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Tuesday, 14 July 2020
Recently trending 11 lessons from my lousy $50K profit on AfterpayHow much bigger can the virus bubble get?Which companies will do well in the turmoil of 2020?Share trading is the new addictionWhat is happening with SMSFs? Part 1
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As the world gradually emerges from the aftermath of COVID-19, many are questioning if now is value’s time to shine? How can value stocks deliver outperformance in today’s environment?
Too many investors are lumping all companies together in the current crisis, but some businesses will emerge in good shape with recovering revenues, while others are disadvantaged permanently.
With central banks injecting as much liquidity as the market needs, the fundamental price signal has been lost. But the evidence is this does not help sustainable and long-term economic growth.
If a vaccine immediately emerges, equities would rally to an all-time high, implying a better outlook than pre-COVID with absolutely no damage done to the economy. It doesn't make sense.
It's not easy focussing on the long term when the short-term news is bad, but strong businesses find a way to thrive when times are tough. Here are three timeless facts and three evergreen mistakes.
Despite signs of optimism, market valuations are stretched and recovery is fuelled by government support. Some companies are doing well but stimulus cannot continue to prop up consumers for too long.
It is always easier to see the challenges and risks while underestimating ingenuity and positive possibilities. It's likely to be the case this time, too, as long as we move quickly to open economies.
Downside risks remain and we expect another leg down, but active managers should take advantage of market dislocations. In the current context, humility and risk management are key.
A key market heuristic during times of crisis is the second derivative. This is simply the rate of change or the acceleration or deceleration of whatever is causing the crisis.
Bear markets caused by recession fears follow a pattern, but we have never seen anything like coronavirus. If financial stimulus and medicine prove ineffective, all bets are off.
Investors who try to time buying and selling shares risk missing the strongly positive days which drive good performance, while over the long term, stock markets will recover from price falls.
It's too easy to look at a long-term chart of rising share prices and be reassured about performance. But adjusted for inflation, many of our largest companies have gone nowhere in half a century.
Afterpay listed at $1 in 2016 and traded recently at $70. How should an investor treat a small holding in a 70-bagger when each new level defies the experts? Should true believers let the profits run?
Stocks have rallied hard creating a virus bubble, but will this run for years or collapse in a matter of months? The market is giving a second chance to leave so head for the exit before there's a rush.
While the shutting of Australia’s borders to international travellers and quarantine measures is damaging to certain sectors of the economy, it is not uniformly negative for all companies.
The ability to buy and sell cheaply and quickly in small parcels is both the biggest drawback and benefit of shares. But it encourages people who should not go near the market to use it as a casino.
Taking a realistic view of the median ‘operating expense’ of an SMSF shows they cost less to run than previously claimed. Look at this granular breakdown and see how the costs of running your SMSF compare.
Investors tend to overstate the impact on investments when something significant happens and they assume the future will be different. COVID-19 has been dramatic, but is it really that unusual?