The Stock Market Takes Another Dive - Steer Clear ?

IronWolf

gadgetmind wrote: »

I wonder where my subordinated debt of bombed-out banks would come?

OTOH, someone on the Fool forums recently bought £65k worth of debt in the fifth largest bank in Kazakhstan, so maybe I'm Mr Cautious!

Depends how much you're buying the debt for. If you buy it £1 on the £1 its a lot riskier than buying it 1p on the £1.

Risk is dependent on the price you pay for something, not beta or volatility metrics

gadgetmind

IronWolf wrote: »

Depends how much you're buying the debt for. If you buy it £1 on the £1 its a lot riskier than buying it 1p on the £1.

Risk is dependent on the price you pay for something, not beta or volatility metrics

Well, quite. I'd only ever buy even quality preference shares etc. at discounts anyway (say 80p in the £1) and the dodgier the company, the less I'd pay. Some of the Irish prefs and pibs were down at 20-30p when the SLOs were being waved around.

Here is the fool thread.

http://boards.fool.co.uk/atf-capital-10-not-kazakhstans-finest-bank-12477477.aspx?sort=whole#12477958

And I thought that I bought some 5h1t!

EnglishMohican

dunstonh wrote: »

Its not relatively safe either. If you take a basic 1-10 risk scale with cash being 1 and the highest risk UT/OEIC being 10 then the FTSE tracker would come out at 7. I dont think you can class any investment that is two thirds of the way up the risk scale as being safe.

I seem to be picking on my heroes in this thread!

Given that the whole thread is about stock exchanges and investments it is not helpful to be pedantic about whether a FTSE tracker is "safe" compared to cash.

I have given reasons before why it has a claim to be safe compared to other stock exchange investments - - avoids currency risk, covers a number of sectors, global companies so not one territory. Others have argued that some of these reasons are compromises and can be improved on by more specialist investing and I accept what they say but think its takes us beyond a first investment.

My recent experience is that the FTSE tracker only just achieves the same return as a good building society account.

I have seen bonds suggested as a lower risk and other exchanges. I can believe bonds are lower risk and may produce a better return at the moment. For my money, no other exchange is a lower risk as currency risk comes to play immediately.

So what other asset classes that are traded on a stock exchange are lower risk than a FTSE tracker yet produce better returns than a building society account and do not involve hindsight or simple luck?

gadgetmind

EnglishMohican wrote: »

So what other asset classes that are traded on a stock exchange are lower risk than a FTSE tracker yet produce better returns than a building society account and do not involve hindsight or simple luck?

I spent 2011 rolling out of gilts (too soon!) and went into corporate bonds and infrastructure funds (HICL, JLIF, BBGI, 3IN, INPP, etc.) as an alternative. I also bought into some low-geared commercial property companies, which is higher risk but also higher potential rewards.

Infrastructure might be getting a bit toppy as the likes of Investec are belatedly getting on the bandwagon and steering their clients in that direction.

I'm happy continuing to hold (ideal holding period = forvever) but am looking for new pastures to move to if the thundering herd starts heading my way.

EnglishMohican

gadgetmind wrote: »

I spent 2011 rolling out of gilts (too soon!) and went into corporate bonds and infrastructure funds (HICL, JLIF, BBGI, 3IN, INPP, etc.) as an alternative.

Thanks for this.

Is the low risk evidenced by the way none of these dropped last August when the FTSE did?

If I have followed your other contributions correctly then this represents the safe part of your portfolio (in stock exchange terms - ignore cash:D). You have other investments in other sectors to broaden the overall risk and improve the overall return? Otherwise this is a very narrow investment.

coastline

Nobody knows where the markets are heading...but I would say if theres no growth then the indicies won't go too far North...maybe someone can find a long term chart of GDP growth and market returns..it might give some hint...
You're money has to go somewhere...and theres always risk...just got to give it time thats the bother..
It wouldnt be so bad if bank returns were better than 3% but we're stuck with this situation for a while..so what do you do...
For seasoned investors they'll do their own thing...as they've probably found out the hard way in the past...now after years they dont listen to the media...
New starters are probably better off finding a growth fund and investing monthly...hopefully bulding up a nice nest egg over decades..
If theres a crash ...then fill your boots with a lump sum...that goes without saying..
Finding a fund to invest in...now theres a thing...when you begin to read up....many funds don't even beat the indicies they're competing with...so whats the point....maybe I'll stick to my FT100 tracker then...and my cash ISA....hard game this..;)

gadgetmind

EnglishMohican wrote: »

Is the low risk evidenced by the way none of these dropped last August when the FTSE did?

Some of them dropped, but not by much, and not for long. Most of them have good protection against inflation, but rising interest rates could have an impact.

If I have followed your other contributions correctly then this represents the safe part of your portfolio (in stock exchange terms - ignore cash:D)

Yes, I'm using a spectrum of safer investments to make up for the fact that gilts are currently so safe that they are risky IYKWIM.

You have other investments in other sectors to broaden the overall risk and improve the overall return? Otherwise this is a very narrow investment.

Yup. In my main SIPP I'm currently 60% global equities (with my own weightings), 10% bonds (mainly corporate and short on gilts), 15% property and infrastructure, 5% themes (aka "It seemed like a good idea at the time") and 10% cash.

I could explain my themes, but it's really conviction buys into 4-5 very focussed holdings.

gadgetmind

coastline wrote: »

For seasoned investors they'll do their own thing...as they've probably found out the hard way in the past...now after years they dont listen to the media.

You can't treat "the media" as a homogeneous group as these are a few diamonds out there, but sadly only a few. But, in general, you're right: media work doesn't attract the brightest brains in the first place, and the pressure to keep pushing out "coo gosh" headlines rather detracts from their ability to provide balanced analysis.

1echidna

http://www.cnbc.com/id/47118120?__source=RSS*tag*&par=RSS&utm_source=twitterfeed&utm_medium=twitter

BP Refocuses on Production Two Years After Gulf Oil Spill

sabretoothtigger

BP suffering from Russian problems again apparently. They cheap so long as Putin stays in his box, when are they ex div

UPDATE: TNK-BP Shares Slide Amid Concern On Government Criticism
(Adds comments from TNK-BP shareholders in paragraphs 3 and 4, updates share price movement in paragraph 7)

By Alexander Kolyandr

Of DOW JONES NEWSWIRES

MOSCOW (Dow Jones)--Shares in TNK-BP Holding (TNBP.RS) continue to slide Friday, amid investor concern that the Russian government's criticism of the company's ecological policy and allegedly high dividend may be a sign of a wider attack from the state.

Yury Trutnev, Russia's natural resources and environment minister, told Prime Minister Vladimir Putin at a government meeting Thursday that TNK-BP spends "practically all of its profit, almost $8 billion" on dividends, while maintaining "poor" environmental policies.

Russian partners in TNK-BP--a group of Soviet-born businessmen known as the Alfa-Access-Renova consortium, or AAR--said Friday: "AAR and TNK-BP have excellent relations with the Russian Government, and actively cooperate on different environmental projects".

BP said TNK-BP's capital investment has been among the highest of its peers, adding that in 2012 the company expects to invest nearly $6 billion.

The government of Russia, not known for its scrupulous environmental policy, has repeatedly used ecological concerns for putting pressure on private companies, forcing them to invest more or to cede their licenses.

TNK-BP, a joint venture between BP PLC (BP) and a group of Russian investors, said that despite declining number of oil spills at its sites "[the] ecological situation is far from ideal", and said it is confident that jointly with the government it would "agree on plans and rapidly achieve a qualitative breakthrough to demonstrate TNK-BP's environmental leadership and properly preserve land and water resources used by oil companies"

The market, apparently worried that the company may be under government attack, sent the company's shares down 8% immediately after Thursday's comments. The shares gained back part of this loss and closed Thursday down 4.1%, but were down 1.3% by 1300 GMT Friday in Moscow amid a higher oil price and marginally growing Micex index.

The minister's tone was relatively mild Thursday, and it got almost no reaction from Putin, who is to become president May 7. Putin called for the establishment of a dialogue with the company and its owners, to fix any problems.

"We think the market overreacted to the news yesterday, and expect an amicable solution to the problem by a higher commitment from TNK-BP to maintain high environmental standards and probably paying a fine," said Ildar Davletshin from Renaissance Capital.

The Russian government has recently intensified its pressure on many Russian resource companies to "invest in Russia", which in government speak means plants, equipment and infrastructure.

Troika Dialog noted that TNK-BP shareholders may want to continue to receive "a constant large cash flow stream from the company, so if pressed by the government to spend more money on whatever, the company may decide to borrow."

April 20, 2012 09:27 ET (13:27 GMT)

Fallacy Alert

Most of them have good protection against inflation, but rising interest rates could have an impact.

Raising interest rates with even faster rising inflation is not tighter money flow

My recent experience is that the FTSE tracker only just achieves the same return as a good building society account.

Just the dividend alone is higher, the growth has been flat true

infrastructure funds (HICL, JLIF, BBGI, 3IN, INPP, etc.) as an alternative

Do they own anything of interest particularly? ERE is an Indian infrastructure fund, ports and train stations, its not really a capitalist country though ?

So what other asset classes that are traded on a stock exchange are lower risk than a FTSE tracker yet produce better returns than a building society account and do not involve hindsight or simple luck?

A house that negates your existing rental costs and/or some gold sovereigns. Why is gold not about luck ? Because british currency was gold up until 1971, ask your parents.
Thirdly, a larder of food could feasibly produce returns of 3% or more if it meant you regularly were able to buy cheaper. It might be a one off gain though as you can only store so much, depends if you know a good price also

thasquizza wrote: »

Oil is the safest thing to invest in at the moment with everything that is going on in the countries that hold most of the worlds oil supplies

Its not that simple. A big petrol tank sounds good but it goes off
The worlds largest oil holder is rapidly increasing its supply at the moment and it should easily beat Iran or Saudia Arabia when finished. Demand needs to rise faster
USA is producing the most it ever has apparently. USA demand is dropping and they are the largest consumer

Oil price is getting cheaper when measured in 1950's USA currency. Oil price is rising when measured in brand new 2012 dollars. The value placed on oil is dropping and could continue which as an investment makes it not simple.

If higher supply vs demand occurs also with declining western wealth it would not be the safest way to invest especially when oil company production is taken over by unstable governments like Argentina

http://www.economist.com/blogs/americasview/2012/04/argentinas-oil-industry