'Eerily reminiscent' of pre-GFC conditions

[gzbkel]

Current situation quite a dilemma for me, as an average run-of-the-mill retail investor.
- If buy too much, may get badly burned in a crash.
- If I don't buy and market keeps rising, I will get left in the dust holding a lot of money in FD with negative real returns.

My plans:
- Try to maintain a constant ratio of equity to cash (Perhaps 70:30)
- Stick with companies with proven track record of surviving well in the last GFC.
- Prefer companies paying decent dividend to lessen pain of deep unrealized loss in a crash.
- Buy cautiously, taking historical average yield and PE into consideration.
- Psycho myself not to sell in a deep crash (Stalin's "Not one step back" order in WW2)
- In crash, buy reliable dividend stocks at depressed prices, using my 30% cash.

Heard that this is very tough psychologically. I shall see if I can pull it off.

[chialc88]

Sgx only blue chips n reit can buy...
I am venturing into overseas bourses..e.g. Hkse n lse

my feel too.
sti is simply too small and everyone knows that it could be manipulated relatively easier compare to overseas bourses.

for one, my interpretation is not only sti do not drop but the big boy is engineering a bull (bad news, low volume, slowly increasing sti)

based on my guts, sti blue chips will be the only buy for me.
it has to be near 52 weeks low in order to ride the wave.
if it's not near 52 weeks low, there must be a catalyst before I will buy it.

any thing else will have to wait (wait for what?)
wait for these blue/bull chip to charge first.

$$$$$$$&&&$$$$$$$$$$$$$
I am not sure who will buy at current market sentiment.
I just want to quote one of our value buddies words:
Be fearful when everyone is buying.

LC



my life is powered by ValueBuddies dot com!!!

[funman168]

The problem w sg mkt sentiment is that nobody bothers abt it, dun even hv any fear/greed. The big boys basically is ownself play, ownself happy..

Sgx only blue chips n reit can buy...
I am venturing into overseas bourses..e.g. Hkse n lse

my feel too.
sti is simply too small and everyone knows that it could be manipulated relatively easier compare to overseas bourses.

for one, my interpretation is not only sti do not drop but the big boy is engineering a bull (bad news, low volume, slowly increasing sti)

based on my guts, sti blue chips will be the only buy for me.
it has to be near 52 weeks low in order to ride the wave.
if it's not near 52 weeks low, there must be a catalyst before I will buy it.

any thing else will have to wait (wait for what?)
wait for these blue/bull chip to charge first.

$$$$$$$&&&$$$$$$$$$$$$$
I am not sure who will buy at current market sentiment.
I just want to quote one of our value buddies words:
Be fearful when everyone is buying.

LC



my life is powered by ValueBuddies dot com!!!

[Temperament]

At the tail end of both extremes of the market, usually the volume of trading is low to very low. Especially severe bear market tail end (40-50% drop) with hardly any trading at all.
But then don't forget the darkest hour is just before dawn.
How many times have you stop buying then the market starts to turn North? The morning has come.
That's why they say you buy until you can't take the hurt anymore.

Some of us will miss the opportunity of buying due to many reasons.
But i think the worse reasons is you are caught by the BLACK SWAN not really by the BEAR.
So always have some cash ready.

[chialc88]

Thanks for your kind words, T.

Will remember to keep some cash too.

LC


yesterday enemy has become tomorrow friend

[greengiraffe]

RBA chief also noted uneasy calm in global markets

Investors hold their fire as long cycle grinds on
• JOHN DURIE
• NEWS LIMITED
• JUNE 04, 2014 12:00AM
THE big unknown pinpointed by the Reserve Bank is just why volatility in global financial markets is so low right now when the geopolitical and economic risks are not exactly missing in action.
Vladimir Putin is on a rampage, the Thai military has taken control of the country and the European elections threaten mayhem — none of which has barely raised a whimper on global financial markets.
Reserve Bank chief Glenn Stevens noted the uneasy calm and questioned whether markets were being over-optimistic in “attaching a very low probability to any rise in global interest rates over the period ahead”.
He didn’t use the word optimistic but he may as well have in scratching his head as to just why markets are apparently so calm.
The Australian stockmarket has barely moved since the start of April, with just a 150-point swing from high to low.
Fund managers are unwilling to place bets right now in either direction, even though at 14.3 times earnings the market is trading smack on the 20-year average.
Price-earnings ratios are just one indicator and the market has also changed dramatically in the past three years, with financials now accounting for 47 per cent of the index from 37 per cent this time three years ago.
Resource stocks have fallen, with the big two, BHP and Rio, down to about 15 per cent of the index from more than 20 per cent at the peak of the boom in 2009.
Goldman’s Matthew Ross noted in a recent article that some of the value investor favourites had taken off in recent months due to a combination of takeover bids and upbeat outlooks.
The likes of Goodman Fielder, David Jones, CSR, Boral and BlueScope fall into this category.
As the RBA noted yesterday, the Australian dollar is defying wisdom by remaining stubbornly high even as the key commodities like iron ore prices have fallen.
The currency is a risk, and risk normally worries stock investors, but right now they are just sitting on their hands.
The RBA, of course, is doing much the same as it watches an economy in transition.
ANZ economist Warren Hogan noted the recent economic news in Australia had meant the balance of risks has evened out.
By that, he thinks there is still an outside chance of a rate cut. The rest of the market, including Bank of America Merrill Lynch’s Saul Eslake, thinks the next move will be up, but not for some time.
For the record, back in 1997-98 the RBA left rates unchanged at 5 per cent for 15 months so we are a long way short of that record now.
The federal budget, which has created a lot of noise in recent weeks, didn’t rate a mention in the RBA statement yesterday, even on its impact or otherwise on consumer confidence.
The decision to leave rates ¬unchanged had little impact on local markets because it was widely expected.
Macquarie strategist Tanya Branwhite argues that the market is missing the upside ahead for corporate earnings, which for many stocks was not being fully factored in. In a note this week, she argued looking at cashflow projections five years out.
She said the market was being too focused on near-term price-earnings ratios, which were a narrow measure.
Stocks, which are not pricing in forecast growth on Macquarie’s numbers, include Flight Centre, Amcor, Woolworths, Mirvac, Lend Lease, Asciano, CSL and Sydney Airport.
The view on low volatility from the stockmarket strategists then is the fact we have a “long grinding cycle”, which is keeping investors on the sideline.

[Nick]

Personally, I don't think we are in bubble territory yet. Valuations of most decent companies seems to be fair. Even blue chip valuations isn't excessive. I would say the market is fairly valued now with little catalyst on either fronts at the moment. This would explain the benign calm and low volatility - there is simply no directions to get in or out going forward ! Moreover, I suspect most people are waiting in the sidelines for things to happen so it isn't a recipe for a bear crash. Naturally, I tend to target 70:30 equity to cash ratio in case of black swans and bear markets.