chiangmai
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Post by chiangmai on Aug 7, 2022 7:09:44 GMT 7
The big question for many investors is whether the current surge in equity markets is sufficient proof that they've reached the bottom or whether this is nothing more than a bear market rally that has a short life. Todays headlines in the financial papers haven't helped, "Berkshire pounces on market slump to buy equities", Buffet is buying the dip, just like we all should do. Bear market Fed watchers remind us that the Fed has said repeatedly that the next steps for interest rates will be determined by the data and market activity is not the data they are referring to! The BIS confirms that, "the recent surge in inflation is not simply a story of excess demand that overwhelmed the pre-pandemic trend supply of the economy," he wrote. "Rather, it is a case of diminished supply capacity that has not kept pace with the recovery to trend". At some point in the future, supply-side capacity should return to normal but before that can happen, business must resume full output, everyone must return to work, broken supply chains must be repaired and geopolitical conflicts must be settled. Those things will take time. Just because the price of oil has dipped below $100 and Ukraine has shipped its first load of grain overseas, doesn't mean the supply side has been healed, even if some investors see those things as important indicators. Want proof? GDP levels in emerging and developed economies remain substantially below the pre-pandemic trend. That continues to imply that scarcity of supply will continue to fuel inflation, even if some of it is not sticky and will fall away with time. The bond markets are supportive of the above. "Exaggerated a bit by this week's U.S.-China tensions over Taiwan, 10-year U.S. Treasury yields dropped almost a full percentage point in just six weeks to as low as 2.51% while inflation-adjusted yields fell back to zero. The inversion of 2-10-year yield curve, often cited as the most accurate harbinger of recession, deepened to most since the dot.com recession at the turn of the century". The following summed things up nicely for me, from an investor's perspective: "the uncertainties are just too great in the midst of a tightening cycle to bet the farm on either outcome just yet. And many asset managers appear reluctant to jump on July's rally. "We lean more towards fading the rally in risk assets than chasing it," said Paul O'Connor, head of Multi-Asset at Janus Henderson Investors. "We can envisage a fundamental path higher for risk assets from here, but it is a narrow one." www.reuters.com/markets/europe/inflation-beaten-team-transitory-re-emerges-2022-08-03/ |
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chiangmai
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Post by chiangmai on Aug 7, 2022 8:07:22 GMT 7
We spoke earlier about the things that can and cannot be included in the 40% of a 60/40 fund, that percentage that is designated as bonds but in fact can contain almost anything that is useful to the objectives of the fund, including pocket lint! Below are the primary contents of the RICA fund by Ruffer, a fund I am quite keen on, at my last count, it was a 44/35/12/9 fund, that's equities/bonds/other/cash although this ratio can change often. Note the high percentage of holdings designated as "illiquid strategies and options".  |
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chiangmai
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Post by chiangmai on Aug 11, 2022 11:37:55 GMT 7
A useful and interesting article talks about the rebound in equities (and bonds): The chart showing the rate of fall in equities and separately, bonds, confirms that whilst holding bonds in a portfolio will not stop the fall in value, it will reduce volatility and the rate and depth of the fall. "Plenty of investors remain hesitant to jump on board the rallies in either stocks or bonds. Three previous rebounds in the S&P 500 have wilted this year, the index crumbling to new lows. Big swings in Treasury markets, meanwhile, have wrongfooted investors". www.reuters.com/markets/us/softer-inflation-huge-relief-battered-investors-us-stocks-bonds-2022-08-10/And truly conflicting views here, as might be expected: “This remains a bear market rally until we close above the 4,232 level on the S&P,” Stovall said. “After that, history reminds us that no bear market ever recovered 50% of its decline only to set an even lower low. It would be an early signal that the bear is behind us.” (NOTE: the S&P is at 4210 currently) By contrast: "warnings from strategists at firms like Morgan Stanley and Goldman Sachs Group Inc. have been getting louder. In a client survey conducted last week by Wolfe Research during a webcast, 75% of the participants said the S&P 500 has yet to reach a bottom". finance.yahoo.com/news/stock-rally-everyone-mocked-headed-160000636.html |
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chiangmai
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Post by chiangmai on Aug 12, 2022 9:24:20 GMT 7
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chiangmai
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Post by chiangmai on Aug 14, 2022 9:21:23 GMT 7
As said, I'd be happy with 8/10% return per year, here's one model that I'm working on that achieves that. Low volatility, low PE, low risk, 58/42 and a nice geographic spread. The upside is constrained but who cares, so is the downside, TN reckons less than -3% over the past year.  |
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chiangmai
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Post by chiangmai on Aug 14, 2022 10:25:40 GMT 7
Why three different wealth preservation funds? Because they all behave and perform differently. CGT is the current winner but it wasn't in the past, PNL historically has a higher equities ratio which means it has tended to outperform its peers, not so currently.
Why RL Global? It's multi-manager, low risk with a good track record, good geographic diversification and good past performance.
Why F&C? Consistent dividend payments since the fund was first started over 100 years ago, low FM turnover. The Board has said it wants to close the discount gap and that's just what's happening now but NAV is still -5.5%.
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Post by rgs2001uk on Aug 15, 2022 20:50:05 GMT 7
Why three different wealth preservation funds? Because they all behave and perform differently. CGT is the current winner but it wasn't in the past, PNL historically has a higher equities ratio which means it has tended to outperform its peers, not so currently. Why RL Global? It's multi-manager, low risk with a good track record, good geographic diversification and good past performance. Why F&C? Consistent dividend payments since the fund was first started over 100 years ago, low FM turnover. The Board has said it wants to close the discount gap and that's just what's happening now but NAV is still -5.5%. Nice to see For & Col get a mention. |
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chiangmai
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Post by chiangmai on Aug 16, 2022 4:08:29 GMT 7
Why three different wealth preservation funds? Because they all behave and perform differently. CGT is the current winner but it wasn't in the past, PNL historically has a higher equities ratio which means it has tended to outperform its peers, not so currently. Why RL Global? It's multi-manager, low risk with a good track record, good geographic diversification and good past performance. Why F&C? Consistent dividend payments since the fund was first started over 100 years ago, low FM turnover. The Board has said it wants to close the discount gap and that's just what's happening now but NAV is still -5.5%. Nice to see For & Col get a mention. I don't know why it hasn't had more mentions here, 10% growth per year for the past 5 years is fine for me. |
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chiangmai
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Post by chiangmai on Aug 16, 2022 7:39:07 GMT 7
BTW my portfolio just passed its previous 3 year peak value and has recovered all losses to date, up 41.2% since May 2019 (I previously quoted 32% or so, that was incorrect). The big question for me now is when should I buy into F&C and RL, both of which are 95%+ equities and will extend my risk significantly. I'm very comfortable doing nothing, for the time being, Blackrock analysts don't believe the rally is sustainable although JPM thinks it "has legs" (probably short ones I think). An interesting article the other day talked about perspective and how it's easy to get immersed in the euphoria of the moment and lose sight of the bigger picture. Inflation has still not been tamed by any means, one set of data points doesn't make a trend and there's a whole truckload of other data points that are leaning the other way. On the other hand, F&C at -5.5% to NAV is tempting and the divi's are consistent.....I believe I shall wait and if I find myself on the wrong side of history later I shall remember that I probably don't need a rally to make a paltry 10% per year. And talking of indicators, CGT reduced their allocation to equities to 24%, slightly more than my 33%.
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Post by rgs2001uk on Aug 16, 2022 21:09:18 GMT 7
Nice to see For & Col get a mention. I don't know why it hasn't had more mentions here, 10% growth per year for the past 5 years is fine for me. I held it years ago, it was binned as I was downsizing from about 30 holdings, too may to track. Others to consider that I held that were also binned, Caledonia IT, Brunner IT and Witan IT. |
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chiangmai
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Post by chiangmai on Aug 17, 2022 6:49:44 GMT 7
I don't know why it hasn't had more mentions here, 10% growth per year for the past 5 years is fine for me. I held it years ago, it was binned as I was downsizing from about 30 holdings, too may to track. Others to consider that I held that were also binned, Caledonia IT, Brunner IT and Witan IT. I have looked at all of them, Brunner is good at times and Caledonia is currently a bargain at -11% to NAV but there's nothing consistent or reliable about them, apart from divi's. F&C still looks like the best of the plodders to me but only time will tell. I think it's often tempting in this game to forget what we're trying to do and to become impatient, especially during the good times. It's a bit like buying a car. You (not you personally) buy a Honda Civic because you know it's a solid reliable cost effective means of transportation but you gave it away and bought a lambo instead, just because you thought you'd get there quicker.......in rush hour, in Bangkok traffic and oil at $150 pb! Silly boy.  |
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AyG
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Post by AyG on Aug 17, 2022 9:05:12 GMT 7
Caledonia is currently a bargain at -11% to NAV You may want to check your facts. It's actually -22.8% at the moment (which is fairly typical for it). |
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chiangmai
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Post by chiangmai on Aug 17, 2022 9:29:35 GMT 7
Caledonia is currently a bargain at -11% to NAV You may want to check your facts. It's actually -22.8% at the moment (which is fairly typical for it). Yep, you're right, it's Brunner that's -11%. |
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AyG
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Post by AyG on Aug 17, 2022 12:50:10 GMT 7
F&C at -5.5% to NAV is tempting and the divi's are consistent.... F&C, with its vast number of holdings (349 as of last count), is a closet tracker. Its 5 year performance is 61.8% (with income reinvested). In comparison iShares Core MSCI World UCITS ETF Acc GBP has returned 69.4%. So, you're actually worse off buying a managed fund than buying an ETF tracker. Attachment Deleted(B is the ETF.) Note also that F&C has a by far larger draw down than the ETF. A good fund manager, through stock selection, can beat a benchmark by roughly 2-3% a year. (Any more than that, and it's almost certainly luck or high risk taking.) Clearly F&C is short of a good fund manager. Plus, the bid/offer spread with the ETF is less, it's more liquid, and there's no discount to NAV to worry about. The case for buying F&C is pretty weak. |
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chiangmai
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Post by chiangmai on Aug 17, 2022 15:10:46 GMT 7
Up to you, I don't think there's that much in it. In fact the discreet performance comparison of the two funds shows F&C to be the more profitable holding for 4 out of 5 years, with the exception of the 36-48 months timeframe. If you like ETF's go for it, I prefer to go with a managed fund that has the potential to beat the index by a greater margin. I also prefer that FM's are able to switch in and out of different geo markets, as economic circumstances dictate.
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