stockmarkets -are we nearing the bottom or is there further to go ??

JohnRo

I was going to make a similar point about how the highlighting and examination of various systemic problems and how they might play out, what effect that might have etc. is not the same, of course, as being a prediction they are about to transpire.
If various "doom mongers" are talking about the same issues year after year, it isn't because they're getting it wrong every year, it's because those aspects still remain an unresolved issue.
Feel like I've painted myself into the doom monger corner in this thread and that's not the case at all, I'm bullish on equities but do have a desire to try and gleen some understanding of a bigger picture and that it isn't all flowers, blue skies and sunshine.
The real gripe I do have, if it isn't annoyingly obvious, is with a rapacious banking industry, empowered and allowed to make it up as it goes along. To manipulate and distort what should be an otherwise healthy marketplace, and impose experimental policies and employ dubious practices to keep their privileged gravy train on the tracks at everyone else's expense.

bowlhead99

Procrastinater wrote: »

Ok you linked to a FTSE all share index. The FTSE tracker I meant was a simple tracker of the FTSE 100 - as per :

https://uk.finance.yahoo.com/q/bc?s=^FTSE&t=my&l=on&z=l&q=l&c=

Which clearly shows a triple top at just below or about 7,000. with two bottoms (so far ) at just below 4,000. In fact there are 3 lesser "bottoms" in the 2011- 2013 era. This support is what the guy who is talking of "below 5500" is looking towards when anticipating a bottom in thsi range. My own view is that the Time element of the chart is such that a fall right down to the previous major support levels around 3800 is a distinct possibility.

No, I linked to a graph that showed two lines: the returns of investments in two actual FTSE indices, which could have been achieved through holding trackers with costs of a small fraction of a percent per year.

One was the return of the FTSE all-share and one was the FTSE100. As noted, the 100 is a terrible index for an investor and nobody would realistically use it as their only investment - it focuses exclusively on large companies that happen to be listed in the UK and which are concentrated in a few industry sectors. The FTSE all share is composed of 80+% of the result of the 100, plus some other stuff., so is still pretty poor. It would only be a small part of a proper global portfolio as the UK index is less than a twelfth of the global index. So for context, either of the total return lines represents a bad basket into which to put all your eggs and educated private investors or IFAs would not claim it was representative of a proper portfolio return. But the lines are overall positive.

By contrast, the link you just provided was the capital value of the FTSE100 only. It is the return you get if every time a company in the 100 pays a dividend, you throw it in the bin.

By that logic then sure, after accidentally investing your entire net worth into the FTSE 100 index on the very highest day in history prior to the dot-com crash, it takes 8 years to recover that point. However, the companies in the index were paying an annual dividend yield comfortably in excess of 3%. Which if -as you suggested- you were holding a fund designed to track the index's total return, would have been reinvested in the index constituents at the time the dividends were received.

So as I said, on my graph of the FTSE 100, the losses are recovered by early 2006 and have largely been in positive territory during the decade since. In your graph for some reason you are pretending the dividends generated just went into the shredder rather than being spent or reinvested.

So your conclusion that I am still 20% down from 2000 is somewhat disingenuous : in fact, I have received 15 years of 3%+ dividends, equating to probably 50%, and most of those dividends have been re invested when the capital value of the FTSE is significantly lower than its all-time peak, generating bodacious gains.

I am not sure if:
a) you completely understand how the markets work and are trying to pull the wool over everybody's eyes to deceive them into thinking they would have got a negative return from this specialist, single region, industry-concentrated tracker which you implied they would have invested in for some reason. Or

b) you completely misunderstand the markets and genuinely believe the FTSE100 tracker would have delivered a negative result from December 2000 to now because you did not understand the economics and finance courses you took at school and university.

Either way, a single specialist tracker is not the sort of thing that an IFA would have told you to hold as your portfolio, and even if he did, the notion that a FTSE100 tracker would have produced a negative return from Jan 2000 to Jan 2016 is patently false.

Regardless of the choice of cliched recommended reading material you're putting forth, if you don't understand the difference between total return from a portfolio of shares and the movement in the capital value of an index, there is no point listening to your experiences in respect of IFAs - or your opinion of whether a particular writer is one who can and does or is one who can't and doesn't, and teaches or writes as an alternative.

Thrugelmir

JohnRo wrote: »

The real gripe I do have, if it isn't annoyingly obvious, is with a rapacious banking industry, empowered and allowed to make it up as it goes along. To manipulate and distort what should be an otherwise healthy marketplace, and impose experimental policies and employ dubious practices to keep their privileged gravy train on the tracks at everyone else's expense.

Not sure it's just banks. As Tesco's demonstrated. What should in principle be a simple business operation to understand. Resorted to financial engineering on a huge scale. As with any team and ladling exercise. When the music stops there's no where to hide.

The US market is hugely distorted by share buy backs. US companies to keep profits off shore and untaxed. Then borrow money on shore at low interest rates to buy stock. All of which creates an illusion.

As for equities. What went without little comment was that 17% of FTSE 250 companies issued profit warnings last in 2015. Yet people say that stocks look cheap to buy. Makes one wonder if people actually take the time to read these days. As there's plenty of noise on which to form an opinions if one bothers.

bowlhead99

Thrugelmir wrote: »

As for equities. What went without little comment was that 17% of FTSE 250 companies issued profit warnings last in 2015. Yet people say that stocks look cheap to buy. Makes one wonder if people actually take the time to read these days. As there's plenty of noise on which to form an opinions if one bothers.

I know what you are getting at, but don't see that 40 companies out of 250 companies issuing profit warnings tells you that 'stocks look cheap' to buy or not. That's 40 companies saying their profits are due to fall for one reason or another and 210 companies saying their profits are not due to fall or are growing as planned or are exceeding expectations.

Over 2015 while the 40 companies were saying this, the index went from about 16000 at 31/12/14 to about 18000 and back to 17400 at 31/12/15 and now it's more like 15000. Buying when the stocks are 15000 is cheaper than when they were 16000 or 18000 or 17400. So the question is just whether what you are getting for your money when you buy at 15000 is at least 83.33% as good as what you were getting for your money when you were paying the full 18000.

It's certainly worth being aware of the stat that some of the companies warned last year and indeed the 17% warning rate is an interesting coincidence with a 17% drop in value from the peak. But companies warn all the time - and other companies in the index might be financially stronger than they were before (and the largest and smallest are different companies now than they were a year ago anyway).

Some of the movement from 18000 to 15000 was because of some of the companies issuing profit warnings. Some of the movement from 16000 to 18000 in the first place was despite some of the companies issuing profit warnings. Most of the companies did not issue profit warnings. The fact that some companies warned about their profits, and their share prices went down as a consequence, does not refute a throwaway comment that stocks are cheap today, because some proportion of companies are always issuing profit warnings.

The impact of the index from a profit warning depends whether it is is one of the largest 50 companies which make up half the index between them (like Morrisons is currently over 1%) or one of the 200 companies that make up the other half and are individually less important (like Moneysupermarket is only 0.5%). For example, for most of last year Morrisons was a tiny part of the FTSE100 instead of a large part of the 250; so the fact it warned on its profits during 2015 before eventually dropping out the 100 would not lead you to conclude that the FTSE100 was cheap or expensive - it was a company worth under ten billion on an index worth 1.5 to 2 trillion and really didn't matter a damn.

Most of us do not know whether the stat on 2015 profit warnings was 7% or 17% or 27%, and how many more profit warnings are overdue to be made as of today. The notion of cheapness or expensiveness is usually made by some comparison of current price to previous profits or dividends. Obviously if some of those are not sustainable then the conclusions may be wrong - but if 17% are not sustainable then perhaps there is another 17% that are going to outperform their previous profit levels and make up for it.

I appreciate the profit warning stat was just an example of the noise which is out there to help inform, and you point is that people do not necessarily pick up on such subtleties when they see a headline index number announced in the press and make a superficial comment that something sounds cheap or expensive.

As you say, there is always information (news, profit warnings, financial reports, observations about competitors and external factors) with which to form an opinion on individual stocks, which is what people do when they are wondering whether to buy a share or not for a personal portfolio, and what active fund managers do when they are wondering whether to buy a share or not for their fund.

What is obviously harder to do, is to decide whether the index as a whole is worth buying, because you would have to evaluate whether each of 250 shares are worth buying or not and weight your overall answer to the market capitalisations of the companies. That is harder for someone with a day job to do. As you surmise, the 'value' presented by the index can't be seen by simply looking at 15178 on 11/2/2016 and seeing it is different to 16085 on 31/12/2014. So when people say 'buy the index it is low' when they haven't formed a view on each of the individual stocks within, they are missing the point. There is obviously a reason it has got cheaper, but the question is will that reason persist or does the new price actually represent a bargain in terms of the current known and unknown risks and the likely rewards.

But of course there are some passionate advocates of not trying to form a view on any companies anyway because you can't outguess the market, so you should probably not listen to noise, profit warnings, or do any research. Simply go ahead and buy the total market in its cap weighted proportions whenever you have spare cash, and look back in 40 years and you have probably grown your wealth. Whether you've grown it as effectively as you could have with the right amount of volatility en route is always going to be up for debate, so I'll duck away now!

masonic

bowlhead99 wrote: »

By contrast, the link you just provided was the capital value of the FTSE100 only. It is the return you get if every time a company in the 100 pays a dividend, you throw it in the bin.

I think this comment is probably nearer the mark than you think. From what I've read so far from Procrastinator, it seems he is a not long term investor, rather a trader of some sort. The use of technical analysis requires dividends to be ignored and Procrastinator's argument is that he can see the TA equivalent of a celestial alignment that is predicted to be a bad omen of the type that would terrify astrologers and cult leaders of the past. It might even be completely valid for him to ignore dividends - it is oft remarked that for a trader, if they hang around long enough to receive them, dividends are useful to cover trading costs, whereas their aim is just to make short-term gains from share price movements.

It is a very different mentality to someone who is using sound economic principles to gradually build wealth over an extended period of time.

Glen_Clark

JohnRo wrote: »

The real gripe I do have, if it isn't annoyingly obvious, is with a rapacious banking industry, empowered and allowed to make it up as it goes along. To manipulate and distort what should be an otherwise healthy marketplace, and impose experimental policies and employ dubious practices to keep their privileged gravy train on the tracks at everyone else's expense.

Bankers have obviously had undue influence on politicians - many of whom have slipped into well banking consultancy jobs when they have left office.
I think the bigger danger for Britain now is the influence over politics the big 'old money' landowners have - promoting this disastrous idea that restricting the housing supply to promote high house prices is a good thing.

_CC_

No, this is just the start. Deschute Bank will collapse causing mass panic and new banking crisis, while the central banks are left scratching their heads on what they can do. We'll enter a global depression, there will be mass write off of debt and asset prices will plunge :eek: happy Friday folks :beer:

Thrugelmir

bowlhead99 wrote: »

I know what you are getting at, but don't see that 40 companies out of 250 companies issuing profit warnings tells you that 'stocks look cheap' to buy or not. That's 40 companies saying their profits are due to fall for one reason or another and 210 companies saying their profits are not due to fall or are growing as planned or are exceeding expectations.

I know you like to analyse in the nth degree. Sometimes facts can simply be viewed as bell weathers at a macro level though. More so if the announcements are made across a broad range of industries and sectors. Companies are now under obligation to keep shareholders informed. Particularly if previously stated expectations are not likely to be met. Capita maintain a dividend monitor if drilling deeper is required.

nb73

_CC_ wrote: »

No, this is just the start. Deschute Bank will collapse causing mass panic and new banking crisis, while the central banks are left scratching their heads on what they can do. We'll enter a global depression, there will be mass write off of debt and asset prices will plunge :eek: happy Friday folks :beer:

Yeah, that will happen. Or maybe it won't. What should I do? Maybe I'll put just half my money in stocks, and the other half somewhere safer.

Hang on- I do that already. Phew.

bowlhead99

Thrugelmir wrote: »

I know you like to analyse in the nth degree. Sometimes facts can simply be viewed as bell weathers at a macro level though.

Sure, I just like to pick up on minutiae and examine it to keep the old grey matter ticking over

The idea that an index is cheap because it's gone down is clearly not the whole picture, as you say. But by the same logic the fact that there's been a bunch of profit warnings across a number of sectors does not necessarily tell us that it was right for the 250 index to fall down to 15000, instead of just 16000. Even 19000 might be the fair number if we account for all the companies that are not in particular trouble and should provide dividends and growth over the coming years.

So whether the number of profit warnings is 17 or 7 or 27, deeper analysis (like divi monitors, consensus estimates etc) are needed for any useful conclusion. It just struck me as odd that 17 company warnings out of 250 over a year would be something that was a good yardstick or bellweather for health of an index, when the average private investor doesn't know how many RNSs the 250 generate in a 'normal' year and how many of them would typically be expected to be sour.

_CC_ wrote: »

No, this is just the start. Deschute Bank will collapse causing mass panic and new banking crisis, while the central banks are left scratching their heads on what they can do.

As an aside re banks, I bought a few hundred Deutsche shares yesterday with the proceeds of some Nat West prefs which have held up well (as they behave more like high yield bonds than equity). Plenty of issues for Deutsche to contend with, but only hindsight will tell if I've thrown away a reliable yield for a crazy failed gamble.

Just part of rebalancing some of my allocations in my single-company holdings ; the same process has also led to me exchanging some SL GARS for equity funds within my work pension at whatever price they're at when the fund switches actually go through. I wasn't really going to play with my holdings until nearer April and have left most of the portfolio alone.