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The Motley Fool Presents
Take Stock
Our unique Foolish take on what's really happening
on the stock market
Rediscover That Old Winning Sharemarket Feeling
Tuesday 10th January 2012
Dear Fellow Share Market Investor,
People are running away from shares, but there are great growth opportunities, especially in the overlooked small cap sector.
Are you a fighter, or a quitter?
When the chips are down, do you pack up your bags and go home, or do you double-down your efforts, try even harder, and never give up?
It has been a tough time for wearied, bloodied sharemarket investors.
The S&P/ASX 200 index is back trading at the same levels of early 2005. Over the past 10 years, it is up only 20 per cent in total (dividends excluded).
Worse, from its October 2007 peak, the market is down close to 40 per cent, including last year's fall of 14.5 per cent.
Run away
When looked at through the rear-view mirror, the picture looks bleak. Add into that the seemingly unsolvable European debt crisis, and you'd be excused for running away from shares, and fast.
And that's exactly what many investors have been doing. Having been fully invested during the go-go years of the mid 2000's, and having a whale of a time, now the going has become tough, they've taken their bat and ball and gone home, or gone to gold.
Speaking of gold, in recent months it too has been exposed as an emperor with no clothes.
The doomsters kept telling us gold was the safe haven for when the world economies and world sharemarkets inevitably imploded.
Reality has been very different. During the November sell-off, virtually all asset classes fell (with the exception of the U.S. dollar and U.S. treasuries) including gold.
When markets panic, as they are prone to from time to time, there really is no place to hide.
Goldnothing going for it
We're not particularly fond of gold. As an asset, it pays no dividend and is virtually impossible to value. Not only that, as we saw above, in times of panic, it too is no safe haven.
Back in early September, when gold was riding high, we put our heads on the block by making a bold prediction
"stock returns over the next 10-15 years will be above average, and gold returns will be below average."
We're off to a decent start since then, with the market flat but gold down over 14 per cent. Only 116 months to go to see if we're right.
Putting our money on the line
Today we're going to make another bold predictionthat yields on U.S. Treasuries will rise over the next 3 years, meaning the underlying asset will fall in value.
Putting my money where my mouth is, by selling calls, I've set up a short position on the iShares 20+ Year Treasury Bond Fund ETF (AMEX: TLT).
The ETF has an average duration of 28 years with a weighted average yield to maturity just under 3 per cent. I'm betting, as the U.S. economy slowly recovers, the yield will slowly but surely edge higher. The yield was 4 per cent only in July.
Soif gold is not going to do it for us, and treasuries/bonds aren't, and property definitely isn't, what is?
No surprises here when you hear us say the sharemarket. After all, we're in the business of recommending individual stocks to investors via our relatively new Motley Fool Share Advisor service.
But just think about this
As reported in The Sydney Morning Herald, "for the sixth year in a row the Australian sharemarket chronically underperformed many of its global equity market peers, despite being at the centre of a mining boom and being part of an economy that managed to notch up its 20th consecutive year of growth."
People are pulling their money out of shares.
Domestic interest rates have already fallen, and are projected to fall even further, the 10-year bond yielding 3.75 per cent.
People continue to ignore the sharemarket, despite it looking very cheap."
..and on it goes....
The Motley Fool Presents
Take Stock
Our unique Foolish take on what's really happening
on the stock market
Rediscover That Old Winning Sharemarket Feeling
Tuesday 10th January 2012
Dear Fellow Share Market Investor,
People are running away from shares, but there are great growth opportunities, especially in the overlooked small cap sector.
Are you a fighter, or a quitter?
When the chips are down, do you pack up your bags and go home, or do you double-down your efforts, try even harder, and never give up?
It has been a tough time for wearied, bloodied sharemarket investors.
The S&P/ASX 200 index is back trading at the same levels of early 2005. Over the past 10 years, it is up only 20 per cent in total (dividends excluded).
Worse, from its October 2007 peak, the market is down close to 40 per cent, including last year's fall of 14.5 per cent.
Run away
When looked at through the rear-view mirror, the picture looks bleak. Add into that the seemingly unsolvable European debt crisis, and you'd be excused for running away from shares, and fast.
And that's exactly what many investors have been doing. Having been fully invested during the go-go years of the mid 2000's, and having a whale of a time, now the going has become tough, they've taken their bat and ball and gone home, or gone to gold.
Speaking of gold, in recent months it too has been exposed as an emperor with no clothes.
The doomsters kept telling us gold was the safe haven for when the world economies and world sharemarkets inevitably imploded.
Reality has been very different. During the November sell-off, virtually all asset classes fell (with the exception of the U.S. dollar and U.S. treasuries) including gold.
When markets panic, as they are prone to from time to time, there really is no place to hide.
Goldnothing going for it
We're not particularly fond of gold. As an asset, it pays no dividend and is virtually impossible to value. Not only that, as we saw above, in times of panic, it too is no safe haven.
Back in early September, when gold was riding high, we put our heads on the block by making a bold prediction
"stock returns over the next 10-15 years will be above average, and gold returns will be below average."
We're off to a decent start since then, with the market flat but gold down over 14 per cent. Only 116 months to go to see if we're right.
Putting our money on the line
Today we're going to make another bold predictionthat yields on U.S. Treasuries will rise over the next 3 years, meaning the underlying asset will fall in value.
Putting my money where my mouth is, by selling calls, I've set up a short position on the iShares 20+ Year Treasury Bond Fund ETF (AMEX: TLT).
The ETF has an average duration of 28 years with a weighted average yield to maturity just under 3 per cent. I'm betting, as the U.S. economy slowly recovers, the yield will slowly but surely edge higher. The yield was 4 per cent only in July.
Soif gold is not going to do it for us, and treasuries/bonds aren't, and property definitely isn't, what is?
No surprises here when you hear us say the sharemarket. After all, we're in the business of recommending individual stocks to investors via our relatively new Motley Fool Share Advisor service.
But just think about this
As reported in The Sydney Morning Herald, "for the sixth year in a row the Australian sharemarket chronically underperformed many of its global equity market peers, despite being at the centre of a mining boom and being part of an economy that managed to notch up its 20th consecutive year of growth."
People are pulling their money out of shares.
Domestic interest rates have already fallen, and are projected to fall even further, the 10-year bond yielding 3.75 per cent.
People continue to ignore the sharemarket, despite it looking very cheap."
..and on it goes....
