Timing the market.
Discussion
So, Draghi didn't inject any hope into the Eurozone yesterday.. because he couldn't. And worse, he doesn't even know what Plan B is. A day as unexpected as it was unsettling and calamitous to many, and proof, if ever any was needed, that you don't try to time the market. Work out your strategy, refine it if you must, set out a course, be contingent.. but don't try to think you can outsmart the market. Define your objectives, put them on the fridge door, punch holes in your own case, differentiate between financial planning and investment management and work out how much time to spend on each. Timing the market successfully even once can be fatal, because it will make you think you're smart.
http://www.telegraph.co.uk/business/2016/09/08/ecb...
http://www.telegraph.co.uk/business/2016/09/08/ecb...
Some good points, and with one in particular in mind, when you look at data like this which emerged earlier this morning, which must be incredibly worrying for the Germans (and Greece!), it's as good a time as any to question your portfolio. Not to react needlessly, but to question if your circumstances are still the same as they were when you were all young and punchy, whether you now have to take as much risk, basically.. are your needs the same and are you the same person? Don't react to news, react to how your life changes - try and anticipate your needs.
https://www.destatis.de/EN/PressServices/Press/pr/...
https://www.destatis.de/EN/PressServices/Press/pr/...
You *could* be right 
.
I never react to news. I just sit there and chew it all over from every angle first. Then react. Chewing over, that's reacting though, right?
Edit; on reflection (damn there I go again), I would stand by that more than not. News is transient, we get overloaded with it, bombarded. Register it, assimilate it, but you don't always have to react. It is more important to know what the objectives are and to reflect properly first before reacting (if indeed, any action/reaction is needed). Maybe I've just got a much longer flash to bang time these days.
.I never react to news. I just sit there and chew it all over from every angle first. Then react. Chewing over, that's reacting though, right?
Edit; on reflection (damn there I go again), I would stand by that more than not. News is transient, we get overloaded with it, bombarded. Register it, assimilate it, but you don't always have to react. It is more important to know what the objectives are and to reflect properly first before reacting (if indeed, any action/reaction is needed). Maybe I've just got a much longer flash to bang time these days.
Edited by Ginge R on Friday 9th September 10:46
twinturboz said:
Was it really that unsettling and calamitous? The global markets hardly sold off.
There's nothing new there than whats been going on more or less since 08. There's been multiples rounds of qe all of the global markets are no where near inflation targets.
To a certain extent if your tracking the markets there's been signs that another wave of deflation might be coming for the last 3/4 weeks.
What's being going on since 08 is one massive experiment, I don't think any of the global central banks to an extent have any idea of how this ends and the markets currently are hooked on qe.
So qe1 didn't work lets l try qe2 etc, that doesn't work we'll try negative rates, of course that's not working so next well try helicopter money and maybe well think about buying actual stocks to try and keep this "bubble" propped up, ultimately they'll try anything for as long as possible until they lose control of the market.
You know the stock market cycles nothings changed, history tells you, you have boom and bust cycles it's human nature except this time the central banks are trying to avert it and personally in doing so they've made things ten times worse. It's all good while the music is playing no one cares the market is complacent, where's the next fix of qe, it doesn't matter if the market dips the central banks are there just blindly buy the dip it will be fine and you can't really argue against that strategy because it's simply been the best strategy since 08 but at some point that all ends one of those dips won't be the one you want to buy.
I'm adamant 20 years from now history will not look too kindly on what these guys are doing right now, it's almost blatant market manipulation.
There doesn't have to be a sell off for it to be calamitous, although we are seeing some of that today. The cupboard is, in effect, bare. Monetary policy and centralised influencing may have gone as far as they can, and I agree with much of what you say. It's going to be a very interesting, and for many, an unsettling six months. My money remains on there being a bit of a serious house price fall, just as well I didn't buy that small place last year. There's nothing new there than whats been going on more or less since 08. There's been multiples rounds of qe all of the global markets are no where near inflation targets.
To a certain extent if your tracking the markets there's been signs that another wave of deflation might be coming for the last 3/4 weeks.
What's being going on since 08 is one massive experiment, I don't think any of the global central banks to an extent have any idea of how this ends and the markets currently are hooked on qe.
So qe1 didn't work lets l try qe2 etc, that doesn't work we'll try negative rates, of course that's not working so next well try helicopter money and maybe well think about buying actual stocks to try and keep this "bubble" propped up, ultimately they'll try anything for as long as possible until they lose control of the market.
You know the stock market cycles nothings changed, history tells you, you have boom and bust cycles it's human nature except this time the central banks are trying to avert it and personally in doing so they've made things ten times worse. It's all good while the music is playing no one cares the market is complacent, where's the next fix of qe, it doesn't matter if the market dips the central banks are there just blindly buy the dip it will be fine and you can't really argue against that strategy because it's simply been the best strategy since 08 but at some point that all ends one of those dips won't be the one you want to buy.
I'm adamant 20 years from now history will not look too kindly on what these guys are doing right now, it's almost blatant market manipulation.
Didn't it ever? It's been on the radar now for a month or so, but I was expecting some nod or assurance that QE beyond March would (or may) continue.
I think the Draghi speech which precipitated my post yesterday is going to be a defining moment. It's an acceptance that measures are doing nothing to generate sustainable growth - worrying too, that this wasn't just sovereign debt stimulus that seems to have been stopped, but also corporate debt. The ECB is trying to suggest that it wants it wants interest rates to remain low, but in no uncertain terms it's also making it clear that it will not extend QE beyond March.
Interestingly, he said they didn't even *discuss* the extension. They could have said they might/may, but they didn't.. it wasn't even considered. Just divulging that was probably intended just to give a Heads Up to the market, which it certainly did, and hence what turned out to be the big sell off. Draghi's news was based too, on that export news from Merkel that I posted yesterday. She can't afford it either. So, given..
A) Yields are likely to be affected (the big sell off yesterday was mainly with those higher yield income producers)
B) S&P 500 is currently running a Schiller/PE multiple of c.25 X
C) Vanguard Life Strategy is popular and heavily biased towards the US
.. it's going to be a very absorbing and worrying few months (I think). I was going to sell my US trackers *anyway* (not suggesting anyone else should, it's just right for my strategy), so the timing is fortuitous. Charlie Bean, a wheel at the Bank of England, gave an interesting speech yesterday too, which suggested we shouldn't pay too much attention to central bank economic forecasts.
I think the Draghi speech which precipitated my post yesterday is going to be a defining moment. It's an acceptance that measures are doing nothing to generate sustainable growth - worrying too, that this wasn't just sovereign debt stimulus that seems to have been stopped, but also corporate debt. The ECB is trying to suggest that it wants it wants interest rates to remain low, but in no uncertain terms it's also making it clear that it will not extend QE beyond March.
Interestingly, he said they didn't even *discuss* the extension. They could have said they might/may, but they didn't.. it wasn't even considered. Just divulging that was probably intended just to give a Heads Up to the market, which it certainly did, and hence what turned out to be the big sell off. Draghi's news was based too, on that export news from Merkel that I posted yesterday. She can't afford it either. So, given..
A) Yields are likely to be affected (the big sell off yesterday was mainly with those higher yield income producers)
B) S&P 500 is currently running a Schiller/PE multiple of c.25 X
C) Vanguard Life Strategy is popular and heavily biased towards the US
.. it's going to be a very absorbing and worrying few months (I think). I was going to sell my US trackers *anyway* (not suggesting anyone else should, it's just right for my strategy), so the timing is fortuitous. Charlie Bean, a wheel at the Bank of England, gave an interesting speech yesterday too, which suggested we shouldn't pay too much attention to central bank economic forecasts.
Mike,
Bond yields have been low because investors sought safe havens. Germany’s 10-year bund yield dropped to minus 0.2% a couple of weeks after Brexit. In other words, if an investor bought that debt and held it for the ten years, when it matured, he would have earned less than what he paid for them. And he'd be happy to do so, presumably, because it was the lesser of two evils (for him).
The problem that the ECB faces is that the securities which yield less than minus 0.4% aren't eligible for it to buy. That means most have been beyond its remit. I'm not sure what the numbers are now, but a couple of weeks ago, about 80% of German sovereign debt had yields below zero. That will have crept up now, but even so, the pot into which the ECB can dip its cup isn't infinitely deep.
The ECB is also governed about the amount of debt that it can draw from one country, relative to the size of its debt. You could allow more latitude in the types of bonds available to the ECB to buy, but Draghi's comments of a few days ago seem to be implying this won't happen. And if the latitude was introduced, that would mean more debt being bought from Germany, not politically desirable - and increasingly fraught with uncertainty. This (bond bubble) could cause prices to drop, thereby increasing yield and I see this morning, that yields have gone up as a consequence.
http://www.bloomberg.com/news/articles/2016-09-09/...
You asked about dividend yields. If there is a sell off, and there has been - where is the money going? Lipped reported on Friday.. "The Q2 2016 blended earnings growth estimate is -2.2%. Excluding the energy sector, the earnings growth estimate for the index improves to 2.2%."
That's a big differential. The attractive divi payers could struggle, and chucking a wedge into one of the historically good oilers or high yielding income funds may cause disappointment. Hence my point about Vanguard yesterday. Hugely popular, and rightly so, but incredibly US-centric. Investors have poured into equity markets because bond yields have fallen (as referred to by Ozzie's inverse relationship post), but what now? It's going to be fascinating to see where the money goes this week.
As ever, the investment basics apply.
Be happy with your objectives, check your risk exposure and make sure you're suitably diversified. In my opinion (not advice), modestly aspirational, well managed, good income funds, nicely diversified and never claiming to be the ones to punch the lights out, should be a nice banker to have in the back pocket. Sterling has dropped, as we know, making it almost impossible to imagine we won't start seeing inflation (possibly at letter writing levels) in the shorter term but probably without a proportionate rise in rates for savers. I wouldn't commit to that three year saving bond just yet, either.
Interestingly, I spoke with a client yesterday who is seeing this as the moment to sell off some metal after three years of the garage contents remaining off the agenda. Not indicative, certainly, but still interesting to see from a previously self declared buy and hold collector.
Bond yields have been low because investors sought safe havens. Germany’s 10-year bund yield dropped to minus 0.2% a couple of weeks after Brexit. In other words, if an investor bought that debt and held it for the ten years, when it matured, he would have earned less than what he paid for them. And he'd be happy to do so, presumably, because it was the lesser of two evils (for him).
The problem that the ECB faces is that the securities which yield less than minus 0.4% aren't eligible for it to buy. That means most have been beyond its remit. I'm not sure what the numbers are now, but a couple of weeks ago, about 80% of German sovereign debt had yields below zero. That will have crept up now, but even so, the pot into which the ECB can dip its cup isn't infinitely deep.
The ECB is also governed about the amount of debt that it can draw from one country, relative to the size of its debt. You could allow more latitude in the types of bonds available to the ECB to buy, but Draghi's comments of a few days ago seem to be implying this won't happen. And if the latitude was introduced, that would mean more debt being bought from Germany, not politically desirable - and increasingly fraught with uncertainty. This (bond bubble) could cause prices to drop, thereby increasing yield and I see this morning, that yields have gone up as a consequence.
http://www.bloomberg.com/news/articles/2016-09-09/...
You asked about dividend yields. If there is a sell off, and there has been - where is the money going? Lipped reported on Friday.. "The Q2 2016 blended earnings growth estimate is -2.2%. Excluding the energy sector, the earnings growth estimate for the index improves to 2.2%."
That's a big differential. The attractive divi payers could struggle, and chucking a wedge into one of the historically good oilers or high yielding income funds may cause disappointment. Hence my point about Vanguard yesterday. Hugely popular, and rightly so, but incredibly US-centric. Investors have poured into equity markets because bond yields have fallen (as referred to by Ozzie's inverse relationship post), but what now? It's going to be fascinating to see where the money goes this week.
As ever, the investment basics apply.
Be happy with your objectives, check your risk exposure and make sure you're suitably diversified. In my opinion (not advice), modestly aspirational, well managed, good income funds, nicely diversified and never claiming to be the ones to punch the lights out, should be a nice banker to have in the back pocket. Sterling has dropped, as we know, making it almost impossible to imagine we won't start seeing inflation (possibly at letter writing levels) in the shorter term but probably without a proportionate rise in rates for savers. I wouldn't commit to that three year saving bond just yet, either.
Interestingly, I spoke with a client yesterday who is seeing this as the moment to sell off some metal after three years of the garage contents remaining off the agenda. Not indicative, certainly, but still interesting to see from a previously self declared buy and hold collector.
Just my personal belief, based as much as anything, on the premise of human nature. Import inflation will rise as Sterling remains low, rates will rise, money supply will shift, stock levels will remain low, (unless you're near CrossRail) London prices will continue to drop or increase much more slowly, B2L availability will increase as landlords seek some liquidity.
I was going to buy a probate property last year, it fell through. 25 yards from a beach. It went, last month, for 8% less than they rejected with me. Looking around now, agents are far happier to negotiate pragmatically - in my experience, anyway. Like I said, it's just my personal belief - I could be wrong.
I was going to buy a probate property last year, it fell through. 25 yards from a beach. It went, last month, for 8% less than they rejected with me. Looking around now, agents are far happier to negotiate pragmatically - in my experience, anyway. Like I said, it's just my personal belief - I could be wrong.
If we could all predict the future, eh?
On a more general note, and linked to the thread, the Bank of England has just released more details of its corporate bond asset purchase scheme.
http://www.bankofengland.co.uk/markets/Pages/apf/a...
On a more general note, and linked to the thread, the Bank of England has just released more details of its corporate bond asset purchase scheme.
http://www.bankofengland.co.uk/markets/Pages/apf/a...
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