General Markets Talk

[Kanga Commando]

What I've been doing over the past week and a half:
- I pumped and dumped XOM after the share price went absolutely bananas - it always feels good to pump and dump an evil company

- I recalculated how I measured volatility for each stock/ETF because I realised that they current broad based approach - ideally keep investments within a range of 10% either way - wasn't taking into account how bond/currency ETFs were much less volatile than stock ETFs, so I was losing out on opportunities to sell and buy

- To this end, what I did was take an ETF that was close to the mean in terms of portfolio volatility (10%), divided the percentage of my portfolio that said ETF comprised by a figure which approximated 1 standard deviation both ways (15), and then divided the 3-year standard deviation of the ETF by the mean standard deviation of my entire portfolio.

I found said SD by using morningstar.com and clicking on risk (NOT morningstar.com.au), and if that figure wasn't available I either used the index/category SD (depending on how appropriate for the ETF it was) or cross-checked with the 1-year (?) SD available on the www2.asx.com.au website for each ETF. If the 1-year SD was unusually high, as it was for HLTH, I assumed that the 3-year SD was up to 1.5 times higher (more like 1.25 for bond ETFs), which is reasonably consistent with what I've found when examining differences between 1-year and 3-year SD on sites like Fidelity.

I used a 3-year SD because a 1-year SD might be misleading if the market was behaving unusually for some reason, whereas a 5-year SD would exclude many newer ETFs and maybe not fully consider recent fluctuations.

After doing that, I realised that GGOV, AGVT and HLTH were too volatile for my liking (HLTH in particular was dangerously volatile, nearing a 3-year SD of 20%), and so I cut my losses in all three.

With stocks, what I did was use Refinitiv (available via SelfWealth Premium) to figure out the 5-year SD, divide that by the 5-year SD for VOO (S&P 500) or STW (S&P ASX 200) and then multiplied that by the 3-year equivalents for both.

- I then split my sector analysis into three categories: the ones I expected to do consistently well going forward in 2022 (blue), the ones I expected to do well at various periods in 2022 (green), and the ones I expected to plummet (red). I split some sectors - healthcare/communication staples into two because growth-oriented and blue-chip healthcare are quite different animals. The former would do reasonably well during disinflationary downturns, but not so much during stagflation, whereas the latter would hold its own in both scenarios.

- I replaced the Trend Trigger Factor with the True Strength Index - the latter is not as volatile and hence more indicative of how bullish/bearish a stock/ETF really is. I also got rid of the Linear Regression Std Dev and Donchian Price Channels because they needlessly overcomplicated my analysis, and I reinterpreted the Linear Regression 100% figure and the DMI while modifying my use of the Std Dev measurement to make sure it would be at the midway point between the Linear Regression 50% and 100% figures.

I reckon that the Trend Trigger Factor would be more suitable in less volatile markets, but I think that using both that and the TSI at once would just complicate things too much, and I have a bad habit of doing that. So I'll just switch back to the TTF when the market is less volatile. Kanga Commando The Cryptkeeper jd2010 might be interested in re-reading that old post of mine, because I made my edits there.

Thanks for he info on TSI. I havent used it before... Will try and backtest asap.

FWIW - Although I normally test trend trading indicators, lately i have come across several support/resistance as well as trend reversal indicators. They generally require more screen time as they are basically for scalping on FX and indices. Let me know if thats of interest and i will post some details.

 

[00Stinger]

Some ASX listed companies (such a ASX:SOR) you don't pay CGT on them at all. I sometimes trade SOR for shits and giggles.

why isn't CGT applicable?

 

[DaRick]

Thanks for he info on TSI. I havent used it before... Will try and backtest asap.

FWIW - Although I normally test trend trading indicators, lately i have come across several support/resistance as well as trend reversal indicators. They generally require more screen time as they are basically for scalping on FX and indices. Let me know if thats of interest and i will post some details.

Sure thing, man. It'd be appreciated.

It seems to me that TSI is the RSI to TTF's Stochastic - the former is better in volatile markets; the latter is better in relatively stable/stagnant markets.

 

[Falchoon]

Really hopeful m3m can have a similar hit, roll the dice jello.

Looks like it's run out of sellers

 

[Pappagallo]

why isn't CGT applicable?

This is from their website…

“Strategic Elements operates as a registered Pooled Development Fund (PDF) on the Australian Stock Exchange under the code ‘SOR’.

Under the Federal Government PDF program our investors pay no tax on capital gains or dividends to compensate for the higher risk of investing in small and medium sized companies.”

 

[00Stinger]

This is from their website…

“Strategic Elements operates as a registered Pooled Development Fund (PDF) on the Australian Stock Exchange under the code ‘SOR’.

Under the Federal Government PDF program our investors pay no tax on capital gains or dividends to compensate for the higher risk of investing in small and medium sized companies.”

ok so I did some research on this

Capitals gains on pooled development funds are exempt from tax, however if you incur loses they are not able to be claimed. They must be a very volatile market

Also this only applies to companies that registered pre 2007, the pooled development fund can no longer be registered by new companies

 

[Kram]

And finally back level on WPL after a couple of years..

 

[Nothing]

And finally back level on WPL after a couple of years..

Lucky you. I'm glad I sold some @$50+ but would need 50% from here to break even (excluding dividends).

 

[NonPhixion]

And finally back level on WPL after a couple of years..

Me and you both. It's been disappointing but I think we will see some good times ahead. At least I hope anyway, 35% of my portfolio is WPL

 

[Kram]

Me and you both. It's been disappointing but I think we will see some good times ahead. At least I hope anyway, 35% of my portfolio is WPL

Should have went in one more time back at around 21.

Could have fluked picking a bottom in the high 16s but pulled the bid when I heard Trump had Covid.

 

[DaRick]

No offence to anybody here, but it still looks like the ASX is in a bull trap, whereas the US stock market decline points to it being further ahead in the cycle.

Although the yield was low, I felt the need to supplement my existing AUS bonds with some inflation-linked ones and so bought about $1000 worth of ILB.

Meanwhile, I discovered that the yield for US TIPS was unusually high (and it triggered my technical thresholds), so I bought AUD$1000 of those.

I will purchase $725 of VAF once the price goes below $48 given its higher yield, and because that would trigger my technicals.

 

[Kram]

No offence to anybody here, but it still looks like the ASX is in a bull trap

Don't worry I want this to be correct!

 

[Jimmy_the_Gent]

No offence to anybody here, but it still looks like the ASX is in a bull trap, whereas the US stock market decline points to it being further ahead in the cycle.

We're at odds! I bought the dip and added VAS at $90.10 last week.

 

[DaRick]

We're at odds! I bought the dip and added VAS at $90.10 last week.

I think you'll do better than me up until May/June - maybe longer if the Russo-Ukraine conflict heats up and China seriously stimulates - but VAS is more volatile than what I'd like, and the Fed will no doubt keep hiking until oil/commodity prices decline. The RBA's reluctance to raise interest rates also won't do AUS financials too many favours. China may also face a financial crisis on top of its existing property one, which won't do our banks many favours, either.

I did buy $500 worth of TLS and WES some time ago (IMO a bit too early in the latter case with hindsight) - both are very stable stocks by Australian standards, WES is considered a high-quality stock by global standards, telcos tend to weather stock market slumps pretty well and consumer spending picking up going forward should help WES hold its own. Both also pay pretty high dividends, which are attractive in a low interest-rate environment. The only issue is that telcos like TLS don't do so well during economic recoveries, but the market is so volatile that I feel obliged to stick with them for now.

Instead of buying VAS, I decided to purchase $1250 worth of YMAX last month, since covered call ETFs tend to do well during volatile/bear markets, owing to their high yields.

 

[Kram]

TLS?

It's a dog pal!

 

[DaRick]

TLS?

It's a dog pal!

Yeah, but at least it's well-trained.

 

[The Cryptkeeper]

TLS?

It's a dog pal!

 

[Jimmy_the_Gent]

I think you'll do better than me up until May/June - maybe longer if the Russo-Ukraine conflict heats up and China seriously stimulates - but VAS is more volatile than what I'd like, and the Fed will no doubt keep hiking until oil/commodity prices decline. The RBA's reluctance to raise interest rates also won't do AUS financials too many favours. China may also face a financial crisis on top of its existing property one, which won't do our banks many favours, either.

It will be interesting to see what happens. I am slightly concerned about rates but from what I've gathered things never follow the obvious script so I don't spend much time trying to work out the cause and effect of it all. For example, I don't know how many rate hikes are baked into everything and I don't know that higher rates will hurt all shares. Not at this level at least. I also don't know if there's a random occurrence about to hit which will make this whole conversation irrelevant.

I think you and I are very different in this regard and that's why I find it interesting that we disagree on Australian equities right now.

I'm not knocking you by the way. I read all your posts and I respect the way you do it. I'm hoping we both make money - there's more than one way to skin a cat.

 

[DaRick]

It will be interesting to see what happens. I am slightly concerned about rates but from what I've gathered things never follow the obvious script so I don't spend much time trying to work out the cause and effect of it all. For example, I don't know how many rate hikes are baked into everything and I don't know that higher rates will hurt all shares. Not at this level at least. I also don't know if there's a random occurrence about to hit which will make this whole conversation irrelevant.

I think you and I are very different in this regard and that's why I find it interesting that we disagree on Australian equities right now.

I'm not knocking you by the way. I read all your posts and I respect the way you do it. I'm hoping we both make money - there's more than one way to skin a cat.

I think we have this disagreement because our approach to investing is quite different. One suspects that you're more tactical; if you see a dip, you buy. If it goes up beyond a certain point, you sell. This approach seems to work fairly well for you (I hope) - you must be able to think on your feet pretty well and be pretty self-confident to make money in this sort of volatile environment.

I prefer a longer-term, more strategic approach because I don't think on my feet well. This led me to bunch a whole pile of info from various successful investors and then synthesise it into a workable portfolio. Then, through a lot of trial-and-error to the tune of $1200 capital losses, I could then refine my approach to investing.

One other rule I've instituted ala David Swensen - I place anywhere from 2.5-32.5% of my investments in any given asset class (asset allocation, bonds). It used to be 2.5-35%, but I realised I was overweighting some assets in doing so. This approach allows me more diversification without suffering from a big loss should a disfavoured asset class go down the drain.

 

[Kram]

I think you'll do better than me up until May/June - maybe longer if the Russo-Ukraine conflict heats up and China seriously stimulates - but VAS is more volatile than what I'd like, and the Fed will no doubt keep hiking until oil/commodity prices decline. The RBA's reluctance to raise interest rates also won't do AUS financials too many favours. China may also face a financial crisis on top of its existing property one, which won't do our banks many favours, either.

I did buy $500 worth of TLS and WES some time ago (IMO a bit too early in the latter case with hindsight) - both are very stable stocks by Australian standards, WES is considered a high-quality stock by global standards, telcos tend to weather stock market slumps pretty well and consumer spending picking up going forward should help WES hold its own. Both also pay pretty high dividends, which are attractive in a low interest-rate environment. The only issue is that telcos like TLS don't do so well during economic recoveries, but the market is so volatile that I feel obliged to stick with them for now.

Instead of buying VAS, I decided to purchase $1250 worth of YMAX last month, since covered call ETFs tend to do well during volatile/bear markets, owing to their high yields.

Can you elaborate a bit more on your case for WES?

 

[sabre_ac]

No offence to anybody here, but it still looks like the ASX is in a bull trap, whereas the US stock market decline points to it being further ahead in the cycle.

Although the yield was low, I felt the need to supplement my existing AUS bonds with some inflation-linked ones and so bought about $1000 worth of ILB.

Meanwhile, I discovered that the yield for US TIPS was unusually high (and it triggered my technical thresholds), so I bought AUD$1000 of those.

I will purchase $725 of VAF once the price goes below $48 given its higher yield, and because that would trigger my technicals.

I think over the long-term being heavier in the US market than the AUS market is the better play.

I'm curious to hear your reasoning for ASX being a bull trap and the US market not having similar isuses?

 

[DaRick]

I think over the long-term being heavier in the US market than the AUS market is the better play.

I'm curious to hear your reasoning for ASX being a bull trap and the US market not having similar isuses?

In the long-term, yes. Once the US stock market recovers then its growth stocks (tech and to a lesser extent growth-oriented healthcare like Biotech) will take off, as would most cyclicals because 1) during the rebounding stage, people would have more discretionary income to spend and 2) people believe in the growth of the US. Small-cap and mid-cap stocks should rebound particularly strongly, since people would feel emboldened to take a few chances on 'the next big thing'.

Financials are a partial exception if interest rate hikes don't occur or aren't slated to, because rising inflation (where demand causes the price of goods to rise) makes its assets (money) comparatively less valuable. Customers patronising them more should help them though. Defensives are also redundant.

The ASX will also improve, but not to the same degree because it just doesn't have that growth component to it. Financials should rebound some, with the above caveats, and materials should do OK, but I'd plump for rare earths (graphite/lithium etc.) above all else. Iron ore's fortunes depend on whether China seriously stimulates, as do coal's. Coal will do better if Japan generates more electricity due to a hot summer/cold winter, and demand for steel products should increase when the Japanese market rebounds.

I had been under the impression that the US had passed its bull trap stage and was heading into the decline stage after FB got trashed, but it seems like people think they can still BTFD. So I may have spoken too soon. I think it's still further ahead than we are in this cycle, though.

When I talk about tech, I'm referring to 3rd gen tech more so than 2nd gen tech (GAMMA), though no doubt Gates and Zuckerberg will want a piece of the action. Those two are imperialists.

 

[00Stinger]

AVZ back up to 85 cents. Looks like getting back to its record value really soon

And RNU is now at 36.5. Just keeps going up at the moment

 

[Mofra]

No offence to anybody here, but it still looks like the ASX is in a bull trap

Agree - not buying right now.
I'm converting some holdings to cash to wait it out, although some acquisition schemes help that (SYD & AST upcoming, had another just before Xmas too)

 

[craigos]

I'm all in on the resources sector.