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  • FIRST POST
    • BrockStoker
    • By BrockStoker 5th Feb 18, 8:32 PM
    • 193Posts
    • 87Thanks
    BrockStoker
    Correction in progress!
    • #1
    • 5th Feb 18, 8:32 PM
    Correction in progress! 5th Feb 18 at 8:32 PM
    I've just seen the largest (single day) spike in volatility I've ever experienced (currently @ 106%). Certainly it's looking like this is going to be the largest correction since 2015!

    https://uk.investing.com/indices/volatility-s-p-500-chart

    Time to look at what to buy with the cash I've been holding!

    More inclined to look at overseas assets/equities, but I have been thinking about buying some UK micro-cap for a while, and possibly some Chinese equities. Any one else shopping right now?
Page 15
    • Alexland
    • By Alexland 10th Feb 18, 8:45 PM
    • 1,578 Posts
    • 1,085 Thanks
    Alexland
    I agree we could just be looking at a correction here as some markets were just too hot in the last few months.

    As UK investors as we didn't really see the rapid overseas share price growth as our currency was strengthening at the same time negating a lot of the upside.

    It might be the next crash comes for all the reasons mentioned in this thread but after this correction has recovered? Who knows.

    Alex
    Last edited by Alexland; 10-02-2018 at 9:10 PM.
    • economic
    • By economic 10th Feb 18, 9:34 PM
    • 2,662 Posts
    • 1,414 Thanks
    economic
    I agree we could just be looking at a correction here as some markets were just too hot in the last few months.

    As UK investors as we didn't really see the rapid overseas share price growth as our currency was strengthening at the same time negating a lot of the upside.

    It might be the next crash comes for all the reasons mentioned in this thread but after this correction has recovered? Who knows.

    Alex
    Originally posted by Alexland
    I don't see a crash happening anytime soon. We have a strong global growth story, strong earnings, a steepening yield curve in the US, bonds seemingly at the start of a bear market, cash deposits guaranteed to lose money.

    In this scenario, where do you think is the best place to have most of your wealth?

    I would think easily stocks. In fact i am betting stocks will make new highs this year.
    • economic
    • By economic 10th Feb 18, 9:41 PM
    • 2,662 Posts
    • 1,414 Thanks
    economic
    At the moment my (excluding my wife's investments) portfolio is:

    35% investment property
    34% equities
    18% fixed pension
    13% cash (not normally this high, but looking to upsize home)

    But over the next 5-6 years (for retirement) I will be re-balancing my portfolio to something like this:

    34% equities
    30% bonds/cash (mainly bonds)
    23% fixed pension
    13% investment property
    Originally posted by chucknorris
    Thats a good mix. I am:

    stocks - 63%
    cash - 27%
    P2P - 10%

    I am now thinking of starting to derisk from P2P lending. i think derisking completely will take about 6 months to a year max. Its not that im worried about defaults, yet. Its more forward planning. Whilst i dont see a recession hitting the UK in the next 1 year or so, i think one could happen within 2-3 years and by that point i rekon there will be a lot of defaults on these P2P platforms. In this case i rather just start slowly derisking now and investing the money in stocks. A bit of forward planning, thats all.
    • Bravepants
    • By Bravepants 11th Feb 18, 12:08 AM
    • 340 Posts
    • 378 Thanks
    Bravepants
    A bit of forward planning, thats all.
    Originally posted by economic
    Planning is ALWAYS forward. It's always too late to do backward planning!
    • BananaRepublic
    • By BananaRepublic 11th Feb 18, 12:53 AM
    • 1,173 Posts
    • 849 Thanks
    BananaRepublic
    I don't see a crash happening anytime soon. We have a strong global growth story, strong earnings, a steepening yield curve in the US, bonds seemingly at the start of a bear market, cash deposits guaranteed to lose money.

    In this scenario, where do you think is the best place to have most of your wealth?

    I would think easily stocks. In fact i am betting stocks will make new highs this year.
    Originally posted by economic
    At present it does look fairly good, and I can see a year or two of bull market ahead of us. And yet crashes usually come along when you do not expect them, due to some external force - a hike in oil prices for example - or a weakness that most people did not see - such as junk debt.

    The one weakness that people talk about is Chinese debt. Given that the GFC was triggered by Western debt, primarily US debt spread around the US and Europe, perhaps the next crash will be triggered by Chinese debt. A crash has been predicted by many including a Niall Ferguson, due to raising interest rates and Chinese debt.
    • economic
    • By economic 11th Feb 18, 1:01 AM
    • 2,662 Posts
    • 1,414 Thanks
    economic
    At present it does look fairly good, and I can see a year or two of bull market ahead of us. And yet crashes usually come along when you do not expect them, due to some external force - a hike in oil prices for example - or a weakness that most people did not see - such as junk debt.

    The one weakness that people talk about is Chinese debt. Given that the GFC was triggered by Western debt, primarily US debt spread around the US and Europe, perhaps the next crash will be triggered by Chinese debt. A crash has been predicted by many including a Niall Ferguson, due to raising interest rates and Chinese debt.
    Originally posted by BananaRepublic
    I think we could get a em debt crisis. Rising rates and rising dollar could blow it all up. The question is timing.
    • Glen Clark
    • By Glen Clark 11th Feb 18, 9:56 AM
    • 4,067 Posts
    • 3,096 Thanks
    Glen Clark
    I don't see a crash happening anytime soon. We have a strong global growth story, strong earnings, a steepening yield curve in the US, bonds seemingly at the start of a bear market, cash deposits guaranteed to lose money.

    In this scenario, where do you think is the best place to have most of your wealth?

    I would think easily stocks. In fact i am betting stocks will make new highs this year.
    Originally posted by economic
    You haven't mentioned the thing that is causing prices to fall - possible withdrawal of QE.
    “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair
    • economic
    • By economic 11th Feb 18, 10:03 AM
    • 2,662 Posts
    • 1,414 Thanks
    economic
    You haven't mentioned the thing that is causing prices to fall - possible withdrawal of QE.
    Originally posted by Glen Clark
    The market knew QE is to be withdrawn weeks/months before the correction, why didn't it correct then?

    The correction was due to FED uncertainty. That is all. The vix trades just exacerbated the sell-off. This uncertainty will persist until we get more clarity from the FED and more economic data.

    A withdrawal of QE does not mean stocks go back down to 2009 levels. This is because a withdrawal of QE does not automatically mean credit suddenly starts to contract.

    Please stop reading the media or fake analysts.
    • Glen Clark
    • By Glen Clark 11th Feb 18, 10:22 AM
    • 4,067 Posts
    • 3,096 Thanks
    Glen Clark
    The market knew QE is to be withdrawn weeks/months before the correction, why didn't it correct then?

    The correction was due to FED uncertainty. That is all. The vix trades just exacerbated the sell-off. This uncertainty will persist until we get more clarity from the FED and more economic data.

    A withdrawal of QE does not mean stocks go back down to 2009 levels. This is because a withdrawal of QE does not automatically mean credit suddenly starts to contract.

    Please stop reading the media or fake analysts.
    Originally posted by economic
    Withdrawal of QE means rising interest rates. Which is a double whammy for share prices - Not only does money flood out of shares into cash, (Who wants Amazon at 300 times earnings when you can get more in a bank account) but companies have to pay more to borrow, leading to falling profits.
    “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair
    • Filo25
    • By Filo25 11th Feb 18, 10:36 AM
    • 1,297 Posts
    • 1,920 Thanks
    Filo25
    Withdrawal of QE means rising interest rates. Which is a double whammy for share prices - Not only does money flood out of shares into cash, (Who wants Amazon at 300 times earnings when you can get more in a bank account) but companies have to pay more to borrow, leading to falling profits.
    Originally posted by Glen Clark
    And the discount rate applied to future earnings increases.

    No idea how it plays out, but the current uncertainty is more a valuation issue than one with the real economy, perfectly possible to have a more significant correction when the underlying economy looks strong (not that I'm saying that will happen).

    Equities have had a hell of a run, but they are due either a more significant pullback or just relatively suppressed returns in the coming years, as always trying to predict when and how that happens is so phenomenally difficult, it is probably pointless!
    • Glen Clark
    • By Glen Clark 11th Feb 18, 10:59 AM
    • 4,067 Posts
    • 3,096 Thanks
    Glen Clark
    And the discount rate applied to future earnings increases.

    No idea how it plays out, but the current uncertainty is more a valuation issue than one with the real economy, perfectly possible to have a more significant correction when the underlying economy looks strong (not that I'm saying that will happen).

    Equities have had a hell of a run, but they are due either a more significant pullback or just relatively suppressed returns in the coming years, as always trying to predict when and how that happens is so phenomenally difficult, it is probably pointless!
    Originally posted by Filo25
    Exactly. You said it better than I have.
    Seems to me it depends on when they withdraw QE and by how much. I don't know. The market swings on what politicians and bankers say, because thats all we have to go on - but it has been notoriously unreliable.
    “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair
    • economic
    • By economic 11th Feb 18, 11:56 AM
    • 2,662 Posts
    • 1,414 Thanks
    economic
    Withdrawal of QE means rising interest rates. Which is a double whammy for share prices - Not only does money flood out of shares into cash, (Who wants Amazon at 300 times earnings when you can get more in a bank account) but companies have to pay more to borrow, leading to falling profits.
    Originally posted by Glen Clark
    Actually the pe of Amazon is now 200 - they are producing strong earnings. It was 300 before.

    Depends on how fast they unwind qe. The fed are for now in control about the pace - they can always slow it down if they see asset prices collapsing. But that!!!8217;s not even the point. You have earnings which are driving shares higher. You have rates higher increasing the discount rate. Which one is more offsetting then the other?
    • Glen Clark
    • By Glen Clark 11th Feb 18, 12:15 PM
    • 4,067 Posts
    • 3,096 Thanks
    Glen Clark
    You have earnings which are driving shares higher.
    Originally posted by economic
    until that raises the chances of withdrawing QE which drives them lower

    Depends on how fast they unwind qe.
    Originally posted by economic
    Exactly.
    But how do we know what they will do?
    Unless you can hire politicians for inside info like the big investors, all we have to go on is the bullsh*te they spout in public..........
    “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair
    • economic
    • By economic 11th Feb 18, 12:21 PM
    • 2,662 Posts
    • 1,414 Thanks
    economic
    until that raises the chances of withdrawing QE which drives them lower


    Exactly.
    But how do we know what they will do?
    Unless you can hire politicians for inside info like the big investors, all we have to go on is the bullsh*te they spout in public..........
    Originally posted by Glen Clark
    THats the beauty of it - you’re not meant to know anything for certain. That’s simply how it works. Otherwise it’ll be way too easy to make money.
    • fun4everyone
    • By fun4everyone 11th Feb 18, 1:37 PM
    • 882 Posts
    • 1,432 Thanks
    fun4everyone
    I don't think its possible to predict future returns from equities in any way. Anyone that tries to is just making click bait or claiming to be a fortune teller.

    IMO the gfc was not even that nasty when you look back on it, due to the speedy recovery. There is not guarantee of a quick recovery after a large crash but people now feel that there is imo. To me the following crash looks like it was worse and it's never talked about

    https://en.wikipedia.org/wiki/1973%E2%80%9374_stock_market_crash

    75% off the UK market and an eternity to recover....ouch. Imagine that with VLS 100. Funny that they started the year thinking it was going to be a good one....
    • economic
    • By economic 11th Feb 18, 8:05 PM
    • 2,662 Posts
    • 1,414 Thanks
    economic
    I don't think its possible to predict future returns from equities in any way. Anyone that tries to is just making click bait or claiming to be a fortune teller.

    IMO the gfc was not even that nasty when you look back on it, due to the speedy recovery. There is not guarantee of a quick recovery after a large crash but people now feel that there is imo. To me the following crash looks like it was worse and it's never talked about

    https://en.wikipedia.org/wiki/1973%E2%80%9374_stock_market_crash

    75% off the UK market and an eternity to recover....ouch. Imagine that with VLS 100. Funny that they started the year thinking it was going to be a good one....
    Originally posted by fun4everyone
    All due to global monetary reform (collapse of bretton woods), which resulted in very high inflation and economic chaos (recession) thus the stock market devaluation.

    In the present day all we are talking about is 4 hikes this year instead of 2/3 in the US. long term rates moving higher as well but not drastically/chaotically higher.

    I do not see inflation getting out of control at all anytime soon. We still are nowhere close to running at full capacity. Lot of slack left in the economy.
    • economic
    • By economic 11th Feb 18, 8:07 PM
    • 2,662 Posts
    • 1,414 Thanks
    economic
    We should actually still be worried about deflation, not inflation.
    • Audaxer
    • By Audaxer 11th Feb 18, 8:42 PM
    • 900 Posts
    • 495 Thanks
    Audaxer
    Of course a problem for those in retirement is that they are likely to be wanting to live on the dividend income, hence they won't benefit from being able to reinvest them. Hence why 100% equity may not be the best option in retirement unless you can cut down / stop taking the dividend income during the worst of a major crash.
    Originally posted by LHW99
    I agree 100% equities not the best option or necessary as I think best to have some fixed income as well. However I think you could still take dividend income during an equity crash, but it will just take longer to recover. However better still to have a cash buffer so that you can reinvest dividends at times of an equity crash.
    • Glen Clark
    • By Glen Clark 11th Feb 18, 11:18 PM
    • 4,067 Posts
    • 3,096 Thanks
    Glen Clark
    We should actually still be worried about deflation, not inflation.
    Originally posted by economic
    Has Britain ever had deflation?
    For deflation you need a strong currency.
    But debt is still growing and imports exceeding exports.
    All that leads to a weak currency.
    When the pound fell following the Brexit vote, making imports more expensive Britain just borrowed more to pay for them - because we don't make most of the stuff we need.
    “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair
    • GT85
    • By GT85 11th Feb 18, 11:58 PM
    • 8 Posts
    • 1 Thanks
    GT85
    Of course, my first foray into investing was transferring a £40k cash ISA into a Vanguard S&S ISA, and putting it into VSL80. The transfer purchased on the eve of this current dip FFS.

    Rather than gleefully enjoying my returns, within the first fortnight I've seen a 5% loss. Seeing such minor volatility has been beneficial, as it slightly tests my risk, and I haven't been phased at all. At 32, and not wanting the money for 18-25 years to help my son out at uni/house deposits etc, I'm in for the long game. I've gone out to the library and read Tim Hale's 'Smarter Investing' which has been a great read.

    I still have £110k sat in cash, which I plan to invest in a general account before moving it into the ISA with each financial year. I've really had to sit on my hand this weekend to stop myself going all in or even with smaller lump sums in stages. I have a quid pro quo arrangement with a friend, his IFA owes him a good turn and is meeting with me free of charge to give advice. He knows I'm a passive investor (especially after reading that Hale book ), so I expect as much impartial advice as possible.

    It'd be interesting to read other investors opinions, especially against those of a professional fund manager. So what would you guys do? Go in now adopting the "time in the market" approach, or observe further and attempt the "time the market" angle and take advantage of further downward trends? Or other?
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