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Sep 18, 2019
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Hawthorn
Anyone know a good resource for bond investment strategy? Exploring my options at the moment for diversification, and want to do some reading.
Depends on your objectives and time frames to meet your objectives. What is your appetite for risk? Are you investing or speculating?

Diversification, in my opinion, is just a catch cry used to often. What is the point of diversifying; to protect capital, to lessen your risk, or to make money on your money?

There is no point having one portfolio that looses money while another makes money because you're diversified. If you think a defensive approach is required, then go all defensive in quality, be it companies or bonds. Keep your speculating completely separate from your investing.

In answer to your question Benjamin Graham's The Intelligent Investor is about defensive investing.
 

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Janus

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Here's some sobering statistics for you:

During 2018:
  • licensed issuers received gross trading revenue of $490 million from binary options and $1.5 billion from CFDs—which can largely be attributed to a combination of net client losses and fees and costs charged to clients
  • CFD issuers automatically closed out 9.3 million client CFD positions in margin call, and
  • over 41,000 clients’ CFD trading accounts went into negative balance, totalling -$33 million (that is, clients owed money to the CFD issuer).
A review (REP 579) conducted by ASIC in 2017 found that:
  • 80% of clients who trade binary options lose money
  • 72% of clients who trade CFDs lose money, and
  • 63% of clients who trade CFD over currency pairs lose money.
There's a rule in the financial markets - the 90/90/90 rule. 90% of retail traders lose 90% of their margin within the first 90 days of opening an account. And they do this because they treat the market as if they are going to the casino, when the market is actually linked to real world data like ISM, GDP and economic, industry and company forecasts.

I'm expecting the US ISM numbers that will be released on Friday (Thursday in the US) to still show a contracting economy but for there to be significant uptick. Permits for new housing went up in November, so the wood, furniture and other related industries to the housing market will surge after winter. We are at the bottom of the trough and it's going to turn upward from here.

“Chemical industry has been slow globally, but the curve seems to be flattening.” (Chemical Products)

Economy is holding up. Business is staying constant. The same challenges persist — foreign exchange, trade uncertainty and trend changes [for example, sugar reduction].” (Food, Beverage & Tobacco Products)

Incoming orders and production have ticked back up. Tariffs are still a question.” (Furniture & Related Products)

Demand has stabilized for the last half of [the fourth quarter], and production will be stable for the rest of this year.” (Machinery)

2020 is going to be the year where everyone who blinked and sold off because of talking heads talking about a recession wish they never did, IMO. If you've got a decent risk management strategy in place, there's absolutely no reason you should be locking in profits unless you get stopped out.

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Jello_B

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Here's some sobering statistics for you:

During 2018:
  • licensed issuers received gross trading revenue of $490 million from binary options and $1.5 billion from CFDs—which can largely be attributed to a combination of net client losses and fees and costs charged to clients
  • CFD issuers automatically closed out 9.3 million client CFD positions in margin call, and
  • over 41,000 clients’ CFD trading accounts went into negative balance, totalling -$33 million (that is, clients owed money to the CFD issuer).
A review (REP 579) conducted by ASIC in 2017 found that:
  • 80% of clients who trade binary options lose money
  • 72% of clients who trade CFDs lose money, and
  • 63% of clients who trade CFD over currency pairs lose money.
There's a rule in the financial markets - the 90/90/90 rule. 90% of retail traders lose 90% of their margin within the first 90 days of opening an account. And they do this because they treat the market as if they are going to the casino, when the market is actually linked to real world data like ISM, GDP and economic, industry and company forecasts.

I'm expecting the US ISM numbers that will be released on Friday (Thursday in the US) to still show a contracting economy but for there to be significant uptick. Permits for new housing went up in November, so the wood, furniture and other related industries to the housing market will surge after winter. We are at the bottom of the trough and it's going to turn upward from here.

“Chemical industry has been slow globally, but the curve seems to be flattening.” (Chemical Products)

Economy is holding up. Business is staying constant. The same challenges persist — foreign exchange, trade uncertainty and trend changes [for example, sugar reduction].” (Food, Beverage & Tobacco Products)

Incoming orders and production have ticked back up. Tariffs are still a question.” (Furniture & Related Products)

Demand has stabilized for the last half of [the fourth quarter], and production will be stable for the rest of this year.” (Machinery)

2020 is going to be the year where everyone who blinked and sold off because of talking heads talking about a recession wish they never did, IMO. If you've got a decent risk management strategy in place, there's absolutely no reason you should be locking in profits unless you get stopped out.

View attachment 800072
Do you have an opinion on lithium pricing in 2020?
 

Janus

Dominus Ex Machina
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Do you have an opinion on lithium pricing in 2020?
Are you asking me if they’ll actually come up with a standard tradable commodity? Or if the price will rebound?

If it’s the first question - not sure, but it needs to happen.

If it’s the second - I don’t think it will. China has reduced subsidies and has allowed Tesla to build the first factory in China that isn’t a JV with a Chinese company. I was already suspicious of that, but then Tesla has submitted a patent for a new kind of lithium-ion battery that can do a million miles before being replaced, which they reckon will be used in trucks and urban transport.

Might be a bit of quid pro quo going on there, where Tesla gives the tech to Chinese companies open source for domestic applications. At any rate, longer range batteries equals less need to replace them which drives the price down, because with this development Tesla is basically the only game in town for long haul applications (although another company, Nikola, reckons they’ve developed even better tech then that). Couple that with oversupply worries, and I’d hold off on it for 2020 (unless it breaks out) unless you’re prepared to stick it in a drawer and forget about it. But if you’re going to do that, you’re unable to sell down your position and join the day trading party (or just cash in your chips and wait for things to stabilise) if the VIX starts ramping up.

Personally, any trade that lasts longer than three months is too long. I’d rather ride the coattails of a commodity or stock that’s breaking out and just keep rolling up my stop loss so others decide when the ride ends than try to predict a trough or a peak.

Leading indicators are for idea generation so you know where the next wave is coming from...but you don’t start paddling until you can see the wave. It’s the quants and market makers that will start that - the guys who spend millions of dollars on research, have relationships with the businesses that they invest in and so get the information that is “current” news six months before it’s released to the public.

Positive price action and technical analysis of resistance levels are your friends. Better to just trade what the market tells you to trade instead of arguing with it. If lithium is going down, it’s going down for a reason.
 

Janus

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ISM Manufacturing PMI report wasn't as good as anyone expected (including me) - probably will take a little more time for things to pick up in that area. I liken it to a cargo ship changing course. The Markit PMI index (another indicator you should look at if you want to know what's going to happen in 6-12 months in regards to GDP) shows a decline in growth as well.

On the flip side, non-manufacturing (which accounts for 80% of US GDP) is going gangbusters, with a NMI of 55.

The tensions in Iran affected the market for all of a day or so before the computers took over and kicked in their buy algorithms. One of the key reasons why I don't think there will ever be another GFC event is because people aren't in charge of the bulk of trading anymore precisely because of the GFC (where mass panic almost cratered the entire financial system) - as soon as the market dips to a certain level, stocks are flagged as a buy due to fundamentals and the market rallies.

80% of a professional trader's time is spent staring at a computer screen watching automated trades get placed and filled.
 

Kram

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Looks like we will be in for a rough day on Monday.

Had been looking at buying Oceana Gold, should have pulled the trigger on some last week.
 

Janus

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Looks like we will be in for a rough day on Monday.

Had been looking at buying Oceana Gold, should have pulled the trigger on some last week.
I pulled out last of half my positions last Tuesday (mainly energy and mining stocks that are directly affected by exposure to China). Should have gotten out on the Thursday/Friday the week before when they were already starting to sell off, but better late than never.

Already bought half the positions back on Thursday when it dropped 2%. Monday is shopping day. I’m expecting a 2-5% pullback across the board. That would mean around a 10% drop, which is historically what these virus concerns are good for.

I have no idea why the ASX went up on Friday. There was no logical reason for it - both the LSE and the NYSE went down in the sectors that are related to what Australia actually has exposure to. It’s like people looked at the Dow Jones Industrial Index and said “Oh, the Dow is up, that must mean everything is fine.”

The reason why the Dow was up was because companies like Tesla, Apple, Amazon etc. released earnings that massively beat projections. It had nothing to do with economic impacts of coronavirus. If coronavirus wasn’t a thing, the Dow would be much, much higher than it is now.

My only conclusion is that most Australian retail investors are dumb.
 

Janus

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I'm expecting the US ISM numbers that will be released on Friday (Thursday in the US) to still show a contracting economy but for there to be significant uptick. Permits for new housing went up in November, so the wood, furniture and other related industries to the housing market will surge after winter. We are at the bottom of the trough and it's going to turn upward from here.
ISM numbers for January beat market expectations. It improved to a growing economy for the first time in six months:

PMI® at 50.9%

GDP Growing at 2.4%

New Orders and Production Growing; Employment Contracting
Supplier Deliveries Slowing at Slower Rate; Backlog Contracting
Raw Materials Inventories Contracting; Customers’ Inventories Too Low
Prices Increasing; Exports and Imports Growing


If you take the time to understand how these things work, you can write your own money. But you've got to be prepared to do the work. Most of the people who talk about trading on shows are ex-bond/forex traders who look at the opposite sides of these things.

I mean, you've got people on Bloomberg wondering how this happened. It's like they don't know a ******* thing about cause and correlation between industries - if new housing permits go up, everything else is going to go up. It's just how the economy works.

If the coronavirus wasn't around, the S&P would be ripping it right now.
 

Kram

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Anyone have any goldies they like atm, either larger producers or in the juniors? I offloaded all my WAF at the start of the year and have nothing with that as a main focus in the sector now.
 

Pie eyed

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Anyone have any goldies they like atm, either larger producers or in the juniors? I offloaded all my WAF at the start of the year and have nothing with that as a main focus in the sector now.
Seek advice from n actual financial adviser and even then be ******* careful.
 

ash_1050

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Anyone have any goldies they like atm, either larger producers or in the juniors? I offloaded all my WAF at the start of the year and have nothing with that as a main focus in the sector now.
Do your own research but I'm in MKG and and MCR at the moment.
 

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sdfc

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Feb 15, 2019
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ISM numbers for January beat market expectations. It improved to a growing economy for the first time in six months:

PMI® at 50.9%

GDP Growing at 2.4%

New Orders and Production Growing; Employment Contracting
Supplier Deliveries Slowing at Slower Rate; Backlog Contracting
Raw Materials Inventories Contracting; Customers’ Inventories Too Low
Prices Increasing; Exports and Imports Growing


If you take the time to understand how these things work, you can write your own money. But you've got to be prepared to do the work. Most of the people who talk about trading on shows are ex-bond/forex traders who look at the opposite sides of these things.

I mean, you've got people on Bloomberg wondering how this happened. It's like they don't know a ******* thing about cause and correlation between industries - if new housing permits go up, everything else is going to go up. It's just how the economy works.

If the coronavirus wasn't around, the S&P would be ripping it right now.
The fed funds has been cut to 1.60%, the NY Fed is pumping money into the money market and the government is running a $1 trillion deficit. Everything's peachy.
 

Janus

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The fed funds has been cut to 1.60%, the NY Fed is pumping money into the money market and the government is running a $1 trillion deficit. Everything's peachy.
And yet the USD is strong.

Compare the US to everywhere else. Where else would you put your money? There are countries with negative rates still.

The Fed is pumping money into the money market because they are trying to get people spending and pump up inflation, but they can barely get CPI to 2%. The deficit isn't a problem unless GDP doesn't cover the rate on interest, which it does easily. It's the equivalent of an interest only home loan that has a credit card attached to it with no limit - as long as the money being spent generates value to the economy (such as spending on military) and therefore covers the payments, does it really matter how big the deficit becomes?

Answer: it doesn't. That's why Australia banging on about a trade surplus is rubbish, because it only matters when you believe you have nothing else to offer the world. As long as the money is being spent on infrastructure projects that add value to economy (i.e. shipbuilding industries for military which create jobs etc), then it's actually better if they spend money. Austerity never works.

The GFC completely changed the way central banks operate. Instead of being reactive, they are proactive and try to keep ahead of recessionary behaviours. The ECB buys something like $30b worth of treasury bonds per month to keep the Eurozone ticking over.
 

ash_1050

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Very speculative - both raising capital and not turning a profit. Surely there's easier money out there?
Expecting some announcements from them with regards to exploration holes and new sites in the next couple of months. Purely a speculative venture, as most small cap mining prospects are.
 

_Buffalo_

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Anybody been watching NEA (Nearmap)? Strong foundation, good product, has shown potential and is probably close to it's rock bottom share price due to a disappointing forecast report.
 

Kram

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Anybody been watching NEA (Nearmap)? Strong foundation, good product, has shown potential and is probably close to it's rock bottom share price due to a disappointing forecast report.
At 2.30 these guys don't like it. So it's probably a buy!

 

ash_1050

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Anybody been watching NEA (Nearmap)? Strong foundation, good product, has shown potential and is probably close to it's rock bottom share price due to a disappointing forecast report.
We use Nearmap at work over Google Maps but I can't see why most industries as a whole would have a need for the product and I doubt many people know it even exists.
 

Kram

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https://www.afr.com/markets/equity-markets/asx-to-drop-virus-fears-flare-20200222-p543b8

ASX to drop, virus fears flare

Australian shares are poised to open lower, amid concerns about whether the coronavirus outbreak is set to widen across the globe.
ASX futures were down 47 points or 0.7% to 7039. On Friday the S&P/ASX 200 slid 0.3% to 7139.
Shares tumbled in both Europe and on Wall Street to end the week with investors wary of being caught short over the weekend.
AFR interim profit season calendar: Today's scheduled results: Bluescope Steel, NIB Holdings, oOh!Media, WorleyParsons, WPP AUNZ
The focus as the week begins is the status of the coronavirus: is the outbreak worsening in China? is there about to be a surge in cases outside of China?
At a news conference on Friday Geneva time, Tedros Adhanom Ghebreyesus, WHO director-general, said he was optimistic the virus could be contained, however his optimism was tempered.
"Although the window of opportunity is narrowing to contain the outbreak, we still have a chance to contain it," he said.
"If we don't, if we squander the opportunity, then there will be a serious problem on our hands," he said.
The yield on the US 10-year government note fell 4 basis points to 1.47%, its lowest since September. The yield on the 30-year fell and reset its record low at 1.886% in the process; it pared some gains to end the day at 1.91%.
"Yields across the board are plummeting as investors are abandoning riskier assets, including stocks," wrote Oxford Economics' Bob Schwartz.
"Until recently, expectations of a central bank put gave solace to equity investors. But the market retreat now underway suggest investors are less confident that that a rate cut would be effective in staving off a recession if the disease is not contained soon."
In a note, Bank of America said its Bull & Bear indicator dropped to 5.7 from 6.5, driven by the biggest outflow from emerging market equities since September 2019.
While big techs tumbled on Friday in New York, BofA said inflows into tech were annualising at $US62 billion v the record $US18 billion in 2017. The latest BofA fund manager survey found tech to be the most crowded trade.
 

Kram

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Wall St tumbles on US virus warning
Timothy MooreOnline editor
Feb 26, 2020 — 4.38am


Australian shares are poised to fall again, as Wall Street extended its sell-off after the US Centres for Disease Control and Prevention warned Americans to prepare for "severe" disruption to daily life with a domestic outbreak of the coronavirus.
ASX futures were 159 points or 2.3% to 6667 near 8am AEDT, paring some earlier losses. The local currency was little changed.
Nearing 4pm in New York, all three major benchmarks were closing at or near their session lows. The Dow was down 3.2% or 879 points; it fluctuated wildly through the session; in early trading it had been up almost 190 points.
“The best course of action for investors is if you’re in stocks and you have a reasonable allocation, stay with that; we would not be selling into this weakness," David Katz, chief investment officer at Matrix Asset Advisors. "By the same token, if you have had cash on the sidelines you are hopeful to put to work, we think this is a good opportunity to be adding into stocks here.”
The VIX leapt as much as 19% to 29.8 - its highest since the late December 2018 markets swoon. It was up 14% at 3.58pm New York time.
President Donald Trump and his top economic advisor, Larry Kudlow, each sought to calm concern about the virus in contrast to the CDC's tone.
In the text of a speech, Federal Reserve vice chairman Richard Clarida reaffirmed the US central bank's manta that the US economy "is in a good place" overall. "The labour market remains strong, economic activity is increasing at a moderate pace, and the Federal Open Market Committee's (FOMC) baseline outlook is for a continuation of this performance in 2020."
In response to Mr Clarida's comments, Jim Bianco tweeted: "The Fed is still hiding under their desk."
Market strategists from bulls to bears offered conflicting views.

Michael Batnick, director of research at Ritholtz Wealth Management, said most investors would agree the sell-off is "normal" and not really worth paying too much attention to.
"The reason noise increases during these episodes is because every time stocks fall a little, there’s always a possibility they fall a lot," Mr Batnick also said. "What if the virus continues to spread, what if it brings the global economy to a grinding halt, and what if the stock market crashes? This is what investors are worried about."
Mr Batnick said: "The more you risk, the more you make, and the more you make, the more you have to be willing to lose. There is an amount of pain that you must be willing to bear per unit of risk."
"The data over the past week about the spread in other countries has raised our level of concern and expectation that we are going to have community spread here," Dr Nancy Messonnier, director of the CDC's National Centre for Immunisation and Respiratory Diseases, told reporters on a conference call.
What is not known, she said, is when it will arrive and how severe a US outbreak might be. "Disruption to everyday life might be severe,” she cautioned.
"We are asking the American public to prepare for the expectation that this might be bad," Dr Messonnier said.
The yields on US government bonds fell. At 4.13pm in New York, the 10-year yield was at 1.34% - it earlier touched 1.31% - and the 30-year was at 1.81%, according to Bloomberg data.
"It’s a market that’s not concerned about value right now, it’s concerned about safety," Don Ellenberger, head of multisector strategies at Federated Hermes, told Reuters.
"How low can the 10-year go? It’s difficult to say," Mr Ellenberger said. "We’ve printed the lowest print ever in 10 year Treasury (notes) and there’s no reason to say it can’t continue to go lower if you start to have headlines that people in NY are infected and that leads to more fear. I don’t think there’s any doubt that 10 year yields can go down well below 1 per cent.”
Across Europe, equity benchmarks closed down near 2%. The pan-European STOXX 600 has seen nearly $US700 billion ($1.06 trillion) wiped off its value since Friday's close.
“It’s the realisation that the market was not going to bounce like it usually does after a severe one-day decline,” Matt Maley, an equity strategist at Miller Tabak & Co, told Bloomberg. “Once that become obvious, the short-term traders started selling and the long-term investors pulled in their horns.”
The global impact of the coronavirus outbreak appears set to compound with South Korea now reporting near 1000 confirmed cases and the death toll from the virus in Iran reaching at least 15.
As seen in China, both consumption and production will be hit and it's unclear at this point how long it will take to rebound.

Oil retreated again - Brent was 2.8% lower at 4.04pm New York time - and even gold lost some of its lustre, it was 1.4% lower at 4.14pm New York time.
Investors hoping for help from central banks may have to wait.
In a column for Bloomberg, former New York Federal Reserve boss Bill Dudley said it's simply too early for a US rate cut. "The greatest risk to the record US economic expansion is an external shock that the Fed can't offset because it responds either too late or without enough force. This risk is rising."
However, Mr Dudley also wrote that for the moment, "the harm to the US economy remains mostly speculative".
https://www.afr.com/markets/equity-markets/wall-st-tumbles-on-us-virus-warning-20200226-p544ci

I would like to see markets take a sustained breather for selfish reasons.

Also notable right now is that the AUD is near a decade low against the USD.
I've been feeling frustrated and a bit silly for being in over 40% cash recently, could end up working in my favour if this carries on.
 
Last edited:
Feb 24, 2020
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If inflation is 1.9%, why would I put my money in a bank under term deposit for less than that? What kind of yearly return should I be looking for in a diverse stock portfolio?
 

ash_1050

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If inflation is 1.9%, why would I put my money in a bank under term deposit for less than that?
Because you're old or nearing the age of retirement and don't want to risk losing money if it's tied up in shares and there's a market selloff.
Alternately you're young and saving for a house with a view to buying in the next 6-12 months.

What kind of yearly return should I be looking for in a diverse stock portfolio?
It depends on the year. The market has gone gangbusters the last 10 years and returns over the last 3-4 years have been 10%-17% across the board for most investors. Next year could be 17%, it could be 2% it could be -10%, you don't know. Read up on how most individual stock pickers won't beat the market and then dump it in something like a Vanguard fund so you can set and forget.
 

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