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Market Correction
Freefall Junkie
Posted: 09 February 2018 16:00:23(UTC)

Joined: 09/06/2014(UTC)
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Painful week for the markets, no doubt, but I've just been reminding myself that some perspective is needed. Quick look at my largest holdings (SMT, JEO, BGFD) and they are all at levels they were at around October, November time. Yup, just a couple of months back, and if you'd asked me then I would have been dead chuffed with how most of my investments had performed over the previous 4 or 5 years. Note to self - ignore the short term noise, focus on the bigger picture. I'll still be cracking a Friday evening beer thinking it ain't all that bad...
13 users thanked Freefall Junkie for this post.
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Micawber
Posted: 09 February 2018 17:58:12(UTC)

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^ ^ Exactly.
chubby bunny
Posted: 09 February 2018 19:14:50(UTC)

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Indeed. My portfolio value is only back to where it was in the first week of December. No big deal.
geoffrey mulford
Posted: 09 February 2018 19:18:07(UTC)

Joined: 18/09/2012(UTC)
Posts: 3

Let me tell you a story.

Back in about October I was driving a delivery lorry and I delivered to a rich American stock broker. We got talking he told me he was going to start shorting the market in January.

So I have been thinking how could he possibly Know there was going to be a correction?

My thoughts are that the markets have been driven up by the big boys borrowing lots of money. and they have now sold and paid off their debts.

You have to be an insider to get the sell email and only people that can borrow billions are insiders.
King Lodos
Posted: 09 February 2018 19:38:10(UTC)

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Fell Walker;56822 wrote:
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.


I kind of feel the same way .. I think asset allocation's very difficult at the moment .. Bonds are really expensive, and inflation protection's probably sensible, but a bit of a coin toss and a bit of a drag.

So I think it's really just stocks and cash, and you're better earning a bit on cash than paying a fee on it.

Plus this correction's really very unusual:

Stock and bond markets are doing a strange thing that is reminiscent of the 1987 crash
– David Rosenberg says a rise in the 10-year Treasury yield during a stock market drop seldom occurs.
– "This rare occurrence of bond yields rising even as stock markets decline was a feature in 1987 and 1994," he writes.


https://www.cnbc.com/2018/02/09/one-strange-thing-about-this-market-correction-that-is-similar-to-1987.html
4 users thanked King Lodos for this post.
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Dian
Posted: 09 February 2018 22:34:08(UTC)

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Volatility should persist if there is a bull market correction. Commodity like oil, gas and gold are also not looking good. Upside for Agriculture commodity is also limited as a result of oversupply situation. In my opinion, there could be more pain but it could create some great opportunity.

One of the safe places in stock market is strong balance sheet firms as long as they have great value and growth. Defensive stocks which include food, beverage, water, electricity seem to be other safe investment option in a market fill with widespread uncertainty, including stretched valuations. I like debt free companies as well.
Freefall Junkie
Posted: 10 February 2018 09:58:15(UTC)

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King Lodos;56841 wrote:

I kind of feel the same way .. I think asset allocation's very difficult at the moment .. Bonds are really expensive, and inflation protection's probably sensible, but a bit of a coin toss and a bit of a drag.

So I think it's really just stocks and cash, and you're better earning a bit on cash than paying a fee on it.



Yes conventional asset allocation wisdom doesn't seem to apply at the moment. Bonds look totally unattractive, gold defying past norms by going down during this week's correction, absolute return funds looking absolutely useless, and 'wealth preservation' funds like Personal Assets not great either. There have been times when my 2 BTL properties have seemed a royal pain in the neck in the last few years but I now feel glad to have them as kind of hedge against further stock market falls,

I think one other alternative overlooked by many is P2P like Ratesetter or Zopa. You can currently get 3.6% in a rolling one month market on Ratesetter or near 5 if you tie money up for longer, which looks good compared to bonds. You can now use P2P in an Isa or SIPP too, but the big problem is there is no way of moving money between Stocks/Funds and P2P within an ISA or SIPP, at least certainly not with Best Invest. P2P has its own risks of course, but right now I have a chunk of cash in my SIPP and I would like the option of sticking at least some of it in P2P.
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King Lodos on 10/02/2018(UTC)
Tyrion Lannister
Posted: 10 February 2018 12:37:38(UTC)

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Freefall Junkie;56868 wrote:
King Lodos;56841 wrote:

I kind of feel the same way .. I think asset allocation's very difficult at the moment .. Bonds are really expensive, and inflation protection's probably sensible, but a bit of a coin toss and a bit of a drag.

So I think it's really just stocks and cash, and you're better earning a bit on cash than paying a fee on it.



Yes conventional asset allocation wisdom doesn't seem to apply at the moment. Bonds look totally unattractive, gold defying past norms by going down during this week's correction, absolute return funds looking absolutely useless, and 'wealth preservation' funds like Personal Assets not great either. There have been times when my 2 BTL properties have seemed a royal pain in the neck in the last few years but I now feel glad to have them as kind of hedge against further stock market falls,

I think one other alternative overlooked by many is P2P like Ratesetter or Zopa. You can currently get 3.6% in a rolling one month market on Ratesetter or near 5 if you tie money up for longer, which looks good compared to bonds. You can now use P2P in an Isa or SIPP too, but the big problem is there is no way of moving money between Stocks/Funds and P2P within an ISA or SIPP, at least certainly not with Best Invest. P2P has its own risks of course, but right now I have a chunk of cash in my SIPP and I would like the option of sticking at least some of it in P2P.


A crumb of comfort on gold and bonds, at least their prices have remained fairly steady.
Sara G
Posted: 10 February 2018 15:18:33(UTC)

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Gold may be steady, but Gold miners are looking cheap - Blackrock Gold & General is down 35% since the peak in Summer 2016... Thinking of switching some of my 'defensive' holdings into that on Monday. I've been in and out of that fund so many times I've lost count!
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King Lodos
Posted: 10 February 2018 15:34:29(UTC)

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Freefall Junkie;56868 wrote:
King Lodos;56841 wrote:

I kind of feel the same way .. I think asset allocation's very difficult at the moment .. Bonds are really expensive, and inflation protection's probably sensible, but a bit of a coin toss and a bit of a drag.

So I think it's really just stocks and cash, and you're better earning a bit on cash than paying a fee on it.



Yes conventional asset allocation wisdom doesn't seem to apply at the moment. Bonds look totally unattractive, gold defying past norms by going down during this week's correction, absolute return funds looking absolutely useless, and 'wealth preservation' funds like Personal Assets not great either. There have been times when my 2 BTL properties have seemed a royal pain in the neck in the last few years but I now feel glad to have them as kind of hedge against further stock market falls,

I think one other alternative overlooked by many is P2P like Ratesetter or Zopa. You can currently get 3.6% in a rolling one month market on Ratesetter or near 5 if you tie money up for longer, which looks good compared to bonds. You can now use P2P in an Isa or SIPP too, but the big problem is there is no way of moving money between Stocks/Funds and P2P within an ISA or SIPP, at least certainly not with Best Invest. P2P has its own risks of course, but right now I have a chunk of cash in my SIPP and I would like the option of sticking at least some of it in P2P.


Yeah, I've had about 10% in P2P lending since RateSetter was pretty young .. It's been one of the best uncorrelated assets .. However I've been withdrawing cash for at least a year or two.

Funding Circle defaults started climbing, and Zopa scrapped the provision fund .. RateSetter I like, but the company has been losing money and covering bad debt – and that doesn't fill me with confidence, especially in light of the global debt problem.

Revisiting P2P forums, it seems everyone got burnt chasing higher returns – even people on Zopa are having problems .. This adds to the problem of diversifying, as I wouldn't be happy syphoning stock market returns into P2P lending, given how much greyer the skies seem to have become in just a few years .. The forums seem to be full of people (moderators included) talking about how they're going to get out – rather than how much they're going to put in

3 users thanked King Lodos for this post.
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Mr Helpful
Posted: 10 February 2018 15:50:04(UTC)

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Freefall Junkie;56868 wrote:

Yes conventional asset allocation wisdom doesn't seem to apply at the moment. Bonds look totally unattractive, gold defying past norms by going down during this week's correction, absolute return funds looking absolutely useless, and 'wealth preservation' funds like Personal Assets not great either.


+1
Time maybe to engage our brains?

Rather than :-
+ rely on an idée fixe, such as the rigid methods offered by the so-called 'passive' school
+ and look quizzically beneath the bonnet of supposedly defensive funds..
chubby bunny
Posted: 10 February 2018 16:27:39(UTC)

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King Lodos;56901 wrote:
Revisiting P2P forums, it seems everyone got burnt chasing higher returns – even people on Zopa are having problems .. This adds to the problem of diversifying, as I wouldn't be happy syphoning stock market returns into P2P lending, given how much greyer the skies seem to have become in just a few years .. The forums seem to be full of people (moderators included) talking about how they're going to get out – rather than how much they're going to put in


A lot of the people there have much more money in P2P than I have ever felt comfortable with. After having had money in most of the big P2P platforms, my only exposure now is to jewellery/art/book backed loans in Unbolted and Collateral. I completely avoid any new build property development loans. It's a common theme that new platforms start off well but gradually get worse as they become more popular. Reducing rates, questionable due diligence, poor communication, 'black boxes'...I don't have anywhere near the confidence in P2P as I did a few years ago.
1 user thanked chubby bunny for this post.
Tim D on 12/02/2018(UTC)
Hilary hames
Posted: 10 February 2018 20:13:39(UTC)
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I had stop losses get me to 37% cash as the turmoil was unfolding, but bought back right away the next day, as close to the bottom as I could .. The risk of missing an upmove is just as great as catching a downmove, in terms of future returns .. You just have to accept a certain amount of volatility in markets – trader or investor – and not lose your nerve, convincing yourself there's such a thing as 'too high' or 'too low'.

Do you have the same stop loss on everything or do you vary it, please?
King Lodos
Posted: 10 February 2018 20:42:53(UTC)

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chubby bunny;56906 wrote:
King Lodos;56901 wrote:
Revisiting P2P forums, it seems everyone got burnt chasing higher returns – even people on Zopa are having problems .. This adds to the problem of diversifying, as I wouldn't be happy syphoning stock market returns into P2P lending, given how much greyer the skies seem to have become in just a few years .. The forums seem to be full of people (moderators included) talking about how they're going to get out – rather than how much they're going to put in


A lot of the people there have much more money in P2P than I have ever felt comfortable with. After having had money in most of the big P2P platforms, my only exposure now is to jewellery/art/book backed loans in Unbolted and Collateral. I completely avoid any new build property development loans. It's a common theme that new platforms start off well but gradually get worse as they become more popular. Reducing rates, questionable due diligence, poor communication, 'black boxes'...I don't have anywhere near the confidence in P2P as I did a few years ago.


Absolutely .. It comes down entirely to how well the platform can assess borrowers, and how well it can manage supply .. P2P lending a few years back had a similar feel to Bitcoin and alt-coins today – forums with 'experts' in these really untested financial products; at the time making a lot more than I was.

Zopa was always the one I felt most confident in, as it has been through a financial crisis .. I'm kind of expecting to turn the relending back on RateSetter at some point – but it's got quite a lot in property loans .. That's what concerns me a bit too.
King Lodos
Posted: 10 February 2018 20:48:35(UTC)
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Hilary hames;56920 wrote:
Do you have the same stop loss on everything or do you vary it, please?


I only use them on ETFs and ITs, and only when I'm trend following, or when I want to sell something, but want to avoid making an on-the-spot decision (which is usually worse than a systematic one).

A lot of technical analysis only *looks* clean with hindsight – because apart from anything, there are currency moves, and chaos, and all sorts of reasons lines won't be neat, or straight, or anything.

But in the case of Fidelity China Special Situations recently – despite all that – you can kind of identify two things: a long-trend, and a trading range ..

https://i.imgur.com/hfGGBHE.jpg

The Stop I'd place on this, as a *trade* (as opposed to an investment), might be just below the point the price breaks that lower trend line .. But there's a very fine line, because that's also close to the point I'd want to buy in or add to the trade.

Often I'll start buying a position very small, so I can get a feel for the trading range – rather than waiting for it (because there's always a chance now is the best point to buy).

One reason to use Stops is to avoid selling early .. Something rises and rises, and we're keen to sell at the top .. But this can mean selling months or years too soon – some stocks rise 6,000% .. and not many investors are good at sitting on their hands when that happens .. So a stop-loss can be a way to let a trade run, and get you out when it's actually starting to change direction .. It avoids sitting, staring a screen, feeling you have to be there to make the call (which will invariably make you make the call too soon).

Will FCSS keep going down now? Well, I wouldn't buy in at this point .. But I'd hopefully have got out with some kind of profit, and be looking for a new trade immediately .. I wouldn't recommend any of this .. It's certainly not necessary, and nothing to do with investing
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Tony Peterson
Posted: 10 February 2018 21:19:24(UTC)

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The stock market really does seem to be a very efficient machine to strip the nervous of the value of their savings.

I recall Galbraith saying that the great mystery of the market was the way a buyer could always be matched with a seller - provided the price was "right".

For instance, last June I took several very profitable slices into our GSK holdings at over 1700p. I had no difficulty finding buyers at that price. Now I am buying back the shares we sold. There are people out there prepared to sell them to us for under 1300p. Are these, I ask, the same people who bought my profit slices last June? Anyway I am grateful to both past buyers and present sellers and our GSK holding is now at a record high.

It is the same story with virtually all the shares in our portfolios. Thee UU we trimmed in May last year at 1033 are now retrievable at 693. The Vodafone I sold last month at 240 can now be repurchased at around 200.

With profitable sales being quickly repurchasable into bargain buys it is no wonder that our dividend income keeps growing at a rate that keeps me busy reinvesting the tide of realised gains + dividends.

So roll on Monday. The American market's Friday close seems to indicate that I might have to act quickly to get the best bargains. With a backlog of univested recent dividends I would prefer the decline to continue.

It does seem to me, however, that this is not the Great Crash all over again. Too many of you are sitting on cash. The next great crash will come when all you have realised that you cannot miss out any more on dividends or gains so almost all of you will become fully invested. And by that time the gains will have been so spectacular that many will be borrowing to buy stocks on margin. More and more will join the rush with ever increasing size of margins,,,,,,, And then, and only then, will the next Great Crash come. That's how I see it. For what it's worth
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Dian
Posted: 10 February 2018 23:13:18(UTC)

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http://theconversation.c...om-recent-history-91409

Will there be window of opportunity in the market after this sell-off and bouts of volatility? It seems even gold, oil or any other commodity is not safe. They also may lose some shine. Bond market is also not appealing. What would be the safest asset class for 2018? What types of stocks will have more demand?
Mickey
Posted: 11 February 2018 08:41:33(UTC)

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An 'expert' said on TV last week that they expect this year to be a year of two halves. The first part will be good and the second half of the year will be bad. Mmmmmm.....
Hank Elvis Dobbs (texan)
Posted: 11 February 2018 10:33:38(UTC)

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Dian;56930 wrote:
http://theconversation.com/why-stock-markets-crash-lessons-from-recent-history-91409

Will there be window of opportunity in the market after this sell-off and bouts of volatility? It seems even gold, oil or any other commodity is not safe. They also may lose some shine. Bond market is also not appealing. What would be the safest asset class for 2018? What types of stocks will have more demand?



You've already missed it...
Mr Helpful
Posted: 11 February 2018 11:43:22(UTC)

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Dian;56930 wrote:

Will there be window of opportunity in the market after this sell-off and bouts of volatility? It seems even gold, oil or any other commodity is not safe. They also may lose some shine. Bond market is also not appealing. What would be the safest asset class for 2018? What types of stocks will have more demand?


Sorry; haven't a clue as to direction of travel for the Stock Market.
Did add to Stocks during last week, and some possibles lined up for the coming week

In terms of safest (defensive) Asset Class, have been pleasantly surprised when looking for clues in the performance of some of the Defensives in the portfolio.
Short-Term Gilts/Corporates : kind of stable, very small declines
Short-Term US Treasuries/Corporates : up due to unexpected $/£ rebound
Misc Debt (SEQI, GCP, NCYF) : small declines when theory suggests larger declines to be expected, esp for NCYF (junk)
Ground Rents (GRIO) : unexpectedly resilient, may add to this position longer term. Unpopular but useful substitute for highly priced IL Gilts.
Real Estate (RGL, NRR, BLND, LAND, BBOX, HSTN) : mixed but overall not bad
Renewables (TRIG, UKW) : disappointing
Infrastructure (BBGI, 3IN) : slightly disappointing (but note HICL, INPP, JLIF, had a good week)

Continue to diversify defensive positions to seek that elusive -ve or zero/near-zero correlation, supplemented of course with a generous Cash allocation.
Certainly longer duration Bonds do not seem to be behaving in a 'flight to safety' as the 'passive' school expect. There will undoubtedly be comment on this Bonds failure issue, in the weeks ahead.
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