Views on the next uptrending Cycle

Discussion in 'Markets & Economies' started by Willow, Dec 28, 2010.

  1. Willow

    Willow New Member

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    Stackers,
    In a recent thread i read perth silvers comment of "It's better to be a cycles guy than a PM bug."
    Now the comment made me think..I believe we are in the upward trend of the PM cycle being 1980 to 2000 in a downtrend and 2000 to 2015-2020 uptrend? where it stops who knows?

    But i figure stocks ran well in 90's early 2000's
    houses ran well 1970's to now (may be about to die there?)
    Treasuries ran well for 90's till now.

    (Those are rough timelines from a very tired nightsift desk so please comment to get them adjusted)

    which gets me to the subject of this thread...

    What will be the next cycle to be moving up, from which you would want to transition from a PM heavy portfolio to what sector/investments?

    why do you think it
    what history supports it.
    what timeline do you see it as?

    point form is fine, and dont think just because your not a finance guru your thoughts dont count, as some of the quick thinkers here could add some amazing polish to an odd idea
    and we may be set for the next 10 to 15 year stacking idea post PM.

    (PS. hobo jo i look forward to you using your insight here then later on your fine blog.)


    Thanks.
     
  2. lakesentrance

    lakesentrance Member

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    There's a deal going with the "Mike Dillard" crowd (internet marketeers), that if you're holding PMs now, when are you going to sell and what are you going to swap them for. I havent paid the $99 to see the answer to those questions.

    I assume, at the moment, that I would hold PMs until such time as they are a good deal against other assets, such as real estate (not yet).
    Presently, i could probably swap my PM stack for a dog kennel or cubby house (just).
     
  3. perthsilver

    perthsilver Member Silver Stacker

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    My thinking is you have to anticipate the herd, and the majority of people only know how to invest in property or shares. Going by SS a few people are waking up to PM's but of all the people I told, only my brother got in. I think it will be shares because people are more cautious and can risk small amounts of money, and I also think sheeple uneducated in investing will use financial planners to guide their decisions (wether its their own or ones on tv) and FP's cant make money selling you property yet.

    Unless you want to invest in casino's and breweries. They do well in good times and in bad. :)
     
  4. Slam

    Slam Well-Known Member Silver Stacker

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    I hope I can buy a shop outright with my stack =D. A smallish shop around 50-100sqm in size in Sydney. Then Ill think about renting it out or starting up my own business.

    Slam
     
  5. Contrarian

    Contrarian New Member

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    The sharemarket will be my next move. I'm not expecting shares to turn around any time soon but now is the time to slowly start building a position in preparation for the eventual recovery. I'll start selling silver at $40-$50 and put the money into shares.

    It pays to ride the cycles. PM bugs will get burned just the same as the share bugs did and the property bugs are about to.


    C
     
  6. Blame_Game

    Blame_Game New Member

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    Hi all,
    First time poster, short time reader, (usually read the aussie stock forums, but the attitudes here seem better)

    Im 24 and just starting out in the investment game since I have too much $$ doing nothing in the bank.

    I was thinking I might try find my niche in food/energy; this is where I believe the next large cycle will be from the research i have been doing over the last 12 months.

    Short term I plan to jump into some PM (silver only) and mining to kick things off.
     
  7. Bargain Hunter

    Bargain Hunter Active Member

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    Contrarian good luck with the stockmarket I am struggling to find any quality companies at bargain prices in the small to midcap area, and certainly not in the large caps. The flood of money being printed around the world is pushing prices up and making my job difficult. Good luck to you if you think you can uncover some bargains.
     
  8. boston

    boston Well-Known Member Silver Stacker

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    I think you could be right. Plan for the worst, hope for the best.
     
  9. Contrarian

    Contrarian New Member

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    I'll leave the bargain hunting to you. I'm not that specific. The market in general is a bargain compared to what it will be in the next time it booms. I pour money in when it's gone bust and pull it out when it booms. Very technical.

    C
     
  10. Bargain Hunter

    Bargain Hunter Active Member

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    Contrarian I would like to see your case of why you think the market (All Ordinaries Accumulation Index) is a bargain. It is currently trading at around 1.5 times book value (from memory). Assuming in the future the index [i.e. the companies comprising the index (weighted for market cap)] generates a 12-13% return on equity and you pay book value then you would expect to get a 12-13% return over the very long-term. If you buy at 1.5 times book value you would expect to receive a very long-term return in the high single digits.

    Note: expected returns are based on a very long term horizon. Also this does not take into account what part in the market cycle you eventually sell out in. If you sell out near the peak of a bull market when stocks are overvalued your return would be higher than this. If you sell out during a bear market when stocks are undervalued your return will be lower.

    However it would be unwise to expect double digit returns from the Aussie stock market overall if you are taking a 10-20 year view, which is why I say that I can't see why you think the share-market is a bargain right now. It was a bargain in March 2009, not today.
     
  11. Willow

    Willow New Member

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    I am under the impression that windmill mechanics did OK during the depression. so bringing that forward to now.. localised resource/energy supply install and maintenance may be an option.

    Hobo, can you swing a spanner like a slide rule?
     
  12. Agauholic

    Agauholic New Member

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    toilet paper and bicycle inner tubes ;)
     
  13. Willow

    Willow New Member

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    lol nice, exactly and with the BS being spread around toilet paper will be in demand
     
  14. Big A.D.

    Big A.D. Well-Known Member Silver Stacker

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    Dunno, but my "method" thus far has been to look for people doing stupid things with quality assets.

    For example, the Daily Telegraph had this in their front page today: http://www.dailytelegraph.com.au/ne...-struggling-pubs/story-e6freuy9-1225981303980
    Since I've been working in and around the hospitality industry for...wow...nearly 10 years, I got to watch this bubble swell to the (bursting) point it is at now. It probably wouldn't be a bad thing to get into once it pops.

    The background is pretty interesting, but basically there is now a big pile of pubs being badly managed by people who don't understand the hospitality industry which are over-capitalised. A lot of the owners are about to go bust.

    A quick, back-of-the-envelope breakdown:
    - A pub is valued $5 million including the building (called a freehold)
    - Sell price is discounted by 40% (the pub is worth $3 million)
    - The pub has 15 licenses for poker machines, which currently trade for $150k-$200k each on the open market

    So...buy the pub from the mortgagee. Flog the pokie licenses off. Get left with a business that makes money for less than the cost of a house.

    After that you actually need to do something interesting with it - get some bands in (like in the old days), add a live theatre, get a proper kitchen and go "gastro-pub", etc. With no pokies and the new anti-smoking laws, the opportunity to become child friendly has increased dramatically, so try actually making the pub a part of the community rather than the miniature casinos so many of them have become over the last 20 years or so.

    Anyway, that is probably one area to keep an eye on because the sector will bottom out over the next year or two. I can think of another half a dozen or so areas that will be good pickings over the next 5 years.
     
  15. Willow

    Willow New Member

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    I like that idea alot well thought. Could even make the old back room poker game a feature.
    I went to the local pub dinner tonight with my wife and it was packed, so we went to the other pub dinner place. both good options.
    Money is tight where do you go out to? PUB DINNER with a beer!!!
     
  16. Argentum

    Argentum Well-Known Member

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    i'm guessing water is going to be next, and will be started to trade as commodity soon by that i mean drinkable water sources. Coca cola and other companies are buying big springs now. Just look at what you paying for water in your bill now it will get worse, the amount of water thats drinkable thats on the planet is 1-1.5 % of total water on the planet. Just a thought
     
  17. Contrarian

    Contrarian New Member

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    Like I said, I don't analyse too much.The returns from my sharemarket strategy over the last 20 odd years suggest that I don't need to analyse too much so I don't.

    Rather than argue whether the market is a bargain or not I'll explain my share investing strategy to put my veiw into perspective. I would be genuinely interested to hear your strategy also.

    All of my investing is based around the phases of a market bubble . I move between and within asset classes based on long term trends and investor sentiment. I do not have the time and therefore have not developed the skills required to analyse individual shares and I have no interest in doing so. My strategy is not dependant on specific analysis.

    Firstly, I should point out that I currently hold no shares. I entered the market heavily in the downturn that followed the Sept 11 attacks with regular monthly investments into two seperate geared Australian sharefunds. As the market eventually started to gain momentum I reduced the monthly investment and then ceased putting money into the funds mid 2006. I starting pulling money out in 2007 and was almost completely out of the market when it crashed leaving me with very minimal exposure. By keeping a constant eye on the stage of the bubble and reacting accordingly this strategy returned an average of 35%pa over 6 years. The most important factors in this strategy is the use of geared funds and having the discipline to enter and exit the market at the opposite times to everyone else. I have not yet re-entered the market.

    Now to the future.

    On the "stages of a market bubble" graph, where do you currently see the sharemarket.? I see it at the end of the blowoff phase, returning towards the mean. I don't consider it to be a great risk to be gradually entering the market at this stage however I think given the world econonomic situation there is no hurry to re-enter yet. I can see the opportunity to let precious metals run their course for the next year or maybe two before gradually re-entering the sharemarket. I agree that March 2009 would have been the ideal time to re-enter but I don't kid myself in thinking that I can pick the absolute top or bottom of any market and nor do I need to.


    I find it reassuring that the majority of people think I'm crazy for entering the sharemarket when I do.(just as they did post Sept 11) It reaffirms that I am doing the right thing and sticking to my strategy. It also allows me to exit the market mania stage early enough so as to minimise risk and still make acceptable gains.

    So there's my take on the current stage of the sharemarket and it's relevance to my long term strategy. Feel free to pick it to peices.


    C
     
  18. Bargain Hunter

    Bargain Hunter Active Member

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    Apparently I read somewhere that Mitre 10 did well during the great depression in Australia as more people decided to renovate and repair their own homes rather than outsource it to professionals.

    Do it yourself renovators are more likely to buy from hardware stores like Bunnings or Mitre 10. Perhaps if there is a recession now Bunnings Warehouse, notwithstanding the impact of Woolworth's entry into the market and a revitalized Mitre 10 under Metcash will do well as more people do their own renovations. Also perhaps renovations could increase as people are less likely to build or purchase new homes and so will spend money to renovate their existing home when it gets worn out?

    Contrarian, I don't particularly analyze the stock-market in detailed phases like you do. However I would say the market is fairly valued (i.e. we have already returned to the mean) and possibly even slightly overvalued (or even possibly slightly exceeded the mean). The rally off the lows was already quite substantial. As to whether it will get overvalued or undervalued from here I have no idea and your guess is as good as mine. I could picture either scenario occurring. Although I think another downturn is more likely. Also remember you need to look further back in history. Perhaps your strategy worked over the last 20 years due to a structural bull market in equities (a rising tide lifts all boats) which arguably started in 1982 and ended in 2007.

    I'm not saying you can pick the bottom but I think the strategy of getting into the stock-market when it is fairly valued and hoping the speculative mania will allow you to get out at a profit (i.e. the greater fool theory) has definite risks attached. I would argue you should wait to get in when the stock-market is bargain priced. I think for the All Ordinaries I would currently define that as being no more than 4000 and preferably around 3000 - 3500, which is well below the 4700-4800 level the index is currently sitting at.

    Contrarian do I sense a hint of complacency? So you think due to your past success (well done) that you don't need to make your analysis more detailed than currently. Are you sure that success hasn't bred complacency in you? Complacency is often the downfall of many successful people.
     
  19. boston

    boston Well-Known Member Silver Stacker

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  20. Bargain Hunter

    Bargain Hunter Active Member

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    Well maybe I confused Mitre 10 with another hardware company. But I am sure I remember reading an article of that nature about a hardware company somewhere some years ago. Sorry I can't be more specific than that.
     

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