt limit early 2014. Are we going to avoid the fiasco of another Government shutdown.
    then we'll need companies in 2014 to show stronger earnings through stronger revenue growth, rather than better profits because of cost cutting measures and refinance savings. ......isn't that the problem though

  5. #1235
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    Quote Originally Posted by winner69 View Post
    then we'll need companies in 2014 to show stronger earnings through stronger revenue growth, rather than better profits because of cost cutting measures and refinance savings. ......isn't that the problem though

    We all wish for economic good times....so when it happens you end up getting what you wish for......a series of seemingly paradoxes...that's another problem
    Last edited by Hoop; 07-12-2013 at 11:50 AM.

  6. #1236
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    Quote Originally Posted by Hoop View Post
    We all wish for economic good times....so when it happens you end up getting what you wish for......a series of seemingly paradoxes...that's another problem
    Hoop - you saying the markets not that strongly correlated to economic growth?

  7. #1237
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    S&P 500 is actually a poor measure of how well companies in the US domestic economy are performing. Although S&P 500 represents 80% of market capitalisation, it has the following issues when using it as a proxy measure for how well the economy as a whole is doing:
    1. Obviously excludes unlisted companies, which far out number of number of listed companies.
    2. S&P 500 has the largest companies, which derive a good percentage of income from offshore subsidiaries. In many cases, the biggest companies often derive more than 50% of income offshore.

    Even if you extend to the Wilshire 5000, same issues arise.

    The good old fashioned GDP may still be the best metric we've got. Here's a good chart posted a few months ago showing the divergence between the S&P 500 and the GDP growth forecasts. We know the share market should be anticipatory, so it's interesting to see an increase in the S&P 500, all while GDP forecasts are falling.

    http://www.businessinsider.com.au/gd...-sp-500-2013-8

    I give up trying to work out the logic of the markets many years ago. Also gave up trying to predict the market, except for knowing that during the history of the US stock market, it has never failed to make a higher high, even after the worst of crashes.

    Best approach if you are a buy & hold/monitor investor is to take the psychological approach to investing. Buy good quality companies you are happy to hold, even if the stock price falls 40%. Then you won't be panicked out of the market. Yes, these are all simple cliches, but has worked for me over 2 decades in the market (going back to the day I actually had to physically ring a broker and speak to a human before I could buy stocks).

  8. #1238
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    Quote Originally Posted by winner69 View Post
    Hoop - you saying the markets not that strongly correlated to economic growth?
    Yes and No........Ha I covered all bets written like a true politician...

    Seriously....Common sense tells one to say No and referring (share market growth, economy growth) of two points over a very long time period statistically the market v Economic growth are strongly correlated...but as you know Winner Crestmont Research says its the PE Ratio that drives the sharemarket not the economy although the economy does have an effect in increasing the E part of the PE

    ...therefore over the medium and short term (the time period that most people on Share Trader refer to) the answer is yes the two are not correlated.

    I dragged this off Google search, it doesn't matter if its not quite accurate as the shapes on the 60 year chart are similar to those I've seen and the ones I have misplaced (lost inside my computer somewhere).


    As one can see with the chart ...the two are part of the mean reverting process and as expected the S&P500 has reversed and closed the GDP gap.
    So has the S&P500 still got legs and rise to 2000? from this chart it looks possible...however the present secular bear PE Ratio downtrend shown on this 145 year chart dampens that possibility...http://advisorperspectives.com/dshor...P-and-PE10.gif but this is another story....

    Higher revenue = no increase in profit during a fully recovered economy ..a seemingly paradox.....................this can be explained.....more competitors entering the "now perceived" lucrative market lowering existing profit margins....supply/ demand price rises for raw materials...extra demand creating a shortage of raw materials .... increased debt costs as interest rates rise (monetary tightening to combat inflation), increased labour costs hiring of staff...more overtime (Laws of Diminishing Returns) ..intra-structural change costs in accommodating extra workers/management (the stages of company growth hurdles)...supply and distribution lines (logistics) becoming stretched due to increasing demand......etc etc
    Last edited by Hoop; 07-12-2013 at 11:46 PM.

  9. #1239
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    Quote Originally Posted by boring View Post
    .................................I give up trying to work out the logic of the markets many years ago. Also gave up trying to predict the market, except for knowing that during the history of the US stock market, it has never failed to make a higher high, even after the worst of crashes.

    Best approach if you are a buy & hold/monitor investor is to take the psychological approach to investing. Buy good quality companies you are happy to hold, even if the stock price falls 40%. Then you won't be panicked out of the market. Yes, these are all simple cliches, but has worked for me over 2 decades in the market (going back to the day I actually had to physically ring a broker and speak to a human before I could buy stocks).
    Hi Boring..This is the buy and hold argument which sounds good in theory but is horribly flawed.
    What stuffs up the argument is the fact that many good quality companies that have been around for a 100 years or more collapse during a bad recession....
    All it takes is one in your portfolio to cease to exist and the job to recoup the portfolio loss during the next bull market becomes even more difficult ,,,eg,,, If the stock market loses 40% it takes a 67% rally to get the market back to even....Now your portfolio with one company gone bust has probably suffered a bigger loss ...lets say 50% then you need a 100% rally to get your portfolio back to even... a cyclic bull market cycles average about 100% before the next bear strikes when means your portfolio could be underwater for the next decade....a very undesirable financial situation to be in if you are 60+ years old like me

    Now I hear you say I can pick good companies that won't fail...OK but the problem is that another company can also pick good companies especially when severely undervalued and after the worst is over and a hostile takeover occurs your portfolio takes a unforeseen hit.....

    A better argument is to buy and hold an index fund.....but cyclic and secular timing is needed...and that's another story too
    Last edited by Hoop; 07-12-2013 at 11:57 PM.

  10. #1240
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    I hear what you are saying, and in many respects don't disagree. However, I had carefully thought through these arguments many years ago and have decided I'm very comfortable with the downsides of this strategy. I have business rules in place to mitigate the downside, and the timeless diversification strategy helps avoid risk of ruin.

    I'm the first to admit, the classic buy and hold/monitor strategy is NOT for everybody. However, it does work well for the type of cash flow business investment strategy I have chosen to use. The most common argument against this strategy has always been the "takes a greater return to break even after suffering a large percentage loss".

    The Wall Street and Brokerage institutions were pushing the message "buy and hold is dead" very strongly and very convincingly during the GFC. But I've heard these arguments over and over again every time there is a Wall Street crash. They want punters to trade, they want punters to buy their buy and sell signals because they want their fees and commissions.

    I don't advocate the "purchase and prey" style of investing. That's for mugs, and those that don't want to put in the time and effort to monitor their holdings should just buy an index fund as you suggest. I personally prefer buying good businesses that return money to shareholders in the form of growing dividends, monitoring them for any secular trends that may warrant selling out of the business, but holding on if your original thesis for buying them in the first place remains intact.

    For example, I've held dividend aristocrat Procter and Gamble for over 15 years. During the tech wreck, I saw the price of the share fall 50%. However, the business remained solid, people were still going to buy Tide laundry detergent, still going to shave using Gillette razors and still largely continue to buy P&G's household staples at the supermarket. Sure, it took years for it to regain it's original share price, all the while I was collecting a growing stream of dividends. Dividends that would one day replace my salaried income. I am also a net buyer of stocks, so it just gave me an opportunity to buy more at better yields. I keep a diversified portfolio of about 30 good business all paying growing dividends.

    Because I know my businesses very well, I sleep very soundly during market corrections and crashes. I think during the GFC, I saw my portfolio value fall by about 30%, but I still slept like a baby.

    This is not to say I've never sold out. For example, I sold Intel several years ago when I though they took the eye off their business. Same with Hewlett Packard when they struggled and floundered around trying to redefine exactly what business they were in (hardware, consultancy services and/or bureau services). When it comes to secular headwinds, you usually get plenty of time to exit before the slow and steady decline in share price. At the moment, I'm monitoring the main secular headwind that faces Procter and Gamble, that's the rise of private label/store brands. If I think this becomes a prominent threat to the business, I'll sell out and buy companies like ConAgra that manufacture private label brands. In contrast to secular headwinds which usually result in a slow and steady share price decline, a general market crash takes everything down with it, but only from a price perspective. As a net buyer of stock, this is always an opportunity.

    Buying a holding an index fund is an excellent strategy for capturing capital gain. But for me, I want the dividend cash flow, so I'm looking at yields that are greater than the market yield. Usually short-term share price weakness creates these opportunities. I hate going out to work as an employee at some large company, so the dividend strategy was the strategy I chose to provide me financial freedom.

    I've always said there is no single best way of investing and trading the market that suits everybody. The best way is the one that suits your individual goals and personal psychology, as long as you follow a coherent strategy. You don't even need to beat the market, you can still make tons of money making below market returns (as I can probably attest to that, I've probably under-performed the market many years in succession).

    Because of the business rules around my dividend-growth strategy, it tends to favour mature, large-capitalisation companies (the behemoths). These companies are usually the ones doing the takeovers, so crystallising capital losses during a hostile takeover is less of an occurrence. It also tends to favour companies in the consumer staple and energy sectors. I have to monitor my sector weighings carefully to make sure I have a good cross-section of sectors. Surprisingly, I found I've always been underweight the Utilities sector, because they fail the growth side of the dividend equation.

    Some people are very successful at trading in and out of the market and picking tops and bottoms of individual stocks. It's not for me, and I wouldn't be successful at it (actually, I've tried short-term trading using technicals and I'm hopeless at it. Don't have the psychology for it, and too lazy to learn and master the proper psychology).

    If several decades of investing and trading has taught me, that's:
    1. The best investment/trading strategy is one that suits your goals and personal psychology.
    2. There is no single best strategy, all strategies over-perform and under-perform during different phases of the market.
    3. I would never be so bold as to think that I had the ability to chop and change strategies to optimise market returns.
    4. The market will humble you whenever you get over-confident.
    5. You can still make tons of money in the stock market even if you under-perform the market index.

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