Time to invest in a FTSE 100 tracker?

[walm]

TheMonster said:

Behemoth said:

If you don't know what the current market sentiment is between these polar opposites then I wouldn't be making any investment decisions

Oh really... I presume you mean everyone is fearful then. But look at the replies to this thread - some are greedy, some are fearful. It's not clear cut. If you do mean everyone is fearful you are basing this on market movements rather than what people are saying, in which case you are turning buffet's maxim In to "buy when the market falls" which is not the same thing.

Greedy means when people are buying with absolutely no regard for the underlying value or fundamentals of the business.
The classic example is the tech bubble in 2000 when people were inventing random valuation metrics such as $/eyeball in order to justify stock prices that made absolutely no sense.

Fearful is sort-of the opposite. People are selling without thought, without an eye on the underlying value or risks etc...

People who are looking to invest in this kind of environment aren't being "greedy" (we ALL want our investments to make money that's just obvious!) they are looking to find assets that are beaten down well below the intrinsic value owing to the fearful distressed sellers.

[TheMonster]

walm said:

Greedy means when people are buying with absolutely no regard for the underlying value or fundamentals of the business.
The classic example is the tech bubble in 2000 when people were inventing random valuation metrics such as $/eyeball in order to justify stock prices that made absolutely no sense.

Fearful is sort-of the opposite. People are selling without thought, without an eye on the underlying value or risks etc...

People who are looking to invest in this kind of environment aren't being "greedy" (we ALL want our investments to make money that's just obvious!) they are looking to find assets that are beaten down well below the intrinsic value owing to the fearful distressed sellers.

I don't think I'd dispute much of that at all. It's some of the other posts I would disagree with which are implying (I think) that everyone is fearful at the moment. Assessed by the posts in this thread or taking in to account "fundamentals" it is simply not true.

[walm]

TheMonster said:

I don't think I'd dispute much of that at all. It's some of the other posts I would disagree with which are implying (I think) that everyone is fearful at the moment. Assessed by the posts in this thread or taking in to account "fundamentals" it is simply not true.

The point is they are VERY OBVIOUSLY more fearful than being greedy in the sense that Buffett meant.

Take today.
Very little incremental news and the market is down nearly 4%.
Classic risk-off, st-your-pants, sell-everything FEAR mentality.

The FTSE is now off 22% from the peak.
BY DEFINITION this isn't some greed sustained rally.

That's why what you wrote is simply wrong.

[TheMonster]

walm said:

That's why what you wrote is simply wrong.

To clarify, what is it I wrote that is "simply wrong"?

To me this kind of comment is an example of what goes wrong in investment markets, and maybe life in general, where people think there is an obvious clear cut answer to things and there are no shades of grey.

[walm]

TheMonster said:

Ozzie Osmond said:

Warren Buffett, “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”.

Right, great. Which in this context means be greedy or be fearful?

Sorry... not wrong. Just no clue. (No offence intended, this isn't general knowledge!!)

The market right now is a bear market by definition.
That's why there isn't a question about whether the market in general is being greedy or fearful.

This isn't a matter of opinion or debate, it's just a fact.

Now whether the markets rally or drop another 20% from HERE - THAT is open to debate for sure.

[red_slr]

As much as I hate to say it I do think the market is over valued by 10-20%.

[TheMonster]

walm said:

Sorry... not wrong. Just no clue. (No offence intended, this isn't general knowledge!!)

The market right now is a bear market by definition.
That's why there isn't a question about whether the market in general is being greedy or fearful.

This isn't a matter of opinion or debate, it's just a fact.

Now whether the markets rally or drop another 20% from HERE - THAT is open to debate for sure.

I don't think it's reasonable to assume how much knowledge I have of financial markets. I personally think understanding what you don't know is pretty important in things like this so in that sense I would agree to not having a clue but that doesn't necessarily bear any relation to my understanding of the issues.

I still don't really see your point. Earlier you say that "fearful is [where]... people are selling without...an eye to the underlying value or risks...". You then say that as the ftse has fallen by 22% tthere "isn't a question about whether the market in general is being greedy or fearful". Yes, people are selling, but it is an opinion, not fact, as to whether this is with "an eye to the underlying value". The market may have been 20% overvalued before.

[Richyboy]

I'm in the fearful camp. If the ship is sinking, why invest in it long. Either man the lifeboats or invest in buckets (physical assets or infrastructure or something lol).

Rising public private debt.
Low growth.
Low oil price.
Low rates and money printing didn't put a dent in this mess.
Stock market in the toilet with near zero rates.
Dodgy accounting. Tesco got me, who else doing the same?
Banks
Derivatives.
Property madness.
We're living beyond our means.
Left wing governments.
Left wing media.
Bernie wins US and then Corburn here.
Massive unskilled Migrant influx with some hatred for western ideals.
Turkey joins EU.
Middle class decimated.
We're fked.

Long term 15 years with those fundamentals lol. Surely the way out of this is a massive increase in cost of living and thats not going to be too good for sales revenues. Pritt-stick propaganda is what's keeping this house of cards together.

Can't wait to read this in 15 years and think what an idiot I was lol.

[walm]

TheMonster said:

I still don't really see your point. Earlier you say that "fearful is [where]... people are selling without...an eye to the underlying value or risks...". You then say that as the ftse has fallen by 22% tthere "isn't a question about whether the market in general is being greedy or fearful". Yes, people are selling, but it is an opinion, not fact, as to whether this is with "an eye to the underlying value". The market may have been 20% overvalued before.

That's a very fair point. I didn't explain myself very well, sorry.

What I really mean is that it is by definition either that the market is fearful or just that it was over-valued before.

In no circumstances is it possible to say that people are being greedy (in the Buffett sense) when we are 22% off the highs.

[Greshamst]

Does anyone else find that the Buffet mantra of "Be fearful when others are greedy, and be greedy when others are fearful" tends to be trotted out by those that realistically have very little knowledge of investing, other than a superficial understanding?

People on this forum love to quote it as if they are enlightening you with such great wisdom, as if no-one has ever heard it before.

Remember guys... buy low, sell high eh.

[Matt1707]

Wow, i didn't expect this amount of interest! I've certainly got a lot of info to process. Still trying to decide if we are near the bottom of this fall after all today has seen another 2.4% drop

[Ozzie Osmond]

TheMonster said:

It's not clear cut.

It's never clear cut - which is the whole point. If it was easy everybody would be doing it.

The market (FTSE 100) was at 7000 last April and it's at 5500 today. I was buying last April and today I effectively have an opportunity to buy the same thing with "22% off in the sale". As such, I'm in.

It's crucial to remember that any market tends to be hyper-sensitive around the edges of supply and demand. Just because the FTSE 100 is "down by 10,000,000,000" doesn't mean shares to that value have been sold and people have moved their money elsewhere. It just means people have got the jitters so there are more sellers than buyers.

If you want to get a feel for the long term picture have a look at the graph on this link and see if you can decide whether 5500 is "low" or "high". https://uk.finance.yahoo.com/echarts?s=%5EFTSE#sym...

What the graph does show is just how much volatility there has been during the last 15 years. IMO a lot of this is driven by the activities of people who are gamblers rather than investors, and by "program trading" where people sell just because the market has fallen by "x%". IMO the same factors which have led to rapid falls have also led to the rapid rises - and will do so again.

[TheMonster]

walm said:

In no circumstances is it possible to say that people are being greedy (in the Buffett sense) when we are 22% off the highs.

But that's still not true is it? It could have been 40% overvalued before.

Being greedy is "when people are buying with absolutely no regard for the underlying value or fundamentals of the business". Just because the market has fallen by 22% doesn't mean that those buying are now paying attention to fundamentals. Indeed you could argue the opposite - if people are buying just because the market has fallen a lot then they are by definition not looking at the fundamentals. There is a lot to be scared at out there - it is not a ridiculous view to think the market is not pricing in all the risks.

[walm]

TheMonster said:

walm said:

In no circumstances is it possible to say that people are being greedy (in the Buffett sense) when we are 22% off the highs.

But that's still not true is it? It could have been 40% overvalued before.

You're still missing the point.

Investors who buy on "greed" are what you might call momentum investors.
They see a stock going up and pile in.
They don't care about valuation or fundamentals - they see the upward trend and that is their investment decision.

At down -22% momentum has turned. Any momentum investor looking at the market today would be going short.
(Or more likely selling.)

That's why Behemoth made his comment and I am defending it.

Buffett is a value-based investor, looking for long term holdings.
He is the exact opposite of a momentum investor (e.g. his Goldman purchase in 2008).
That's why he said what he did about greed and fear.
He needs a market dislocation to make money.
Value investing only works if you get a disconnect between the stock price and the fundamental instrinsic value of a business.

[jeff m2]

TheMonster said:

Behemoth said:

If you don't know what the current market sentiment is between these polar opposites then I wouldn't be making any investment decisions

Oh really... I presume you mean everyone is fearful then. But look at the replies to this thread - some are greedy, some are fearful. It's not clear cut. If you do mean everyone is fearful you are basing this on market movements rather than what people are saying, in which case you are turning buffet's maxim In to "buy when the market falls" which is not the same thing.

"Greedy" is in the context of an investor not a trader, it's about getting quality positions that have been oversold.
True that nobody can predict the bottom but you can watch the spreads!!!

[Ozzie Osmond]

TheMonster said:

walm said:

In no circumstances is it possible to say that people are being greedy (in the Buffett sense) when we are 22% off the highs.

But that's still not true is it? It could have been 40% overvalued before.

You've lost me. It's a market, so the values are always correct. The only question is what's a particular investor's opinion of the market.

Anyone who is not willing to invest at the moment has IMO convinced themselves that,

• Energy is going out of fashion,
• Raw materials are going out of fashion,
• The Chinese have decided to abandon what they've been doing for the last 30 years,
• Something new is going to replace money/banks, and
• Capitalism is dead.

Work creates value. People are still working. Value is still being created.

Compare some of the BTL thread inputs where landlords who aren't highly leveraged don't fret much about the capital value of their houses. They know they own the house, they know people need places to live and they know people are willing to pay for accommodation - so they don't need to worry about "value" on a day-to-day basis. A landlord would be more concerned about all the local factories closing and all the workers leaving town so that demand for housing plummeted.

[TheMonster]

walm said:

Investors who buy on "greed" are what you might call momentum investors.

Who says? Momentum investors are one example of people ignoring fundamentals, not the only example. I think you were right when you said it's about ignoring fundamentals

You are restating Buffett's quote to "be greedy when the market goes down and be fearful when the market goes up". I think his point was wider than that.

[Ozzie Osmond]

Monster - let's get to the facts. Right now are you,

a) Buying
b) Holding, or
c) Selling.

And whichever one you are doing, what is the reason for it?

[TheMonster]

Ozzie Osmond said:

Monster - let's get to the facts. Right now are you,

a) Buying
b) Holding, or
c) Selling.

And whichever one you are doing, what is the reason for it?

Buying, but not too aggressively. My personal view is that prices look pretty attractive (Pe ratios, dividend yields, low oil prices really being a good thing for the world and central bank puts) but I've been caught out before so am not going crazy. Have been topping up each time the free fell 250 points or so since 6250.

And if that's not a sign to sell, I don't know what is :-)

All I'm trying to counter is all the implication in some posts that the market is obviously oversold and that it is clearly undervalued. Even on this thread it's fairly balanced if not slightly in favour of the market being undervalued which tells you that buying is not the contrarian approach you might think.

[walm]

TheMonster said:

You are restating Buffett's quote to "be greedy when the market goes down and be fearful when the market goes up". I think his point was wider than that.

I am not sure I am as bullish as Ozzie but there is one element that is very important that you miss out here.

The REASON why markets go up or down MATTERS.
What we are seeing today (for example) is a fairly solid move but on no news.
Now this happens fairly regularly but it highlights that we MAY be in a situation where stock moves have become solidly disconnected from fundamentals.
That can make for some very good investment opportunities.

Similarly when you look at the FANG stocks last year - they were going up but why? Was it improving earnings or was it a multiple expansion? Or just pure blind speculation and momentum.

When stocks go up because earnings grow and companies beat market expectations and all is good with the world.
It's when they go up with NO OBVIOUS REASON that you should worry.

In 2008, mid-credit crunch, the market was tanking but it had a very good reason - there was genuine systemic risk.
Banks were failing.
Significant numbers of people had mortgages they couldn't afford.
Balance sheets were highly levered.

Similarly in 2011, the Greek crisis could have spread through the EU. It was a justified risk.

Today the risks are far from as obvious.
Balance sheets are far more solid.
Banks have far less toxic debt to worry about.
Slowing China is SLOWING not declining.
The rest of the world is growing, slowly, but surely (for now).
S&P is expensive still but SXXP isn't and yields are still very very low making equity div yields something to be treasured!

So in summary: be greedy when markets go down for no reason and be fearful when they go up for no reason.