25 Aug 2015, 10:04am


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  • This correction ain’t all that much yet…

    be careful what you wish for. You may just get it


    The Grauniad sets us right: On the sea of red v sea of green debate, the answer is, of course, that red is an auspicious colour in Chinese culture, indicating wealth. Thanks to Tom Phillips, our man in Beijing.

    All around there are headlines of market corrections and doom and mayhem, plus the curious fact that the Chinese seem to use green for falling prices

    So an Ermine takes a look and wonders, hmm, is it yet time to pump up the old HYP with a bit of cheap stuff? One of the shares I could use is Unilever, I recall being a bit sore when I read UTMT had got in at about £24 and I was already well behind the curve. So I sat on my hands, there’s always be another day, plus I’m not really that keen on a desultory 3.8% yield… In an HYP it is crucial to get a decent yild when you buy, because one of the corollaries of a HYP peortfolio tends to be that these are established companies, and Slater reminds us that elephants don’t gallop. So you must. not. overpay.

    UTMT has described the firm’s strengths and weaknesses well, notable is a fair sized exposure to emerging markets, and investors really hate anything to do with EMs right now, and so the company should be down the toilet, right?

    UTMT would still have the edge on me

    UTMT would still have the edge on me

    Well, not so fast. Now it could certainly get there, it depends on whether this market rout has got legs. I feel it does, but others don’t, and what do I know. However, it does highlight the need to have a clear target of where to be prepared to buy at. For HYP shares (usually in the FTSE100) I start to get uncomfortable paying more that the long-run market PE of about 15 for the FTSE100 although many of these big brands tend to be high-ish, which is why I hadn’t got in with UTMT. I was spoiled by building a lot of my HYP in 2009 and 2011, there is some hazard that that makes me overcautious buying in normal times, and to totally go on strike in heady times like the last three years.

    memories of this being in on the radio in the lab in the heady dotcom days of 1997, when buying dotcom shares was going to make me my fortune, though work was good enough I had no thoughts of FI/RE

    So I’m all for a market rout, but let’s face it, what I really want, what I really really want, is a bear market – 20% off recent highs at least, and half of that fall is to get to fair value IMO. And so far, sadly, none of the trigger values for stocks I actually want to buy has been reached, despite all the excitement. There are, of course, areas of temptation. I really want to buy JII, but it’s just not really there yet. So far, this seems to be a rout, not a market capitulation, and the starting point had been from outrageously lofty levels. We’re back to late 2012 on the FTSE100. I want the Summer of 2011…

    So in the absence of anything really worth buying I’m drip-feeding into my existing holding of Vanguard Lifestrategy 100. Not because it’s terribly exciting, and the price is only back down to what it was at the beginning of this year, but because the cost structure of funds on TD are made for drip-feeding. I’d hate to look back if this turns out to be short lived and to have done nothing in the swoon. That’s the trouble with trying to use downturns – the hardest part is actually buying in the fog of war…

    Actually we are back to 1999 on the FTSE-100, although I don’t think its a representative global index

    I bought about Β£15k of VWDRL yesterday afternoon, but otherwise didn’t do much

    Hmm, quite, I know what you mean: I’ve been somewhat less than keen on buying much over the last three years since most things have an underwhelming, mildly “unsustainable”, feel about them.

    Listening to Geoff Boycott on Test Match Special recently has chimed with my own thoughts (on the cricket as well as investments): “Just be patient and wait for the right opportunity – don’t go chasing after it !” Seems like people don’t have much discipline these days – we’re all in too big a rush to do things yesterday, and with it come the mistakes. Mind you, he’s a Yorkshireman like me πŸ™‚

    Paying less attention to what passes for informed comment in the media when market falls are being discussed would be a good thing too – I’ve long since binned subscriptions to two investment magazines and am undoubtedly a less frazzled investor as a result.

    Seems you can often do a lot worse than be completely out of touch with the news. Personally, I like to follow the sentiment expressed in the statement at the top of your blog and go sit on top of somewhere like Great Gable, with a butty in one hand and a map in the other. If I choose the right time to do so I can be listening to a gentle cooling breeze and pretty much nothing else, just admiring the view. The plaque on the summit assists with overall appreciation of that too:


    I was over there last week and was completely unaware of what was going on in the markets – damned good thing too !

    As an ex-Unilever employee I see merit in the stock as a value investment only.
    Unilever outlines constant grandiose plans for growth, but in the end they make their yearly numbers by slicing the salami thinner – cost reductions, factory closings, outsourcing, SKU reduction.
    They constantly centralize decision making and remove authority from local companies – it’s a bit like working for the Vatican. Also some centralized strategy decisions have no relevance at all in local markets.
    Lipton tea is almost a meaningless brand in Canada but that is Unilever’s choice for strategic marketing. One of their favorite brand names for a cholesterol reducing margarine is a popular acne medication in North America. No matter. Use it anyway.

    @RayMac – It’s always to read employees takes on investments…even if it doesn’t make good reading!

    @Ermine – I have to say I’m in agreement with your title. Yesterdays fall (excluding todays bounce) was about half what was needed in my opinion. I think we’ll go sideways again for a while, worry about the inevitable FED rate hikes (or not as it may turn out), debate more QE and wait for the next 10% drop.

    I too was hoping for more and the jump today was a surprise, although it does make my options look far less appealing.

    Although I think the news coverage for the most part is hype or fear mongering or sensationalism I must admit I do tend to get sucked into reading many an article, coming up for air after a 3 hour reading whirlwind none the wiser.

    I admit that ‘crashes’ pique my interest and make me want to take a more active approach to choosing investments. I will carry on with my trackers until they get a bit more substantial πŸ™‚

    Sounds like most people are on the same page here.
    I stuck a tentative amount in the old Vanguard LS fund and am awaiting further action. The bounceback from yesterday was perhaps surprising but then it often tends to fluctuate while having an overall trajectory of up or down when you zoom out the time line even just a bit (as we all know too well), so maybe at the end of this week we will see that is all that was.

    27 Aug 2015, 9:13am
    by Neverland


    Looks like the fed put is still in place

    Making it look like the central bank will always bail out investors is not wise

    I suspect this week was your chance for the FTSE 100 as a whole*, though time will tell and of course stocks like ULVR and DGE do look pricey after years of the chase for yield.

    As I mentioned in my own post on this tiny temper tantrum, do remember the opportunity cost of sitting in a big lump of cash for months/years on end, while you wait for an extra 10% off shares. It’s worth creating a spreadsheet for a scientific mind like yours to be persuaded. If you do so be honest about whether you will catch the very bottom — better to use a more generalised low figure.

    On the other hand I may be saying all this because I finally threw in the towel on ULVR and DGE and bought both after selling them years ago. ULVR isn’t cheap but it’s extremely high quality (one of the investment banks put out research saying it has the second safest dividend in Europe a while back!) And it’s come down a bit, and should do better with either/or low commodity prices or an emerging market recovery.

    DGE still looks pricy but the brands are peerless, really, and would definitely sell for a premium I think.

    Another possibility is to hunt about for things that were thrown out but that have not yet come back. I had some fun with some closed end funds that were late recovering. They do tent to be small / small caps though.

    Finally, for a Malthusian like yourself then surely the nearly-10% yields on the likes of BRWM and BRCI (Disclosure: I just bought the latter!) could be worth a punt if you can hold long-term. (BRWM probably better bet as it’s much larger but there’s no energy, so maybe twin with an RDSB/BP/BG top-up?)

    That said, commodities are really hard. I’ve been trading in and out of them all the way down, and on balance have surely lost money on the way, even if I’ve avoided a monster paper loss figure.

    Take a look at the most recent BRWM report though, particularly the dividend yield gap graph. (I think it’s the interim report, maybe annual — the latest, anyway).

    All IMHO, do your own research etc! πŸ™‚

    *Obviously an absolute guess / random stab in dark! πŸ™‚

    @TI BRWM, eh. Funny you should say that. I know one really shouldn’t, but it was a bit too hard for me to pass up. Hehe – RDSB/BP top up, BTDT too πŸ˜‰ For someone with a darker outlook that your good self there seems to be some commonality in the greed part of the fear/greed axis. The only purchase I considered a fail was VGLS100 because I got caught out by the fact TD seem to batch purchases – on Friday! I’m big on funds chap so I screwed up there. Still, no huge deal.

    I have a specific issue with holding a lot of cash because I still don’t have an income so nobody will lend me money. I have to hold a lot of cash against some unlikely tail risks. But that will change soon as I get hold of pension savings giving me an income again, and then I can run down some of the poorly performing cash holdings. This swoon happened a few months too early for me. But I have the suspicion that there will be more jitteriness, hopefully once I have got hold of some of my own money!


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