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Post by Tim on Jan 4, 2018 17:05:46 GMT
I see the Dow index has leapt through 25000 points and the FTSE has finished the day on a record as well.
That can only mean one thing - we're heading for a crash (or correction as the financial service bods call it!).
It might not be in the next few weeks but the fact it is even being mentioned in coverage is bound to turn it into an inevitability 
So hold onto your hats kids. |
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Post by johnc on Jan 4, 2018 17:18:54 GMT
As normal, none of this should be considered advice of any kind - merely my thoughts.
I agree it's an inevitability but the question is when?
There are lots of indicators that some markets are potentially over valued but until interest rates increase I can't see a viable alternative. I suppose there is a danger that someone with lots of money in the market makes a move which triggers a fall and they then get back in to take advantage of the lower prices. Right now though I don't believe anyone who tells me they know what's going to happen - I just make sure I am able to move quickly if required and I pick stocks I believe still offer value and strength. |
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Post by Deleted on Jan 5, 2018 8:56:51 GMT
As normal, none of this should be considered advice of any kind - merely my thoughts.
I agree it's an inevitability but the question is when?
There are lots of indicators that some markets are potentially over valued but until interest rates increase I can't see a viable alternative. I suppose there is a danger that someone with lots of money in the market makes a move which triggers a fall and they then get back in to take advantage of the lower prices. Right now though I don't believe anyone who tells me they know what's going to happen - I just make sure I am able to move quickly if required and I pick stocks I believe still offer value and strength. Exactly. There are things that look worse in terms of valuation - housing, Bitcoin etc etc. But we'll only know what's going to happen when it has happened - the markets are effectively vast buckets of sentiment.
I always try to keep in mind that the market's first dalliances with 7,000 happened at the end of 1999. It was certainly over-valued then, but that was almost twenty years ago. All you can ever do is take a degree of risk that you are comfortable with and accept that there will be good and bad times ahead. No point in panicking - it just makes you miserable.
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Post by racingteatray on Jan 5, 2018 10:42:17 GMT
People have been calling the top of the market at the start of each year for at least three years now. So we are in "boy who cried wolf" territory now. Despite being a securities lawyer, I don't have any genuinely informed idea one way or the other.
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Post by Tim on Jan 5, 2018 11:17:59 GMT
I know there's no direct link between these but I still find it fairly incredible that the stock market is at record levels while the majority of the populace are struggling with rising inflation, low pay rises, etc.
Ultimately all companies are providing a product/service of some sort to these folk with less and less money to spend.
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Post by Deleted on Jan 5, 2018 11:26:16 GMT
Not sure if this format will be acceptable to the software, so let's see:
Orange line is RPI, red is base rate, and green is a proxy for property (not one I have used before, so take it with a pinch of salt).
The two blue lines ate the FTSE 100, based upon price (lower line) and total return (upper line). What this shows us is that the FTSE hasn't really done a huge amount since 1999 in price terms - it's only when you include dividends that you get the upper line - so many investors have had income over this period and not a great deal of growth. What this tells us about the future is not a great deal, I'm afraid.
But we should all panic less - life's too short.
(None of which is advice, lest I be misunderstood!)
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Post by Tim on Jan 5, 2018 11:35:08 GMT
There's another interesting graph I got shown last year that compares the Wilshere 5000 against (I think) the GDP, presumably of the US.
From memory over the last 40-50 years the index generally follows GDP but when it has got significantly above it there has subsequently n=been a correction - the notable ones wer ein the last '80s and the dot-com bubble.
When I got shown it we were at similar levels to the latter of those.
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Post by racingteatray on Jan 5, 2018 12:24:53 GMT
I know there's no direct link between these but I still find it fairly incredible that the stock market is at record levels while the majority of the populace are struggling with rising inflation, low pay rises, etc. Ultimately all companies are providing a product/service of some sort to these folk with less and less money to spend. I suspect there is a corollary with the trend for very low base rates of interest in developed economies since the last crisis. What these feed into is historically very low interest rates in the bond markets that institutional investors usually invest in. You have treasuries and bonds issued by investment-grade/blue chip issuers bearing interest under 1% and even the high yield (aka "junk") bond markets are not nearly so high-yielding as they used to be. I looked up the stats back in the autumn for a presentation I was giving on high yield bonds, and IIRC the average coupon on European high yield bonds in 2017 dipped below 4%. Investors do not like that risk/reward ratio.
This has resulted in institutional investors and money managers having been engaged in a collective "hunt for yield" for their portfolios, and I suspect that this is part of what has fuelled the growth in the equity markets (share prices are not determined by prevailing interest rates in quite the same way as yields on bonds are).
Further, there is an argument to say that rising interest rates would be expected take heat out of the equity markets, as bond coupons started to rise and therefore borrowing costs for issuers started to rise (and thus affect the balance sheet which in turn influences share valuations), given that a lot of corporates gorged on very cheap debt over the last few years. Indeed, if rising debt costs started to stress over-leveraged corporates as a result, that could potentially have a significant negative effect on the equity markets.
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Post by johnc on Jan 5, 2018 13:22:35 GMT
I agree with your thoughts Racing and it wouldn't surprise me if there was significant pressure from big business to their pals within Government to try to keep interest rates low. However that's not necessarily a bad thing when you consider the havoc that high interest rates could bring.
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Post by Stuntman on Jan 5, 2018 20:35:13 GMT
I'm strongly considering taking some equity market risk off the table at some stage during 2018. I'm very much a buy-and-hold investor, but it may well be time to lock in some gains.
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Post by PG on Jan 6, 2018 11:42:47 GMT
I'm strongly considering taking some equity market risk off the table at some stage during 2018. I'm very much a buy-and-hold investor, but it may well be time to lock in some gains. The trouble is, as said above, finding yield elsewhere is not exactly a walk in the park. As 12th's graph shows, if you have been able to roll over dividends and reinvest them, over the past years you've done pretty well in the equities. My problem is that as I'm now retired, we now need to take the yield and live on it - from equities or drawing down pensions. Basically, I think we'll just have to carry on carrying on..... |
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Post by alf on Jan 8, 2018 10:41:58 GMT
Interesting thread - I have been wondering about this myself recently. And very recently - such as in the papers at the weekend - I have seen senior economists (those with a vested interest, in the finance industry usually) starting to make a lot of noise about why an imminent recession or financial correction is not inevitable. That makes me more worried, as they are obviously worried enough to start making noise to defend their jobs/bonuses!
As an addition to Tim's comment, the increase in share value is not only unmatched by the "common man's" financial position, the companies themselves are often making poor profits (if any) and are reporting negative business sentiment. It can't very long before that leads to a correction surely...
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Post by johnc on Jan 8, 2018 11:04:48 GMT
When I am considering buying shares I always look at the P/E Ratio and then I look at the dividend cover.
The P/E ration tells you how many multiples of earnings the company is valued at and the dividend cover tells you what proportion of profit is being paid out as dividend. I will also look at dividend yield (percentage of share price you will get as a dividend which is effectively the basic return on investment)
It's only my view and what drives me, but I like to see a P/E ratio below 15 in a perfect world but up to 20 is OK in my book if the other figures are acceptable. Once it gets to 25 I just don't go there except in exceptional circumstances where the dividend cover is very high and the yield is good.
There are a lot of companies with P/E ratios above 25 at the moment which indicates an overheated market to me but as I said previously what's the alternative? I think it will take a major "incident" or some profit taking by someone very large to spook the market.
All the above are my personal views and should not be construed as advice of any kind. |
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Post by Bob Sacamano v2.0 on Jan 8, 2018 11:31:00 GMT
I'd relax, Trump has tweeted that the rise in the US stock Markets down to him has created 6 trillion dollars of value, basically wiping out half the National Debt - all in 12 months. Come 2020 we'll all be in clover.
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Post by cbeaks1 on Jan 8, 2018 11:54:10 GMT
Has no one explained this to him yet?
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Post by Bob Sacamano v2.0 on Jan 8, 2018 12:06:40 GMT
Has no one explained this to him yet? Apparently a single slide PowerPoint is being prepared. It's a bit wordy at the moment and uses words of more than two syllables but they're optimistic. |
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Post by Deleted on Jan 8, 2018 13:30:06 GMT
Sadly nobody has pointed this out yet, or that to use the big button has to count to ten, meaning he has to put the big button down. Monsters versus Aliens has a good likeness.
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Post by Bob Sacamano v2.0 on Jan 8, 2018 14:54:38 GMT
Sadly nobody has pointed this out yet, or that to use the big button has to count to ten, meaning he has to put the big button down. Monsters versus Aliens has a good likeness. Fortunately, despite Trump's bragging about its size, there isn't really a button, rather a leather satchel, carried by an aide, containing the codes and options for a limited and full scale nuclear response. And his sandwiches. |
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Post by Tim on Jan 8, 2018 15:03:11 GMT
Apparently though there is a button on his desk which, if pressed, summons an aide with a can of diet coke.
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Post by racingteatray on Jan 9, 2018 10:47:33 GMT
When I am considering buying shares I always look at the P/E Ratio and then I look at the dividend cover.
Unfortunately, when I am considering buying shares, I always have to check whether the company is registered as a client. If they are a client (no matter where globally in the network, and irrespective of the scale of our involvement), I can't invest even if I personally have absolutely no involvement or access to any information. Them's the rules. And it's damned difficult to find listed companies that aren't registered clients in one way or another.
As such, I can only own shares in clients "blind" as part of a portfolio where the investment decisions are taken by a third party manager on my behalf with no direction from me (other than generic such as "low risk" or "high risk"). So no point me poring over results etc.
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Post by johnc on Jan 13, 2018 22:09:06 GMT
I went to a meeting with the Chief Investment Officer of an investment bank with a few other clients/individuals a while back. I took notes and listened to where they thought things were going. They were investing in a lot of interesting things including company's involved in the anticipated boom in electric cars. One of the company's mentioned struck a cord with me and I invested a bit a couple of months ago when the shares were down. Now they have had interest in a takeover which has pushed the share price up nearly 40% from my purchase price. Time to get out I think, bank the profit. I am very aware of the potential for the market to fall but while there are opportunities I am still going to take them whilst having my escape route well planned and ready to go!
None of the above should be considered to be investment advice just my own thoughts and experiences. |
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