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And back down on Friday!
Like a shoal of fish instantly changing direction and reflecting the light.
Had coffee with some friends on Sat who are short term traders, they are down about 22k on some of their open positions using CFD's ouch.
I'm so happy not to be option trading these days
Regards
Neil
Hi Tom,
I shall have a look at plotting that indicator as a guide to the All Ordinaries Index.
Currently we have a reading as follows.
All Ords P/E = 13.1
90 day bill rate = 7.18
therefore, combining the two would give a reading of 20.28 which is just above the neutral line.
This sounds like it would be about correct as I got these figures from the financial paper and they are dated Jan 15. After the large falls we had midweek this should be below the neutral line by now.
How is your market in comparison?
Regards
Neil
Buy on Credit Corp & Suncorp
Had a couple of buys triggered today. I added some more Credit Corp (CCP.AX) to the warehouse. Then in the afternoon added some Suncorp -Metway Bank (SUN.AX) to the shelves.
I think, checking in with A.I. that I am getting some more buy signals. I am going to stick with the signals in the well established companies but I shall pass on the more marginal ones.
I imaging if the last few days had record numbers of margin calls today would have been a doozy.
There were some changes to the Superannuation (pension plan) rules over here recently that allowed people to put up to $1,000,000 into super without any tax penalties. This caused a rush of people selling properties and putting the funds into share funds inside their super, all at the top of the market.
I would imagine that there would have been a lot of self managed funds out there and so can see these people selling in panic before their dreamed of lifestyles evaporate before their eyes.
Regards
Neil
Hi Firebird,
The All Ords had a rough old day today we were down 408 points or over 7%.
It is strangely fascinating, I feel far calmer than I did during some of the past market plunges, mainly because I am happy to have sold share at higher prices and although I still have a large exposure to equities I'm thinking about the businesses behind them rather than just a bit of paper.
My only problem now is that there are so many companies out there at bargain levels and I don't have enough funds to pump into them all.
Better luck with your market today.
Regards
Neil
DJIA Futures down 435.
Wow, I just knew it, its that full moon dammit. There is some savage selling in the futures that looks like you guys are going to get a pummeling today.
Look out for those quality stocks being thrown out of the door, nerves of steel are what is needed.
I guess you will have plenty of over margined investors (speculators) about to be blasted out of the market.
Regards
Neil
Mucho Red Day
Wow the Aussie market got a smashing today.
I was expecting a down day as the futures were down 70 points by Saturday morning which implied a weak start.
The usual scenario is for an initial plunge then a bit more rational thought and a rise towards then end of the day.
Not today though, the All Ordinaries lost 70 points then continued on down to end the day with a loss of 168 points or 2.5%.
I believe there is much weeping and gnashing of teeth in the margin loan department. I spoke to my broker this morning to get a feel for what was happening and he said there were about 400 margin calls on Friday, building from previous days (this is only 1 broker of course).
I imagine that the accelerating falls are due to margin selling as people don't have the money to stump up.
I added a some Platinum Asset Management (PTM.AX) to fill up the inventories. Other open orders are waiting to fill.
Best of luck with your first day of trading this week.
Regards
Neil
Hi Adam,
I guess it depends upon how you judge a strong company.
Amazon is definitely a well known company, but as to whether you are paying far to much for it at any particular time.
From what I read in the Ben Graham book, he takes examples of companies stretching back up to 50 years and compares them with the glamour stocks that everyone wants to own.
Of course that is not to say that something that is expensive will not get even more expensive and you can make money off it by selling as it rises, but if in the long term the price reflects more the value then the you may be in for a long slide down.
MSFT hit a price of $60 back in 2000 and probably had less sales then than it has now but its price has not surpassed that earlier peak.
AMZN appears to have a P/E ratio of 95 so from that you would have to be very very optimistic about their earnings. The people buying it have no idea about value they are purely momentum players.
If the stock were to trade on the same P/E as Microsoft then it price would be about $19.
Microsoft is a mature company with more stable earnings, you would be safer (less at risk of losing money) buying that than Amazon as sooner or later the price has to reflect the earnings.
Would you buy a property and rent it out for a 1% return?
Regards
Neil
Hi Aimster,
That is indeed the problem we have with tweeking systems to optimise the returns on a particular stock, it is all hindsight tweeking and that is why it is not particularly useful.
The only tweeking that I do to AIM these days, other than the LD AIM is the increase of SAFE on the buy side on successive buys.
I tend to do this on the smaller companies rather than the larger more stable companies.
One thing that may be useful when considering successive buys at lower prices is to look at the price/book ratio.
If the ratio is getting lower you are at least safer as the price approaches the book value. If the company gets liquidated at least the assets, if sold should provide some return rather than nothing.
It was also one of the parameters that Ben Graham considered the most important.
Regards
Neil
Buy in CFU.AX
Ceramic Fuel Cells was in a 1 month Aim suspension from buys after the last buy in December, as it has fallen further since the signaled buy I picked up more at 50c, a 23% discount from the previous buy.
I've also increased the buy side SAFE to 30% to try and avoid another buy in this cycle as I have had 4 buys already & I would really like a sell.
It was a pretty red day for my portfolio today despite the market not really moving by the end of the day.
The market dropped hard initially before slowly creeping back through the day in anticipation of a relief rally on your side.
I've seen some quite wide ranging opinions of where the Australian market is going to be at the end of 2008, the bearish was 4500 points while the bullish was 7800, all from the same financial paper.
Just shows you why you don't listen to predictions.
Regards
Neil
ASX Podcasts
Just thought I'd post a link to the Australian Stock Exchange Podcasts page.
http://www.asx.com.au/resources/podcast/index.htm
One that I found very interesting was the one regarding benchmarking your performance to see whether your efforts in managing your portfolio are paying off or whether you should just stick things in index trackers and rebalance each year.
Regards
Neil
GOLD
Hi Ken,
There is a gold proxy on the Aussie market called Gold Bullion Securities Ltd (GOLD.AX).
Each share is priced at the A$ value of 1/10oz. of gold and is 100% backed by gold bullion.
So, it's a good way of holding gold without worrying about storage costs or security.
All I need now is another stock that is backed by platinum and I could run an AIM system like David Bean's playing one metal off against the other.
Regards
Neil
Hi Ken,
Sounds like you are having a busy time with all these customers in your warehouse buying up stock ans then replenishing it.
I'm looking out for a few more gold stocks to add to the inventory after one of ming is being taken over by a Canadian company, unfortunately at a $300 loss.
The company had an apt name, Perseverence Mining (PSV.AX), bought $1000 at 33c, some more at 27c and a last buy at 15c after they had some financing troubles. It's being taken over at 20c so that overall is a bit of a loss but AIM limited those by giving a small profit on the last purchase.
Regards
Neil
Hi Tom,
It's funny how the Futures indicator doesn't always play out. Usually this is due to fresh news coming out during the equity trading session during the day.
You will have seen plenty of red today no doubt as we will on Monday, but now, I actually have a feeling of anticipation that I can pick up some stocks at better prices rather than that feeling of dread when I was a trend trader.
I was reading in the Financial Review over here today that the Sub Prime defaults are now starting to infect even Prime mortgages with people defaulting as home values fall.
As I keep saying to people over here, there is no real benefit to having home prices rise by 10-15% per year as you can't sell off a bathroom if the prices skyrocket then buy it back on a dip. All it does if make new entrants into the market pay a high price and have less spending power on other items.
The only time you benefit from strongly rising prices is if you are selling up and buying a motor home in which you intend to spend the rest of your life.
Regards
Neil
Happy New Year,
I'm a bit late off the mark there. I'm still catching up on my sleep what with the late night and the high temperatures it gets a little hard to sleep when it is 33C at night.
I hope the start of the year trading is not how you intend to go on ! Not that I should mind though as it will throw up some bargains.
The Aussie market was pulled down by about 1% by the overnight falls in your neck of the woods.
The only green on my screen was from my gold holdings, everything else was splashed red.
I guess as you have passed into a new tax year some people are selling off some of their gainers and hiding the cash under their mattresses.
From the futures prices on Bloomberg it looks like there may be some more negativity around today as well.
Regards
Neil
Hi David,
It is 42C in Melbourne, They are having a cyclone hitting the north of Western Australia so all Australia's oil production has been shut down and there are so violent storms hitting the Queensland coast all in all very active weather.
I'm going to head out to the beach and brave the White Pointer sharks as it is intolerably hot in here, sweat is dripping off my head onto keyboard and I'm worried the computer may overheat.
So, I'll sign off for now and see you all in the New Year.
Regards
Neil
Happy Christmas & New Year,
Hi Folks,
Hope you are all enjoying your Christmas breaks and are looking forward to the New year and all that it brings.
I am sweltering at the moment in record high temperatures in Adelaide, this is the hottest December day in over 100 years.
My thermometer is reading 45C(113F)in the shade.
Inside my place it is 32C and I dare not step out of the door in case I shrivel up. It is so hot and we are not even at the hottest part of the year yet, that comes in February.
All the plants in my little garden are starting to go brown and burn and there is not much I can do about it.
It would be nice to have a cool day, just one. Apparently this weather is due to stay at these levels for another week or more.
Regards (in extreme discomfort)
Neil
Hi Clive,
Good Luck with the UK version of the AIM board.
When I was over there in July I purchased stock for my father so he could use AIM to get a feel for it.
I purchased Babcock Ltd (BAB), I wanted something that wasn't going to crash and burn and BAB seemed to be a fairly diversified company.
All I have to do now is get him to overcome the psychology of putting some more funds into a stock that has fallen in price.
Regards
Neil
Hello Adam,
The only solution I have come to in the case of volatile deep diver stocks is to limit the amount of money you will allocate in total to the stock.
I start by asking a few of the basics, does it have earnings or is it all hot air.
If it's a hot air speculation, but is supposed to be going to do big things, I'll put maybe $1000 into LD-AIM type account then make 3 or 4 more purchases at lower levels if it drops and no more.
If it's volatile I usually wait for a 100% gain before I sell Half the position.
It's not strictly AIM but once I've got a sale out of it I feel better.
Regards
Neil
Centro Property Beheaded
Well, well, what a day on the Australian Stock Exchange.
The futures were down 50 points on Saturday morning (after your market closed) so that is the fall the market expects unless other news comes out to push it higher or lower. The market was pulled down over 200 points after the Centro contagion spread.
The news this time that kicked the shins of the market was that Centro Property Trust (A REIT in your language) was having difficulty refinancing its loans.
Centro is Australia's second largest trust.
The axeman was swift in his execution, the stock lost 75% of it's value.
Usually Property Trusts are the safe haven for investors when things get a little dicey out there. Not this time.
I think at the moment it is time to take a look at the amount of debt the companies you own are carrying.
Regards
Neil
Hi Aim,
Regarding the earnings of a company, sometimes the share price does not reflect the earnings and growing equity due to perceptions about a stock or sector that are not correct.
I have a filter that looks for a rising equity and a steady ROE but also at a price that is undervalued due to sentiment.
By doing this at least it makes a good starting point to begin an AIM account.
I have found that AIM will not save you when you buy a company that has no earnings and a gradually eroding equity base. If the price of the dud company is rising then AIM will exit you with the price rise, the trick is not to put the money back in again once the price starts to reflect the shrinking equity base.
Regards
Neil
Sell in AND.AX
A nice end to the working week was a sell in gold explorer Andean Resources for a mighty $1.99.
I bought these, at their lowest in my AIM program of around 27c.
Although it would have been nice to have all my original quantity enjoying this large increase in stock price I must be aware that the thought is only brought on by the hindsight trading mentality.
It just isn't possible to project where a stock is going to go in the future just from looking into it's past.
I only have one lot of shares to sell in AND now and hopefully if it can break the $2.20 mark I'll give them up.
Regards
Neil
Hello AIM
Very well stated with regards to the increasing equity value of the company due to retained earnings.
I guess then, theoretically you could adjust your portfolio control upwards by the amount of retained earnings per share.
I had this discussion with a fund manager a few weeks ago regarding the gradual selling of shares as they rise.
He was of the opinion that you hold the entire initial amount as long as the equity value is rising and there is a steady ROE of around 20% without additional capital raisings.
I agree entirely except for the fact that the price of the share fluctuates above and below a valuation given by the amount of return you want.
It also lessens the risk in the case of a sudden collapse in profitabilty and a lower ROE.
It is better to sell a low ROE and buy a high one wouldn't you say?
Regards
Neil
Hi David,
Are you still using your AIM program to play off the Gold/Platinum price using egold?
Just wondered how you are doing if you are. The run up of gold over the last six months (but I'm not sure if that it has run away compared with platinum) would have triggered a few swaps into platinum?
I still think it was an excellent idea that you had.
I purchased a gold bullion stock back in July when the Aussie dollar was strong against the USD and the gold price was weak in USD terms. I think I picked it at it's low.
At the moment I'm just using it as a hedge but I may turn it into an AIM account and gradually swap back into fiat.
Maybe a fiat currency is ok if the the country doesn't run a deficit economy?
I think I heard that the only thing that keeps Australia going is digging minerals out of a hole in the ground, the trade balance is not looking good over here even though exports are at record levels.
Regards
Neil
House prices,
I always believed that house prices tracked inflation but I'm beginning to have my doubts.
House prices have gone crazy in Australia with them now ranking as the worlds most expensive.
The long term ratio of house price/annual income was always around 4 but recently it has moved to between 6 and 8 times income.
All my logical feelings say that prices should fall back to the long term average and as wages are only rising at about 3% (the inflation rate) so if house prices are advancing 10-20% per year as you would think, they are getting less and less affordable.
I hear all this talk about a land shortage, now, come on, this is Australia, how can there be a land shortage with a population of 22 million spread over an area just smaller that the USA.
There is an interesting chart on Robert Schillers website that shows that house prices over long terms (300 years+) only rise around 1% per year.
It is the cycles in property that are longer and that fools people into thinking property moves up by 10%+per year indefinitely.
Regards
Neil
Hi Jeremy,
I have been using Automatic Investor for around 3 years now and can recommend that program.
It's very comprehensive in that it allows back testing to see how AIM would have performed against buy and hold.
I always find that to do a true comparison when using the backtesting is to look at the current price then go back a couple of years until you find the same price, theoretically giving a buy and hold return of 0%.
There is a lot of extra stuff in A.I. some useful other not so useful.
I believe you can download a 30 day trial from Mark Hing if you check out the website.
Regard
Neil
Buy in CFU.
I added some more Ceramic Fuel Cells (CFU.AX) to the warehouse shelves. The third purchase in this part of the cycle. I had them in a 1 month buying halt and picked some up at 65.5c.
I've increased the buy side SAFE to 25% to throw the next buy down to around 57c.
Most of their operations are in the UK (listed on the AIM exchange in London) and Germany despite them being an Australian company. Now that we have a more progressive government in power over here there is a chance that companies that produce energy efficient power products will get a little more support.
Regards
Neil
Manic depressive,
Hey what's going on with the markets over your side of the world, they are acting like they have untreated bipolar disorder, up 200 points, down two hundred points, up again, down again.
I always find it amusing in that you would think this would be the ideal market for day traders, but, each Saturday when I go for an afternoon coffee with some trader friends of mine and ask them how things are going they say 'ooh, the market is too volatile, I'm staying on the sidelines until it calms down'.
That's kind of like a surfer staying out of the water as there are big waves coming in.
No doubt, there will be some sellers regrets today and the market will go up, come on, you did actually get a rate cut. They are still going up over here!
Regards
Neil
Hi Clive,
Who would have thought that you can even bet on the movement of house prices, is that kind of like a CFD on house prices where you can take a leveraged bet on the direction?
Just one more way of separating one from ones money.
I wonder how different the CFD providers are (except for scale) from the 'bucket' shops that existed in the 1920's as mentioned in the books about Jesse Livermore.
Regards
Neil
I just knew I should have worn a dark suit and looked studious with a serious expression on my face.
Maybe the beachcomber look for using AIM made it look as if I just couldn't be serious.
Well, there are still a couple of weeks in December to go and if any people pick it up they may do some investigation.
Regards
Neil
Last post for the night.
I forgot to mention I had a sell in Equigold NL(EQI.AX)around a week ago. This was during the recent gold run when it hit about $850 before settling back.
My market order was sitting there and just caught the spike, Gee this is such a relaxed way to trade.
Regards
Neil
Activity
Hey Tom, has there been any appreciable increase in page hits to your site since the article appeared on AIM in the Smart Investor magazine?
I've been a bit slack recently mainly due to the heatwave we have been having over here.
The hot weather has come in much earlier this year than any time I can remember.
Through November we have had temperatures hitting 100F on about 6 occasions. These sort of temperatures don't usually occur until January and February.
I have a feeling we are in for more crop failures again this year.
The good news I can report from this side of the world is that we eventually saw the light and threw out the conservative government.
It looks like now Australia is going to sign the Kyoto Protocol and maybe it will lead to a little more cooperation around the world, hopefully this should give some of the green energy stocks a bit of a boost.
Regards
Neil
Fair Value,
With all this talk of Fair Value recently I opened a new AIM account on a recently pummeled stock Credit Corp Ltd (CCP.AX).
The beating it took at the hands of investors was a bit unfair, sure it came out with a profit warning due, not to lack of business but too much business and having to take on and train more staff.
It dropped its profit forecast from $24m to $19m, so what do the investors do, slice the share price in half!
The stock still had an excellent ROE and is now undervalued even at a profit forecast of less than they have indicated.
So, I purchased some for a new AIM account and will happily buy more if the market makes them available at a lower price.
I'm almost through reading B. Grahams "The Intelligent Investor". I wish I had read this before getting involved with all the momentum investing crowd many years ago, probably would have saved me a lot of money.
Regards
Neil
Hello Tom,
I was quite pleased that it came across in a coherent manner. They managed to distill the salient points, especially that it is the psychology of the stock market that defeats people, the inability to be able to take losses.
AIM allows you to mainly sell at a profit but on the flipside it does take nerve to buy as a stock falls lower.
Regards
Neil
Hi Aimster,
You were indeed correct, I was standing on a sand dune at the local beach which is a couple of km from where I live. It was a windy evening and the sun was low over the sea so I was blinded while looking out to sea.
It will be interesting to see if there are any more hits on the website after the article. The magazine doesn't hit the shops for a few weeks yet, I get mine on subscription and that arrives earlier.
Regards
Neil
Regarding Quicken,
I have used my version of Quicken to record short sales without any difficulty, the Australian version seems to have an option to record short sales.
It asks, you if you place a sell in and it finds no record of a buy if you want to record it as a short sale.
I used it for recording my Option sales for many years, it did a good job there.
I find it's only shortcoming is in the way it calculates capital gains, the version I have has an option to calculate FIFO but then ignores it and does some weird averaging of buy price that really stuffs around with the tax implications of selling the stock. I had no luck in getting the folks at Reckon Software (Quicken distributer) to sort the problem out so I switched to another package.
Regards
Neil
Buy in Aristocrat Leisure.
A buy was triggered in Aristocrat Leisure (ALL.AX)yesterday when the market dipped so I scooped some up at $9.47 a 24% discount to my initial buy price of $12.50. It rallied nicely today to finish at $10.09.
Aristocrat is Australia's largest gaming machine manufacturer. It has recently been suffering from exchange rate woes as a lot of it's earning are from overseas and also from recently introduced regulations in the industry.
There is a lot of volatility around at the moment so that should be good for AIMers, it must be frightening the life out of the highly margined crowd, this will probably lead to some sharp down moves when the margin calls start arriving.
Regards
Neil
AIM Publicity
I was recently interviewed by Smart Investor magazine here is Australia and I've given AIM and Lichello a plug. I wasn't sure if they would print it but they did and I think they did quite a good job. I was hoping that they would have printed some of the links but they didn't, but it may generate a bit more traffic on Tom's website as people do some research about what it is all about
Regards
Neil
Value Seminar.
I attended a short seminar on Friday about value investing and it shows a classic case of information (or action) out is only as good as information in.
I have been using the Stockval software for making more sensible purchases of stocks to stop me ending up with real dead end cases.
The only problem when you get valuation software is that values change as soon as new data is put into them. I purchased some Aristocrat Leisure (ALL.AX) which was valued at around $14, I purchased at $12.50. A profit forecast came out and it was then revalued at $10.50 and is currently trading at around a dollar under that.
So, even using a Buffet system of valuing does not give immunity to falling prices. Luckily AIM steps in to help, I have a purchase indicated at $9.48 which may get executed on the Monday.
Another sock I had my eye on to add to the portfolio was Credit Corp (CCP.AX). Sound fundamentals and trading at around $10.50, out comes a profit warning where the profits are revised down from $24M to $18M and the stock gets a pasting, down to around $6.00.
That kind of punishment gives me the impression that people are just waiting for an excuse to sell the market and that speculation levels are rising. The Australian market is being carried higher by a narrow range of stocks now, all based on the mining boom. If China stops buying for whatever reason then the good times end.
We have just had another interest rate rise last week, taking the cash rate up to 6.75% and the odds are that more are in the pipeline. This is making the Australian $ pretty strong at the moment and hence will be hurting exports. So, what to do? buy foreign ETF's of course. I'm looking at exchange rates between various currencies to see what ETF's would make the best value buying.
Regards
Neil
Down under report.
Wow, a couple of weeks have elapsed and I've not posted anything so I better catch up with events in the land of the Kangaroo.
From the All Ordinaries index point of view, it continued to hit new highs and made it up to 6853 before retreating on the back of the volatility in your neck of the woods and we are currently sitting on 6607. I think we should be in for a negative open on Monday following the falls on your market on the Friday.
On the trading front, not a huge amount of activity. I had a sell in Andean resources (AND.AX), a gold explorer in South America. This is one where I had my last buy at 27c and I have sold some this last parcel at $1.455. Again, one of my grazing stocks that I will eventually feed into a more stable blue chip or index fund.
My other trade was a buy in Ceramic Fuel Cells (CFU.AX)at 78c during the week. The previous buy was at 87c so I'm replenishing the account after several sells. They should be on the verge of commissioning their ceramic powders plant in the UK to allow them to boost the production, that may kickstart a price move.
I have a few market orders sitting in place waiting to see if they get bites or not, next week should be interesting.
Regards
Neil
Hi AIMster
I updated my Automatic Investor portfolio's this morning and didn't have any problems so it may have just been a temporary thing.
I guess you've checked to see that your registration code is still in place and hasn't been deleted for some reason.
I still get the problems when I'm backtesting in that I suck data in to test and it gives me very weird results, I think it is getting the dates confused. I'm wondering if it si something to do with my PC being set up to read dates in the DD/MM/YY format and AI being an American written program assuming that it is seeing MM/DD/YY. Although this has only been a problem over the last year very odd.
I get around it now by downloading the data to a file then running the backtesting on the file rather than straight from the net. It's a bit of a nuisance but as I've not worked out what the problem is there is little choice.
Regards
Neil