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    • RomfordNavy
    • By RomfordNavy 8th Nov 18, 9:03 PM
    • 182Posts
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    RomfordNavy
    Global Equities - still the best place for core holding?
    • #1
    • 8th Nov 18, 9:03 PM
    Global Equities - still the best place for core holding? 8th Nov 18 at 9:03 PM
    Now that there appears to be a tightening of Quantitive policy around the world and we appear to be entering what I suspect is a sustained period of Quantitive Tightening what are your thoughts regaring global equities?

    Is a mixture of various global equities still a good core holding or do the new quantitive policies make that less of a good idea for the future.
Page 1
    • kidmugsy
    • By kidmugsy 8th Nov 18, 10:39 PM
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    kidmugsy
    • #2
    • 8th Nov 18, 10:39 PM
    • #2
    • 8th Nov 18, 10:39 PM
    I suspect that (almost?) all financial assets are grossly overvalued. Maybe cash is less at risk than global equities but that leaves open the question of which currencies to hold your cash in.

    It may be that sovereign bonds will suffer less than equities in a great crash - except for those bonds that governments renege on, either by simple default, or by inflation, or by other nefarious mechanisms.

    And if enough governments respond to calamity by running inflations then your cash might not be safe either.
    Free the dunston one next time too.
    • Alexland
    • By Alexland 8th Nov 18, 10:40 PM
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    Alexland
    • #3
    • 8th Nov 18, 10:40 PM
    • #3
    • 8th Nov 18, 10:40 PM
    Global equities are still fine for the long term but as always carry the risk that they might not be the highest performer in the short to medium term which is why people increasingly diversify into different and less volatile asset types as they get closer to withdrawal.
    • Thrugelmir
    • By Thrugelmir 8th Nov 18, 11:39 PM
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    Thrugelmir
    • #4
    • 8th Nov 18, 11:39 PM
    • #4
    • 8th Nov 18, 11:39 PM
    Now that there appears to be a tightening of Quantitive policy around the world
    Originally posted by RomfordNavy
    Behind the curve I would suggest. The Fed has been raising interest rates for nearly 2 years. Likewise commenced QE reversal in Oct 17. BOE ceased it's QE policy over 2 years ago. Subtle changes have been apparent for a while.

    With the ECB programme ceasing at the end of this year. The ship is most certainly sailing into uncharted waters.

    One iceberg is Japan whose QE programme has dwarfed everyone elses. How it is going to extricate itself from the position it finds itself in will be interesting to watch.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • C_Mababejive
    • By C_Mababejive 9th Nov 18, 7:44 AM
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    C_Mababejive
    • #5
    • 9th Nov 18, 7:44 AM
    • #5
    • 9th Nov 18, 7:44 AM
    So the answer is to buy tangible assets but what ? Housing is a bubble as are gold and silver. I know,use your money to leverage more personal debt at cheap rates...

    Or buy other peoples debts via corporate bond funds. Unless big companies fail,debt will always be repaid.
    Feudal Britain needs land reform. 70% of the land is "owned" by 1 % of the population and at least 50% is unregistered (inherited by landed gentry). Thats why your slave box costs so much..
    • _CC_
    • By _CC_ 9th Nov 18, 8:40 AM
    • 326 Posts
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    _CC_
    • #6
    • 9th Nov 18, 8:40 AM
    • #6
    • 9th Nov 18, 8:40 AM
    So the answer is to buy tangible assets but what ? Housing is a bubble as are gold and silver. I know,use your money to leverage more personal debt at cheap rates...

    Or buy other peoples debts via corporate bond funds. Unless big companies fail,debt will always be repaid.
    Originally posted by C_Mababejive

    Businesses are tangible and tend to have the greatest earning power to boot.
    • Filo25
    • By Filo25 9th Nov 18, 11:07 AM
    • 1,717 Posts
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    Filo25
    • #7
    • 9th Nov 18, 11:07 AM
    • #7
    • 9th Nov 18, 11:07 AM
    Behind the curve I would suggest. The Fed has been raising interest rates for nearly 2 years. Likewise commenced QE reversal in Oct 17. BOE ceased it's QE policy over 2 years ago. Subtle changes have been apparent for a while.

    With the ECB programme ceasing at the end of this year. The ship is most certainly sailing into uncharted waters.

    One iceberg is Japan whose QE programme has dwarfed everyone elses. How it is going to extricate itself from the position it finds itself in will be interesting to watch.
    Originally posted by Thrugelmir
    To be fair does Japan actually need to reverse the policy?

    It doesn't look like an economy that is going to be overwhelmed by inflationary pressures anytime soon
    • Malthusian
    • By Malthusian 9th Nov 18, 12:37 PM
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    Malthusian
    • #8
    • 9th Nov 18, 12:37 PM
    • #8
    • 9th Nov 18, 12:37 PM
    The evidence from past data (which is all we have) shows that even people who invest in equities at the worst possible moment (e.g. middle of 2007) will beat cash if they hold their nerve. Those who invested at the worst possible moment in the middle of 2007 had beaten cash by 2013, and the gap has become wider every year.

    Other alternatives to a globally diversified portfolio of equties generally involve either

    a) things that will follow similar crash and return paths to equities (e.g. bonds and commercial property), albeit to different degrees and sometimes at different times, so much the same argument applies
    b) or bonkers ideas like investing in shiny metal or neo-With-Profits or corporate loans to dodgy property developers with minimal due diligence (P2P).
    • Thrugelmir
    • By Thrugelmir 9th Nov 18, 4:42 PM
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    Thrugelmir
    • #9
    • 9th Nov 18, 4:42 PM
    • #9
    • 9th Nov 18, 4:42 PM
    To be fair does Japan actually need to reverse the policy?

    It doesn't look like an economy that is going to be overwhelmed by inflationary pressures anytime soon
    Originally posted by Filo25
    BOJ - QE 79% of GDP
    ECB - 41%
    US FED - 21%

    Telling figures as to the level of central bank support.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • talexuser
    • By talexuser 9th Nov 18, 5:30 PM
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    talexuser
    Presumably that was part of what they called "Abeonomics". Ditching free markets and much more government intervention to stimulate growth and inflation? To simplify a complicated policy.
    • kidmugsy
    • By kidmugsy 9th Nov 18, 7:25 PM
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    kidmugsy
    The evidence from past data ... shows that even people who invest in equities at the worst possible moment will beat cash if they hold their nerve.
    Originally posted by Malthusian
    Only if (i) you select the country you look at with some care, and (ii) the investor lives for a very long time.

    It's not even clear to me that it's true of the UK. Have shares really beaten cash since the end of 1999? I wouldn't be surprised if it's close enough that you can get whatever answer you want by making different assumptions about tax and charges.
    Free the dunston one next time too.
    • Thrugelmir
    • By Thrugelmir 9th Nov 18, 11:20 PM
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    Thrugelmir
    Presumably that was part of what they called "Abeonomics". Ditching free markets and much more government intervention to stimulate growth and inflation? To simplify a complicated policy.
    Originally posted by talexuser
    On a simple level. BoJ owns not just bonds, but company shares as well. Biggest shareholder in a number of companies. Likewise owns 75% of the ETF market.

    In a nutshell on a broader level the risk is that the BoJ could under certain circumstances could effectively become insolvent. A mightly complex situation that has to be unwound. Not aided by a rapidly ageing population.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • short butt sweet
    • By short butt sweet 10th Nov 18, 2:03 AM
    • 119 Posts
    • 76 Thanks
    short butt sweet
    On a simple level. BoJ owns not just bonds, but company shares as well. Biggest shareholder in a number of companies. Likewise owns 75% of the ETF market.

    In a nutshell on a broader level the risk is that the BoJ could under certain circumstances could effectively become insolvent. A mightly complex situation that has to be unwound. Not aided by a rapidly ageing population.
    Originally posted by Thrugelmir
    how could the BoJ become insolvent? they are the currency issuer for the yen. they can't become insolvent unless they have liabilities which aren't denominated in JPY.

    i do agree that the endgame for japanese QE is more complex because they've been buying a range of assets, including shares. what are they going to do with all those shares? keeping them indefinitely is a possible answer - not so much because that answer sounds especially good, as because all other answers sound worse

    the UK's QE is relatively simple, in that 98% of it was buying back gilts (and those gilts should just be regarded as cancelled - as discussed on another thread). the other 2% was buying corporate bonds. some decision about what to do with those corporate bonds will need to be made.
    Last edited by short butt sweet; 10-11-2018 at 2:06 AM.
    • Glen Clark
    • By Glen Clark 10th Nov 18, 6:29 AM
    • 4,273 Posts
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    Glen Clark
    I suspect that (almost?) all financial assets are grossly overvalued. Maybe cash is less at risk than global equities but that leaves open the question of which currencies to hold your cash in.

    It may be that sovereign bonds will suffer less than equities in a great crash - except for those bonds that governments renege on, either by simple default, or by inflation, or by other nefarious mechanisms.

    And if enough governments respond to calamity by running inflations then your cash might not be safe either.
    Originally posted by kidmugsy
    All of which suggests that cash is as over valued as everything else.
    So diversify and chill.
    “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair
    • Glen Clark
    • By Glen Clark 10th Nov 18, 6:34 AM
    • 4,273 Posts
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    Glen Clark
    BOJ - QE 79% of GDP
    ECB - 41%
    US FED - 21%

    Telling figures as to the level of central bank support.
    Originally posted by Thrugelmir
    Yes but even that can be misleading as there are different kinds of GDP.
    Some is income from productive industry.
    Wheras some is just higher rental income caused by Government intervention in the housing market.
    One is more sustainable than the other.
    “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair
    • RomfordNavy
    • By RomfordNavy 11th Nov 18, 4:45 PM
    • 182 Posts
    • 15 Thanks
    RomfordNavy
    Well, its been an interesting discussion, thank for the info everyone.

    All equities are a risk, just good to try and make it as much of an educated guess as possible.

    In the final conclusion decided to increase Japan exposure from 1.75% to 3%, only time will tell if this was a good decision or not.
    • Voyager2002
    • By Voyager2002 11th Nov 18, 5:16 PM
    • 12,504 Posts
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    Voyager2002
    The link below is to a blog post that I find interesting about whether equities are over-valued. I think it is relevant to this discussion even though it does not discuss QE.
    https://blog.moneyfarm.com/en/financial-markets/has-moneyfarms-view-of-us-equity-changed/
    • A_T
    • By A_T 11th Nov 18, 7:34 PM
    • 547 Posts
    • 381 Thanks
    A_T
    Well, its been an interesting discussion, thank for the info everyone.

    All equities are a risk, just good to try and make it as much of an educated guess as possible.

    In the final conclusion decided to increase Japan exposure from 1.75% to 3%, only time will tell if this was a good decision or not.
    Originally posted by RomfordNavy
    It's so small a difference it hardly matters
    • Alexland
    • By Alexland 11th Nov 18, 9:33 PM
    • 3,593 Posts
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    Alexland
    It's so small a difference it hardly matters
    Originally posted by A_T
    And wasn't RomfordNavy also keen to buy into Lindsell Train whose flagship Global Equity fund is over 20% Japan?

    https://forums.moneysavingexpert.com/showthread.php?p=74988506

    My gut feeling is that over the long term they would probably get a better result with mostly passive allocations in a global fund of funds.

    Alex
    Last edited by Alexland; 11-11-2018 at 9:35 PM.
    • Malthusian
    • By Malthusian 12th Nov 18, 11:22 AM
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    Malthusian
    Only if (i) you select the country you look at with some care
    Originally posted by kidmugsy
    Nope, this applies to any decently globally diversified portfolio. An investment in the FTSE World TR index in mid 2007 had beaten cash by 2013. Add a few months to take into account charges.

    and (ii) the investor lives for a very long time.
    If you're in your nineties, maybe.

    Have shares really beaten cash since the end of 1999?
    I haven't got access to Morningstar right now, but after nearly 20 years of compounded dividends a properly diversified investment will be miles ahead.

    I wouldn't be surprised if it's close enough that you can get whatever answer you want by making different assumptions about tax and charges.
    Using sensible assumptions, shares beat cash over the long term. That is the point of them.
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