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Market Correction
sandid3
Posted: 09 February 2018 09:45:39(UTC)

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It would be a plucky move for any individual to be a buyer in the US market during this Friday - given that professional investors usually make their move in the last hour of trading.
Hank Elvis Dobbs (texan)
Posted: 09 February 2018 09:52:57(UTC)

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Back your own judgement
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Tony Peterson on 07/04/2018(UTC)
King Lodos
Posted: 09 February 2018 09:54:29(UTC)

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Mr Helpful;56765 wrote:
King Lodos;56762 wrote:
Another drop in US and Asian equities.
Weird things about this correction: safe stocks being hammered just as hard; cheap stocks (like EM) being hammered just as hard; no one really buying haven assets (e.g. gold).
I'm still going with algorithmic anomaly feeding into retail investor panic .. Presumably mood will switch from protecting capital to needing to find positive returns again at some point


Wondering whether the preponderance of newer investors in the now popular ETFs is behind the speed of the US decline.
ETFs, with their essentially open-ended structure, dependant on the role of the authorised participants who create and redeem units, has yet to be seriously tested.

The speed of the drop feels a little like Oct 87 (less the hurricane), when markets recovered after a couple of months. On the other hand this slump may drag on for a couple of years.
So if the investor goes all in now or holds back, there may be regret.
The middle road beckons for this investor, steady modest accumulation.

FTSE strangely resilient this morning, but then the UK was never as fully valued as the US.


Well I thought this was interesting – Fundsmith (PE 26) vs Emerging Mkts (PE 12) – tracing exactly the same decline.

So I can't make the case it's got much to do with relative valuations .. Normally, anything this sharp that isn't triggered by a shift in fundamentals reverts back to the long-term trend .. Consumer confidence was very positive going into this year though, and that's often a sure sign for a major correction.

https://i.imgur.com/VUqBo4D.jpg
8 users thanked King Lodos for this post.
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The Spanish Inquisition
Posted: 09 February 2018 10:23:43(UTC)

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Interesting article on the 87 crash, if you'd invested the day before the crash you'd still be on a 10 fold gain plus divi's.
http://tomhougaard.dk/in...the-storm-of-1987-crash/
3 users thanked The Spanish Inquisition for this post.
Hank Elvis Dobbs (texan) on 09/02/2018(UTC), Mike L on 09/02/2018(UTC), dlp6666 on 09/02/2018(UTC)
Ermintrade
Posted: 09 February 2018 11:03:13(UTC)

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In my 40 year investing career, I have been through major crashes, and numerous corrections like the present one. For the first few years, whenever the markets oscillated wildly I used to sell, buy back, sell, buy back etc until I began to feel completely foolish. And I ended up worse off because of transaction costs and missing the start of the upswing. Nowadays, if everything falls simultaneously, I do nothing but sit on my hands. Slavishly following stop-loss criteria does not work in these circumstances. Up until two weeks ago the value of my total portfolio was the highest it had ever been, so something seems to have worked over the four decades.
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Sara G on 09/02/2018(UTC), S Dobbo on 09/02/2018(UTC), Guest on 09/02/2018(UTC), dlp6666 on 09/02/2018(UTC), Keith Cobby on 09/02/2018(UTC), J Thomas on 09/02/2018(UTC), North Star on 09/02/2018(UTC), gillyann on 09/02/2018(UTC), Alan M on 10/02/2018(UTC), Peter59 on 24/03/2018(UTC)
Sara G
Posted: 09 February 2018 11:04:04(UTC)

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King Lodos;56762 wrote:
Another drop in US and Asian equities.

Weird things about this correction: safe stocks being hammered just as hard; cheap stocks (like EM) being hammered just as hard; no one really buying haven assets (e.g. gold).

I'm still going with algorithmic anomaly feeding into retail investor panic .. Presumably mood will switch from protecting capital to needing to find positive returns again at some point





It's odd that gold hasn't risen... suggests that the fear isn't so much about inflation*, but that interest rates will derail growth. If so it might be a case of markets recovering once interest rates actually start to rise (presumably slowly) and economic growth (hopefully) proves robust enough to withstand the shift - in this case sell the rumour, buy the fact?

*The downside of that is that if investors are not focused on inflation then it would be a bigger shock if it were to take off.



4 users thanked Sara G for this post.
King Lodos on 09/02/2018(UTC), Micawber on 09/02/2018(UTC), dyfed on 09/02/2018(UTC), gillyann on 09/02/2018(UTC)
S_M
Posted: 09 February 2018 11:09:12(UTC)

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Mr Helpful;56765 wrote:
King Lodos;56762 wrote:
Another drop in US and Asian equities.
Weird things about this correction: safe stocks being hammered just as hard; cheap stocks (like EM) being hammered just as hard; no one really buying haven assets (e.g. gold).
I'm still going with algorithmic anomaly feeding into retail investor panic .. Presumably mood will switch from protecting capital to needing to find positive returns again at some point


Wondering whether the preponderance of newer investors in the now popular ETFs is behind the speed of the US decline.
ETFs, with their essentially open-ended structure, dependant on the role of the authorised participants who create and redeem units, has yet to be seriously tested.

The speed of the drop feels a little like Oct 87 (less the hurricane), when markets recovered after a couple of months. On the other hand this slump may drag on for a couple of years.
So if the investor goes all in now or holds back, there may be regret.
The middle road beckons for this investor, steady modest accumulation.

FTSE strangely resilient this morning, but then the UK was never as fully valued as the US.


https://www.cnbc.com/201...lummets-80-percent.html

ETfs are supposed to be boring index trackers until you see this article, it would appear that some retail investors have been burnt quite badly betting on market volatility.

The selling has been indiscriminate because American retail investors are pulling out of ETFs. Naturally, an ETF doesn't decide what to sell and what not to sell.
4 users thanked S_M for this post.
King Lodos on 09/02/2018(UTC), dlp6666 on 09/02/2018(UTC), Mike L on 09/02/2018(UTC), North Star on 09/02/2018(UTC)
Tim D
Posted: 09 February 2018 11:49:38(UTC)

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S_M;56790 wrote:
https://www.cnbc.com/2018/02/05/xiv-exchange-traded-security-linked-to-volatility-plummets-80-percent.html

ETfs are supposed to be boring index trackers until you see this article, it would appear that some retail investors have been burnt quite badly betting on market volatility.


Nice interview with a co-inventor of the VIX today in the FT here. Particularly liked this bit: "If the tail was wagging the dog before, you didn’t notice very it much. What happened on Monday was the tail grabbed the dog and gave it a swing around the room." (And somewhere else I think I've seen someone else using the same analogy write "the tail has become the dog"!)

Also: "The Vix has moved from being a measure of something to being something that influences this thing it is trying to observe... I don’t think all the people buying these products understand the complex mechanics of it. I think they are terrible products that serve no real purpose".

I wouldn't lump the "boring index tracker" ETFs in with these exotic instruments in the same sentence though... completely different kettle of fish. Makes as much sense as saying all shares are supposed to behave like blue chips when someone gets their fingers burnt playing on AIM.

S_M;56790 wrote:
The selling has been indiscriminate because Americans retail investors are pulling out of ETFs. Naturally, an ETF doesn't decide what to sell and what not to sell.


Will be interesting to see this week's update here later: http://www.etf.com/secti...ekly-etf-fund-flows.html
5 users thanked Tim D for this post.
King Lodos on 09/02/2018(UTC), Mike L on 09/02/2018(UTC), Micawber on 09/02/2018(UTC), PaulSh on 09/02/2018(UTC), Peter59 on 24/03/2018(UTC)
Micawber
Posted: 09 February 2018 13:38:29(UTC)

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A few points:
The FTSE all-share is down 7.4% since the turn of the year. It is still above the 100-day moving average. If it fell a further 4% it would just touch the MA100.

Some nonsense being talked about ETFs in general. The ETFs we hold or the dozen I track have not moved out of line with other types of collective investment vehicles - funds, trusts - in comparable sectors. Mrs M's ETFS in gold and TIPs have held firm with minimal loss since 02 January.

The biggest markdowns in our pfs are for the small UK company shares held directly (most of which remain in profit for us).
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Mike L on 09/02/2018(UTC), Hilary hames on 10/02/2018(UTC)
Keith Cobby
Posted: 09 February 2018 13:55:31(UTC)

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The gold price isn't moving - it is finished as an 'investment'.
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Fell Walker on 09/02/2018(UTC)
Simon Owen
Posted: 09 February 2018 13:57:46(UTC)

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What has surprised me about this correction is that virtually all my holdings have fallen in concert, including the trusts such as RICA and PNL which I have been holding to smooth out volatility (in theory at least!). I also hold gold for that reason, but stupidly as I now realise this has been in the form of BlackRock Gold & General, but should have been in an ETC such as SGLN. Inertia is to blame here, I should have sold when I realised my error, but held on and the losses simply widened. A small part of my portfolio but even so..................

As people will know from my previous posts, I have always battled with my investor psychology, I now recognise I am pre-disposed to be over-cautious and also to panic.
I'm actually quite pleased that I haven't sold any of my holdings through the correction just waiting for the appropriate time to top up some of them. More disciplined at last.

Not at all sure about the merits of continuing to hold the likes of RICA if they are going to under-perform in strong markets (accepted) and pretty much follow the market down in a correction. I have steered clear of bonds as they have seemed expensive, but I wonder whether I should replace the defensive trusts with something like the vanguard Global Bond index / treasuries along with SGLN. Those holdings along with cash would form my defensive.

Any thoughts welcome.

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dlp6666 on 09/02/2018(UTC), gillyann on 09/02/2018(UTC)
Mickey
Posted: 09 February 2018 14:01:03(UTC)

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I've nothing against ETF's but Bloomberg and CNBC were discussing this week that some shouldn't be sold to retail investors, also interesting that an ETF was suspended during the week due to volatility.
Sara G
Posted: 09 February 2018 14:30:41(UTC)

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Simon Owen;56808 wrote:
What has surprised me about this correction is that virtually all my holdings have fallen in concert, including the trusts such as RICA and PNL which I have been holding to smooth out volatility (in theory at least!). I also hold gold for that reason, but stupidly as I now realise this has been in the form of BlackRock Gold & General, but should have been in an ETC such as SGLN. Inertia is to blame here, I should have sold when I realised my error, but held on and the losses simply widened. A small part of my portfolio but even so..................

As people will know from my previous posts, I have always battled with my investor psychology, I now recognise I am pre-disposed to be over-cautious and also to panic.
I'm actually quite pleased that I haven't sold any of my holdings through the correction just waiting for the appropriate time to top up some of them. More disciplined at last.

Not at all sure about the merits of continuing to hold the likes of RICA if they are going to under-perform in strong markets (accepted) and pretty much follow the market down in a correction. I have steered clear of bonds as they have seemed expensive, but I wonder whether I should replace the defensive trusts with something like the vanguard Global Bond index / treasuries along with SGLN. Those holdings along with cash would form my defensive.

Any thoughts welcome.



I noticed that too... Ironically the funds which have held up best in my pf (so far) are BRLA and BEEP, so the term defensive is perhaps misleading. Possibly the reason in this instance is that PNL etc have a high proportion of bonds in them of varying duration... or perhaps it is too soon to tell - some investors may be hitting the sell button indiscriminately. I am starting to wish I'd left more in cash though.
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Keith Cobby
Posted: 09 February 2018 14:30:43(UTC)

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ETFs are much too complicated for the private investor. Look at the annual reports, indecipherable.
Keith Cobby
Posted: 09 February 2018 14:32:34(UTC)

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It will be interesting to see how Personal Assets and Ruffer perform during the correction as their investors have had no upside to cushion their share prices.
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Mickey on 09/02/2018(UTC)
dlp6666
Posted: 09 February 2018 14:40:55(UTC)

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Simon Owen;56808 wrote:
What has surprised me about this correction is that virtually all my holdings have fallen in concert, including the trusts such as RICA and PNL which I have been holding to smooth out volatility (in theory at least!).

Not at all sure about the merits of continuing to hold the likes of RICA if they are going to under-perform in strong markets (accepted) and pretty much follow the market down in a correction.


What has puzzled me is not so much the drop in share price (perhaps that could be explained by a bit of panic selling, or investors wanting to realise funds from these 'cash-like-proxies' in order to buy up some 'bargains' elsewhere).

It's the matching plunge in NAV (at least according to the charts on HL) that's so thoroughly disappointing.

Weren't the bearish portfolios of holdings contained in these ITs specifically designed to withstand with rock-solid defense the sort of market nervousness we're currently witnessing?

'Cash' really does begin to look much more alluring!
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Sara G on 09/02/2018(UTC)
Micawber
Posted: 09 February 2018 15:13:40(UTC)

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That just about all asset classes are going down, just as they all went up, suggests that those who flagged up the reversal of monetary easing (which has been going on for a couple of years really) as likely to bear down on markets were right.

This is mostly about the bond market, but changing yields there affect equities and property yields too.
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Mickey on 09/02/2018(UTC)
King Lodos
Posted: 09 February 2018 15:29:54(UTC)

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Sara G;56810 wrote:
Simon Owen;56808 wrote:
What has surprised me about this correction is that virtually all my holdings have fallen in concert, including the trusts such as RICA and PNL which I have been holding to smooth out volatility (in theory at least!). I also hold gold for that reason, but stupidly as I now realise this has been in the form of BlackRock Gold & General, but should have been in an ETC such as SGLN. Inertia is to blame here, I should have sold when I realised my error, but held on and the losses simply widened. A small part of my portfolio but even so..................

As people will know from my previous posts, I have always battled with my investor psychology, I now recognise I am pre-disposed to be over-cautious and also to panic.
I'm actually quite pleased that I haven't sold any of my holdings through the correction just waiting for the appropriate time to top up some of them. More disciplined at last.

Not at all sure about the merits of continuing to hold the likes of RICA if they are going to under-perform in strong markets (accepted) and pretty much follow the market down in a correction. I have steered clear of bonds as they have seemed expensive, but I wonder whether I should replace the defensive trusts with something like the vanguard Global Bond index / treasuries along with SGLN. Those holdings along with cash would form my defensive.

Any thoughts welcome.



I noticed that too... Ironically the funds which have held up best in my pf (so far) are BRLA and BEEP, so the term defensive is perhaps misleading. Possibly the reason in this instance is that PNL etc have a high proportion of bonds in them of varying duration... or perhaps it is too soon to tell - some investors may be hitting the sell button indiscriminately. I am starting to wish I'd left more in cash though.


Glad to hear you're still in BEEP.

Jim Rogers has been predicting the worst bear market in a century (at some point), due to the amount of debt in the system .. Two things Russia's got going for it: very low debt, and very low valuations .. And natural resources .. Jim Rogers is a big fan of the region, and thinks it might be something of safe haven

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PaulSh
Posted: 09 February 2018 15:35:03(UTC)

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Micawber;56816 wrote:
That just about all asset classes are going down...

Except for aircraft leasing, by the look of it.
Fell Walker
Posted: 09 February 2018 15:36:44(UTC)

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I pretty much held Trojan as a fund to catch some of the upside in a bull run and hold steady in a downturn which I would then sell to buy more punchy funds when the turmoil had died down. As has been pointed out it hasn't kept to its side of the bargain by being a preservation fund or giving much gain in a up market. Therefore I might as well sell it now and add the funds straight into Fundsmith & Lindsel Train Global.

I wonder how much of the gain it achieved during Brexit was more down to $/£ currency gains.
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Sara G on 09/02/2018(UTC), Mickey on 09/02/2018(UTC)
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