ASX 200 | Slack Investor

Things a Financial Advisor might tell you … and May 2023 – End of Month Update

Slack Investor has blogged about financial advice before – and although an advocate of trying to do as much as you can by researching finance world yourself, it can be a very difficult journey to be across all the fields of saving, mortgages, investment loans, insurance, superannuation, taxation, and investment.

Most people want financial advice but the problem is that it is so expensive. MoneySmart.gov.au outline a case study where “Rhett” has $400 000 to invest – He might be hit with fees of $13 600 in his first year of advice . These fees include a Statement of Advice and Insurance premiums and layers of platform and investment advice fees.

Where to invest your money is the easiest thing to sort out for yourself – with the key words being diversification and low fees. There are cost-effective ways of investing in a diversified way that will suit your risk tolerance without involving a financial advisor (e.g. Stockspot, Pearler). But some people (Not Slack Investor Readers!) need a trigger to just start investing. Finance world is much more complex than just investing your money. Slack Investor can see the need for finance professionals

Things a Financial Advisor might tell you

Firstlinks have trawled the data to determine the most recommended strategy used by financial advisers – the most common of these are listed below.

Let’s just have a look at some of these in more detail.

Rollover Your Super – “Rolling Over” your superannuation is just a way of describing the transfer of your “protected” super into another protected super fund. Slack Investor readers will be all over this one – Of course it makes sense to put all of your super with one provider to avoid multiple administration fees. Combine your super into one fund – preferably an industry fund (lowest fees) with a good 5-10 yr performance record.

Retain Your Super – This is again good advice for the long-term accumulators of wealth. Unless under extreme hardship, resist all attempts for early access to your super. During the COVID-19 outbreak, $4 billion was paid out to 456,000 people under the early super access scheme. This would have helped distressed businesses and individuals in the short-term but may not have been a great idea in the longer term.

Super Contributions – This is a more complicated area and, it might be good to have advice on when, and by how much ,you should boost your super contributions above those which are compulsory. This is tricky when you have competing loads on your take-home pay (Family, Mortgage, etc). Slack Investor was big on maximizing his super contributions once he had a firm grip on his home mortgage.

Apply for Insurance – When you have a family or debts (home loan?) to cover, life and disability insurance is a good idea. You don’t need an advisor to tell you this. Insurance through your super fund is usually the most cost effective way to do this.

Estate and Aged Care Planning – This area is really complicated for the layman. Professional Advice, or much research, needed.

Commence, Rollover, Retain Pension – You may need advice here if planning to mix aged-pension and super to fund retirement. If there are no aged-pension issues, Slack Investor believes that it is best to start an account pension (from your super) as soon as possible and re-contribute any surplus funds as non-concessional contributions.

Commence, Rebalance Investment – An old truth – Best time to start investing? 20 years ago. Next best time to start investing? Now! Rebalancing can be done automatically with cost-effective platforms e.g., Vanguard Super, Stockspot.

What Types of advice Do You Really Need?

The current financial advice system is complicated by well-meaning regulations that are in dire need of reform. In 2022, the Australian Treasury provided a consultation paper seeking feedback on changes to the regulatory regime that would allow financial advice on specific matters without the obligation that the advisor should know everything about your financial situation – No need for the expensive Statement of Advice (SOA).

Ideally, in a future world, you could get advice at various stages in your life from finance professionals at an hourly rate – perhaps in the same way you would consult a medical specialist about a problem. For Instance

Early/Mid-Career Advice: Am I on track with my savings, super contributions and retirement plan? What strategies should I employ to achieve my goals?
Pre-Retirement: Am I ready? Taxation Issues? Aged-pension/Super mix?
Estate and Aged Care Planning: Complicated – Many issues to discuss here.

Alternatively, you could just turn your financial future into a hobby (Like Slack Investor did), and use the internet and books to educate yourself.

May 2023 – End of Month Update

Slack Investor remains IN for Australian index shares, the US Index S&P 500 and the FTSE 100. It was a dreary month for the Slack Investor followed markets. The ASX 200 performed poorly this month – down 3.0%, and the FTSE 100 even worse – down 5.4%. The S&P 500 was flat (+0.2%) for the month.

In this month of turmoil for stock indexes, the Slack Portfolio did quite well. This is because it is heavy with technology stocks that are having a moment in the sunshine. The Nasdaq 100 index was up 7.7% for the month of May.

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).

Alignment

Four of the planets that are visible to the naked eye – Saturn, Mars, Venus and Jupiter were aligned on **April 24, 2022** at 4.40am visible from Southbank, Melbourne – SBS Australia

We have 8 planets in our solar system (sorry Pluto!) all whizzing around the sun at different rates, occasionally they “align” when the planets line up or appear close together in a small part of the sky .

Planetary Alignment is a special thing, depending on which planets are involved – and their order. Sadly, Slack Investor wasn’t paying attention when 4 of the 5 planets visible to the naked eye (Mercury, Venus, Mars, Jupiter and Saturn) appeared in a line around the world on April 24 2022.

The bright string of lights in the morning sky (in April 2022) is thought to be a one-in-1000-year event.
Australian Geographic

Slack Investor is coming to the planetary alignment party very late and is now setting his sights on September 8, 2040, when five naked-eye planets (Mercury, Venus, Mars, Jupiter, and Saturn) will be within a circle of 9 degrees in the sky.

Investing alignment

Slack Investor may be a poor astronomer but one of his skills is noticing when two of the most important attributes in the stock market have an alignment – Value and Momentum.

Value investing involves looking at stocks that appear to be trading for less than what they are worth using a value screener like “book value” or the Price/Earnings ratio. Slack Investor likes to use the Cyclic Adjusted Price Earnings Ratio (CAPE) as a broad indicator of value – the lower the CAPE, the better the value.

Momentum investing just uses charts and indicators to pick out the current movement of a stock. Based upon the theory that – If the trend is upwards … it is likely to continue upwards. This is tricky though … the trend is your friend … until it isn’t!

Because trend trading is difficult, I always like a bit of assurance or alignment with value. Ideally, I like value and momentum in a stock before parting with Slack cash.

Value

It has been 6 months since I produced a set of index value charts based upon CAPE to look at how the markets are travelling.

As with individual companies, the whole share market will oscillate between overvalued and undervalued. Slack Investor has written about the Cyclically Adjusted Price to Earnings ratios (CAPE) which use ten-year average inflation-adjusted earnings. By plotting this CAPE over a period of time, we can look at how the whole sharemarket is currently valued in terms of historical data.

Using monthly CAPE data from Barclays, the 40-yr mean is calculated and plotted together with the CAPE values. A “fair value” zone is created in green where the CAPE is within one standard deviation of the mean.

Historic CAPE ratios for the ASX 200 – From 1982 to April 2023– Click the chart for better resolution.

Historic CAPE ratios for the FTSE 100 – From 1982 to April 2023– Click the chart for better resolution.

Historic CAPE ratios for the S&P 500– From 1982 to April 2023 *– Click the chart for better resolution*.

From the above, The ASX 200 is right on fair value (1% above av.) and the FTSE 100 is cheap (5% below av.). Both are worth looking at for the moment as their CAPE values are at, or below their long-term averages. The S&P500, is still in the “Fair value” range, but at 20% above the long term average – so, no bargain here.

Momentum

There are lots of stock indicators that track momentum. Slack Investor has blogged about The Coppock Indicator before. It has had an incredible track record in signalling the end of a “bear market”. The signal (Green Arrow) is triggered when the indicator (shown in the lower screens below as a white line) bottoms from under the zero line and then slopes upwards.

Monthly charts of the ASX 200, FTSE100 and S&P500 together with the Coppock Indicator (White Line) in the lower section of each chart. The green arrows show the “bottom of the market” predictions using the Coppock Indicator. The red arrows show a possible time to sell – Click the chart for better resolution – Incrediblecharts.com

The ASX 200 (Since 31 Jan 2023) and the S&P 500 (Since 31 Mar 2023) are showing signs of recovery from the bear market with the is well into the Coppock recovery cycle. The FTSE 100 is also showing signs of recovery, but as the Coppock indicator did not get below the zero line, this is not a proper Coppock reversal.

Alignment of Value and Momentum Together

Slack Investor will again rant about how market timing is difficult and that the best time to buy stocks is “all the time” – by automating your investments so that their is no decision inertia. Use dollar cost averaging.

However, the Coppock Indicator has been reliable so far in predicting stock gains. This is not advice, but the ASX 200 currently has the alignment of both value and momentum indicators. Alignment is good … If I wasn’t already fully invested, I would have a crack!

General Practitioners (GP’s) in Australia … and April 2023 – End of Month Update

Slack Investor is a great believer in writing about experience and a few (fortunately) minor health matters has had him recently exploring Australia’s health system. In Australia, the General Practitioner (GP) is usually the first port of call if you have a health problem and of Medicare will fund a portion of your costs for a consultation. Your relationship with your GP is an important one and it is vital that you feel comfortable with your GP’s manner, knowledge and skills. There are two tiers of GP pricing in Australia.

Bulk Billed – where there is no extra consumer payment required if you have a valid Medicare card.
Mixed Billing – where patients will pay a a bit extra in addition to the Medicare allowance

Bulk billing doctors are becoming harder to find as the rate of bulk billing has fallen to its lowest level in 13 years . According to government figures, it was 80.5% in the 2022 December quarter. Though this figures is likely to be “grossly inflated” as many practices have charged a separate eftpos transaction at the desk and this does not appear in Medicare figures.

What should happen is that either the patient is bulk-billed and pays no money – or they are charged a private fee, a portion of which is rebated by Medicare directly into the patient’s bank account.
Dr Margaret Faux, Health Insurance Law Academic

Levels of bulk-billing are probably closer to 40% as shown in the recent survey by The Age. In answer to the question “Does your GP Bulk-bill or charge you a gap fee?”

Survey results from the Resolve Political Monitor conducted by The Age

This Age poll is in line with results by an excellent organisation called Cleanbill that are driven by a mantra that Slack Investor wholly agrees with …

” … healthcare is at its most accessible when you can see all of your options and their costs before you’ve made a booking.”
The mission statement for Cleanbill

The Cleanbill site is easy to use for locating GP’s in your area and transparently gives their total fees for a standard, or a long consultation. Once you have narrowed your search, you can usually make a booking straight from the site.

Only 42.7% of GP clinics serving nearly 18 million Australians
bulk bill (charge no out-of-pocket fee to) all patients.

At the 57.3% of GP clinics that charge an out-of-pocket fee the average extra cost for a standard, 15-minute consultation is $40.25 (out of a total cost of $80).
Australia-wide survey by Cleanbill – January 2023

The decline in bulk billing is not the GP’s fault as practice costs have continued to rise and the Medicare rebate has not kept pace with the rise in these costs. In 2013, the rebate was frozen for 6 years – and, even last year, though inflation was 6.1%, the Medicare rebate was only increased by 1.6%. The chart below shows how the rebate has failed to keep pace with inflation (CPI) and average weekly earnings (AWE).

The Medicare GP rebate has failed to keep pace with inflation (CPI) and average weekly earnings (AWE) – From ochrehealth.com.au

… more than half of GP practices (55%) plan to reduce bulk-billing and increase gap fees this year
2023 GP Insights Report

Are we heading down the track to a US – style system?

Slack Investor has lived in the US – and hopes not! … and, is pleased that the new Australian government is putting a bit of thought and money into this problem with an announced $2.2b injection of funds into Medicare – no detail yet.

Now Slack Investor does not want a completely “free ride” as he realises that healthcare must be paid for. Even in the much admired Scandinavian health systems there is usually a co-payment associated with a visit to a doctor of $20-25 AUD.

In Australia, many patients pay hundreds of dollars for non-GP specialist consultations, and $40–$50 out of pocket for GPs.
Dr Jillian Farmer – Insight Plus

So perhaps it is just a matter of nudging the co-payment down a bit by increasing the Medicare rebate, and some other reforms – all will be revealed on the Australian government budget night – 9 May 2023.

Slack Investor is hoping for some progress as the Australian Healthcare system is generally good … but could be better. In the meantime, if you are looking for a GP, use Cleanbill to help you find one.

April 2023 – End of Month Update

Slack Investor remains IN for Australian index shares, the US Index S&P 500 and the FTSE 100. It was a positive month for the Slack Investor followed markets. The ASX 200 up 1.8%, the S&P 500 up 1.5%, and the FTSE 100 powering on, and up 3.1% for the month.

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).

Persistence is hard … and March 2023 – End of Month Update

Salvador Dalí, The Persistence of Memory (1931) – MoMA

Dali’s painting “The Persistence of Memory” has been described as a “surrealist meditation on the collapse of our notions of a fixed cosmic order“. Slack Investor is not gifted in the interpretation of artworks but would “have a crack” and say the work was indicating a lack of permanence, or persistency, that we often associate with everyday things. What Dali called “the camembert of time”.

“The sole difference between myself and a madman … is the fact that I am not mad!”
Salvador Dali

Persistence : (Noun) the act of persisting or persevering; continuing or repeating behaviour – vocabulary.com

Persistency is a great investing quality that impresses Slack Investor – but I acknowledge the difficulty. Standard & Poor’s collect data from the US market on how consistently recent top performing share funds are able to keep producing winning records in subsequent years. The following graphic tracks the funds that were in the top 25% of performers in 2018 – and who stayed in the top quartile in successive years.

The percentage of US funds that remain in the top 25% of funds after a 1, 2, 3 and 4 year period – S&P Research – Not many! – Ifa.com

Over a five-year horizon “it was statistically near impossible to find consistent outperformance.”
S&P Research – Ifa.com

Just because a fund, or portfolio, did well in one year does not mean it will continue to perform well the next year. Slack Investor has found this himself with his best performing stocks often becoming the worst performing in the next year – such is the nature of stocks. The stock market often moves between being overvalued and undervalued – and it is the same for individual companies.

Most active (stock picking) funds do not exceed their long-term benchmarks

Not only do active managed funds struggle to maintain consistency, most of them underperform index funds. We are lucky that there are a group of economic boffins that keep an eye on things in the funds department. They are the known as SPIVA (S&P Indices Versus Active). Since 2002, they have been collecting world financial data and comparing actively managed funds to passive (Index) Funds. The 2022 data is now in and the disappointing theme continues. For Australian Equity (Share) funds, for the 5 and 10-yr horizons, respectively, 81.2% and 78.2% of funds underperformed the S&P/ASX 200.

For International equities, the performance of active funds was worse – Over the 5 and 10-year periods, more than 86% and 95% of funds underperformed, respectively.

The percentage of **underperforming** Australian funds in various categories over a 1-yr, 3-yr, 5-yr, 10-yr and 15-yr period – SPIVA 2022 Report

How to cope with inflation

To keep pace with inflation you must be invested somewhere – so that your investments can grow faster than inflation (cpi) over time (at least 5 years). I will explain in a future article why I prefer shares and ETF’s as the vehicle to do this over other appreciating assets. So, on this path, to be exposed to equities (or stocks) you can either buy

Active managed funds – Roll the dice here as most of these underperform Index funds after fees, but the minority showed some skill over benchmarks over a 5-yr period – but there is no guarantee that they will keep ahead of their benchmarks.
Individual stocks – this is what Slack Investor does – but some experience is helpful here!
Low-Cost Index Exchange Traded Funds (ETF’s) – this is the easiest path, and Stockspot have made the process even simpler by researching the best Index ETF’s in each class.

Exchange Traded Index Funds (ETF’s) for a Portfolio

Stockspot diligently analysed 640 of the largest managed funds available in Australia.

Australian Shares Index ETF

For Australian share exposure, Stockspot recommends the ETF ASX:VAS – as it has outperformed 74.3% of large cap Australian shares managed funds over 5 years with an Indirect Cost Ratio (Management Fee) of 0.1% and an annual return (over 5 years) 0f 9.0%.

Australian Small Companies Index ETF

Here, Stockspot recommends the ETF ASX: VSO – as it has outperformed 63.5% of small cap Australian shares managed funds over 5 years with an Indirect Cost Ratio (Management Fee) of 0.3% and an annual return (over 5 years) 0f 11.7%

International Shares Index ETF

For a swing at the world markets, Stockspot recommends the ETF ASX: IOO – as it has outperformed 97.5% of the large cap global managed funds, available in Australia, over 5 years with an Indirect Cost Ratio (Management Fee) of 0.4% and an annual return (over 5 years) 0f 14.2%.

March 2023 – End of Month Update

After a sparkling January, the calendar year has crawled along in share market gains. But, it’s “dividend season” now – and this cheers Slack Investor up greatly.

Declines this month for the Australian and UK markets (ASX 200 – 1.1%, FTSE 100 -3.1%). Those irrepressible optimists in the US keep powering on, with the S&P 500 up 3.5% – even though this is the most overvalued of Slack-followed markets.

Slack Investor remains IN for the FTSE 100, the ASX 200, and the US Index S&P 500.

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index). The quarterly updates to the Slack Portfolio have also been completed

Gold Digger … and January 2023 – End of Month Update

The 2019 BBC TVseries Gold Digger delves into the messy world of a wealthy older woman who is swept off her feet by a younger man. Are his intentions honourable?

The term “gold digger” has been around for a while and is not a nice label to have. Usually defined as people who are in, or are pursuing, romantic relationships primarily for financial gain. However, Slack Investor is resolved to start digging for gold himself. Not just now, but whenever the stock market gets a bit over-valued again.

She take my money when I’m in need
Yeah, she’s a triflin’ friend indeed
Oh, she’s a gold digger
Gold Digger – Kanye West and Jamie Foxx

What turned my attention to gold, and the need to start digging, was this remarkable table put out by Stockspot. Over the past 5 calendar years, when comparing Global Shares, Australian Shares, Emerging Share markets, Gold, and Bonds. Gold has topped the Investment performance table in 3 of the past 5 years! Diversification, it seems, is important.

Yearly returns comparison of Global Shares, Australian Shares, Emerging Share markets, Gold, and bonds – Stockspot – Indices used: S&P/ASX 300, MSCI World ex Australia, LBMA Gold AM Price AUD, MSCI Emerging Markets, and Bloomberg AusBond Composite 0+ Year – Click Image for enlargement

In their usual thorough way, Stockspot has investigated the best way to own gold as an investor. Rather than getting a few nuggets or gold bars, they like to use ETF’s to gain exposure to gold. They analysed three ETF’s

Global X Physical Gold (GOLD)
Perth Mint Gold (PMGOLD)
BetaShares Gold Bullion ETF – Currency Hedged (QAU)

Weighing up costs, buy/sell spreads, liquidity, size and the type of gold assets held they decided that Global X Physical Gold (GOLD) was the best Gold ETF to hold. The liquidity (the ability to quickly buy and sell your gold using an ETF) is a huge factor. The management costs of 0.4% p.a. sounded a bit steep to Slack Investor but, I suppose, there are costs in having to house and secure these gold bars somewhere in a vault in London.

Slack Investor has no financial relationship with Stockspot but thinks they offer excellent low-cost, automaticilly re-balanced investing portfolios. Some of Stockspot’s portfolios hold, at times, up to 15% gold!

Slack Investor will start out small and just dip his toe into the water as there is the general Slack reluctance to hold a non-income producing asset. However, I can’t argue with the results of having gold in your portfolio during times of crisis.

89-year-old oil billionaire J. Howard Marshall II and 27-yr-old Anna Nicole Smith. They married in 1994. Following Marshall’s death after 13 months of marriage, Anna Nicole Smith unsuccessfully battled his son over her husband’s estate – From Interview Magazine

The tragic life, of Anna Nicole Smith is an eventful tale of a woman often labelled as a modern-day gold digger. Slack Investor hopes his gold digging will end more fortunately. Hopefully at some time in the future, during the delightful times when the markets are considered overvalued, Slack Investor has made “a note to self” – start digging for gold – and buy some gold ETF as insurance.

January 2023 – End of Month Update

Slack Investor remains IN for Australian index shares, the US Index S&P 500 and the FTSE 100. The Slack Investor followed overseas markets have had a bumper month to welcome the new year ( ASX 200 +6.2%; FTSE100 +4.3%; S&P500 +6.2%).

There was some adjusting upwards of the stop losses for the FTSE100 and the S&P500, with details on the UK Index, and US Index pages.

As indicated in the last post, the ASX market has reached a significant point at the end of the month. Shown in the bottom part of the chart, the Coppock indicator is moving upwards after a journey below the zero line. This is a prediction that the “bottom of the market” has passed and it might be a good time to buy (not advice). Also, the FTSE100 is moving upwards after a minimum – a good sign, but not a true Coppock prediction as the curve had not spent time below the zero line. The S&P500 Coppock curve has yet to turn upwards.

Monthly charts of the ASX 200, FTSE100 and S&P500 together with the Coppock Indicator in the lower section of each chart. The green arrows show the “bottom of the market” predictions using the Coppock Indicator. The red arrows show a possible time to sell – Click the chart for better resolution – Incrediblecharts.com

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).

Nuns Know Best

In Nuns … Wisdom – The New Indian Express

Slack Investor loves a good story – whether its true or not! I like the owning of stocks and I also admire anyone who can stick to their vows. All of this seems to intersect with the story of the Coppock Curve – a technical indicator that can be mapped on stock price charts that has a great track record for showing when the market has reached the “bottom” of a cycle.

When I first started to think a bit more seriously about financial things, I was going to an evening investment class in Townsville. The class was held by a personal Slack Investor Hero, Robbie Fuller, who put on these classes for no personal gain … he just wanted to educate people about the opportunities that lay waiting in the stock market. Robbie would teach us about fundamental analysis (trying to measure the intrinsic value of a stock) and technical analysis (charts and trends). There was always a particular beauty when fundamental and technical information aligned about a company.

The class was usually a lot of fun, but I remember a time around 2011 when the markets were going through a bit of a lacklustre period and we had all had a few recent losing trades – there was just not much excitement about stocks.

Robbie came bounding in one evening after 31 July 2012 with the news that the Coppock Indicator had just turned … it was a sign that “good things will happen”- He was right – It was the start of a 3-yr period where the Australian market was mostly rising. It is much easier to trade when the “tide is coming in”.

The Coppock Curve is a “smoothed” momentum indicator developed by the economist Edwin “Sedge” Coppock and published in in a 1962 issue of Barron’s. It all started when he was commissioned by the Episcopal Church to find long-term investment opportunities for the Church fund.

According to the legend, he asked a group of nuns (or bishops!) how long it took the bereaved to “recover” from their grief. The answer was 11 to 14 months. He took the radical step of thinking that something similar might happen in stock markets after a market high and subsequent downtrend. He assumed that because markets are motivated by emotion, they might be ready to “move on” after a period of 11-14 months of “grief”.

“Crowds do too much too soon”, he wrote. “They overdo. When they get an urge to speculate, their concerted demand forces prices up at a rate far greater than the growth of the company into which they are buying. Likewise, when they liquidate holdings or make short sales during a panicky decline, they ignore basic economic facts. They overdo because they are motivated by emotion rather than reason.”
Edwin “Sedge” Coppock – from Business Insider

The Coppock Indicator has had an incredible track record in signalling the end of a “bear market”. The signal (Green Arrow) is triggered when the indicator (shown in the lower screen below) bottoms from under the zero line and then slopes upwards.

Monthly chart of the ASX 200 together with the Coppock Indicator below. The green arrows show the “bottom of the market” predictions using the Coppock Indicator. The red arrows show a possible time to sell – Click the chart for better resolution – Incrediblecharts.com

The indicator gives buy signals very rarely, only 6 times in the past 30 years for the ASX 200. But it has just given another one, signalling a buy for the ASX 200. The maths of the curve is a little complex, but it looks for the next uptrend after the market establishes a high and then goes through a 11-14-month “greiving” period.

Is Coppock’s Bollocks?

There is no perfect trading indicator. Coppock designed his indicator to try to establish a “bottom of the market” buy signal to identify long term investment opportunities. He didn’t try to use it as a selling tool. However, there is a trading strategy that uses this indicator after a BUY signal.

SELL when the Coppock Curve takes its first downwards trajectory OR,
SELL when the Coppock Curve falls below zero

I have trialled both methods and the strongest gain (p.a) results were with the first method. I have marked these sell signals on the chart above with red arrows and tabulated the gain results below.

COPPOCK CYCLE	BUY DATE	ASX200	SELL DATE	ASX200	GAIN	PERIOD(yr)	GAIN (p.a.)
1	31-May-95	1981	28-Jan-96	2171	10%	0.66	14.5%
2	30-May-03	3010	29-Apr-05	3983	32%	1.91	16.9%
3	29-May-09	3817	30-Jun-10	4493	18%	1.09	16.3%
4	31-Jul-12	4269	28-Jun-13	4802	12%	0.91	13.7%
5	31-May-16	5378	30-Jun-17	5721	6%	1.08	5.9%
6	30-Nov-20	6517	29-Oct-21	7323	12%	0.91	13.5%
	31-Jan-23	7400?	?	?	?	?	?

Slack Investor uses Incredible Charts to do all his charting … but their indicator screen can get complicated. To easily follow the Coppock Indicator on any stock, just use the free, but great, StockCharts and put in the same chart attributes below.

ASX 200 Chart from StockCharts – showing stock price on top and the Coppock Curve below.

Slack Investor is a great believer that market timing is difficult and that the best time to buy stocks is “all the time” – by automating your investments so that their is no decision inertia. Use dollar cost averaging.

However, looking at the chart history of this indicator … and the GAIN results in the above table, this is not advice, but now looks like a good time to get into the Australian market. Although, officially, the Coppock results are based on the end of month data. In addition, using Slack Investor’s CAPE valuation method, at the end of December 2022 the ASX 200 was “fairly valued”.

Nuns are not infallible … but mostly wise.

Imperfections in the Brickwork and … December 2022 – End of Month Update

Detail from the Pen and Ink “Behind Armstrong Street Shops” – the remarkably talented Bren Luke, 2022.

Slack Investor is always on the lookout for new investments … and nothing attracts the jaundiced Slack Eye more quickly than continuous long term results.

Brickworks Ltd (BKW:ASX) have just had their AGM presentation. I was very impressed by the claim that they have maintained, or increased, normal dividends for the last 46 years!

Dividend record – Brickworks 2022 AGM presentation – Brickworks

Tracking the share price of BWK:ASX since 1968 – Brickworks 2022 AGM presentation – Brickworks

As well as being a very good maker of bricks, Brickworks operates as an investment company and own a 26.1% stake of the diversified investing house Washington H. Soul Pattinson (SOL:ASX). SOL, in turn have holdings in

TPG Telecom – Australian telecommunications provider
Brickworks Limited – Clay and concrete production for the construction industry
New Hope Group – Coal and oil mining and energy generation
Tuas Limited – Telecommunications provider
Apex Healthcare Berhard – Malaysia-based pharmaceutical production
Pengana Capital Group Limited – Fund management
Aeris Resources – Mining and exploration activities

Now Slack Investor does not want to get all preachy here, as as everyone has to draw their own line in the sand – These things are very subjective. I looked up New Hope Mining on the excellent Morningstar Sustainalytics site to get an idea on how well the company is ranked in terms of Environment Sustainability and Governance (ESG).

ESG Risk rating for New Hope Corp. Ltd. – from Sustainalytics

New Hope Group ranked 14571 out of 15559 in terms of ESG risk rating – on a worldwide basis. I personally would feel uncomfortable being a part owner of a thermal coal miner given the current state of the planet.

So despite the most excellent management and performance of BWK, while they still own an interest in the New Hope Group, I will look elsewhere for investments.

Puff Puff MOAT

On the subject of digging deep, I have been a long term holder of the VanEck Morningstar Wide Moat ETF (MOAT:ASX). Slack investor has many vices – Wine and beer just being just two of them … so again, I won’t lecture – as these things are very personal. However, some of the sins that my mother rubbed into me as being “particularly evil” are smoking and gambling. I will do my best to avoid ownership of these type of stocks in deference to my dear Mum.

I noticed back in 2021 that this MOAT ETF had Phillip Morris International as one of its top 10 holdings. According to the Yahoo Finance site – Phillip Morris is 2.5% of the MOAT holdings! Owning a part of a multinational tobacco company that is a leading part of Big Tobacco didn’t really sit well with Slack Investor.

According to the Global Burden of Disease Study, in 2015 alone, smoking caused more than one in ten deaths worldwide and killed more than 6 million people, resulting in a global loss of nearly 150 million disability-adjusted life-years
The Lancet

Slack Investor marked MOAT as an ETF to get rid of, despite liking the concept of its construction – “companies with sustainable competitive advantages”. I had a feeble attempt at shareholder activism and emailed VanEck about this … and enquired whether thy might screen the MOAT ETF with an ethical filter … to get rid of tobacco and gambling stocks – they replied with a polite “no”.

Modified (to protect the innocent!) email from VanEck to Slack Investor

I finally got around to attempt to sell MOAT this month and I thought I should just check the VanEck holdings MOAT site and look at their complete holdings list. Lo and behold … at 29/12/2022, Phillip Morris has now gone from their holdings list! So, for now, MOAT is a keeper!

If at a loose end during the holidays and need a distraction, Slack Investor highly recommends the free exhibition “Streets of Your Town” at the Ballarat Art Gallery, VIC. Bren Luke is an amazing artist, his exhibition runs till 5th Feb 2023.

December 2022 – End of Month Update

The year closes and, I’m not sure if Slack Investor was naughty (probably?)… but, there was no “Santa Rally” this month. All followed markets took a dive in December. The ASX 200 down 3.4%, the FTSE 100 down 1.6%, and the S&P 500 down 5.9%,

Due to the return of all followed share markets to more normal valuations, I have returned my stop-loss upper-limits to 15%. This means that when I work out my stop loss value, I add another 15% to it, this is my upper limit. If the stock price exceeds the upper limit, I will adjust my stop loss upwards. This method helps to lock in some gains if they occur.

Slack Investor remains IN for the FTSE 100, the ASX 200, and the US Index S&P 500.

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index). The quarterly updates to the Slack Portfolio have also been completed.

Checkmate! ASX

Slack Investor is all about “continuous improvement” Obviously not me … but everybody else! I normally have low expectations of “clip the ticket”, almost monopoly, systems such as the Australian Stock Exchange (ASX) as there is little incentive for improvement – they are going to get there cut anyway. Last year, I did get off the couch briefly to have a bit of a rant about ASX Paper …I’m Drowning!‘ But I did end the blog on a hopeful note, that system change was just around the corner with a new “blockchain” based system to replace the Clearing House Electronic Sub-register System of the ASX (CHESS).

After reporting five delays on the CHESS replacement project, the ASX has just announced a move to drop the whole project – that it has been thinking about since 2005. In a damning review of the ASX’s handling of the project by Accenture, that has been described by business leaders as “embarrassing”. There are now undermined expectations that the ASX can ever deliver on any new market infrastructure with its current board and management.

The project, which has dragged on for seven years, will now be “reassessed”, the ASX stated in a media release this morning, with the abandoned software being “derecognised” at a gross cost of $245 million to $255 million.
Tahn Sharpe – The Inside Adviser

Although the structure of the current CHESS system is not broken, there are a lot of things that should be fixed.

Start with clearing up the confusion between Issuer Sponsored (SRN) and Broker Sponsored (HIN) Shares – Just have one type of sponsorship.
Stop sending reams of letters – including the unnecessary posting of CHESS holding statements.
Move towards T + 1 settlement (currently ASX settlement is 2 days). US exchanges have T + 1 scheduled for 2024.
Look at ways to shave off a few layers of fees. Currently ASX fees are paid to registries, fund administrators, wealth platforms and custodians.

The underlying software that runs CHESS was a legacy gift from the NASDAQ exchange (i.e. Cost = $0). It is starting to creak a bit though, as it was written over 22 years ago in COBOL. Slack Investor was hoping that the new system would improve on the layers of fee-charging “ticket clippers” that are in the current system – but it seems that the vested interests still have the ear of the ASX.

… the reality is that the CHESS replacement looks more like a replication of all the old systems with its layers of fees being paid to half a dozen different players.
Chanticleer – afr.com

Instead of being the first National Stock Exchange to try use the blockchain technology, perhaps the ASX could wait and see whether other exchanges can bed down this new “distributed ledger “technology – then adapt their systems. After all, using market value, our exchange represents under 2% of the world’s companies.

Countries with largest stock markets worldwide (January 2022), by share of total world equity market value – Statistica

But what would Slack Investor know? – he is only a punter. In the meantime, streamline the current CHESS system – make it better. Whatever we do … it should cost less than $250 million!

Vanguard Super … and November 2022 – End of Month Update

Slack Investor Hero, Jack Bogle, reflecting in casual ware – on how to keep costs down – New York Times

Jack Bogle created Vanguard as a “penny-pinching” financial powerhouse that was owned by the shareholders of its funds. Vanguard pioneered the low-cost index funds revolution.

The Vanguard Effect

The cost of financial products is important, and Slack Investor does his best to minimise any fees that come with financial transactions. It is not often I get to talk about two of my favourite finance things in one blog. Vanguard, the low-cost fund trendsetter and superannuation.

Vanguard have long been a fund manager and ETF provider that have been at the forefront of lower fees in the finance sector. The term “Vanguard Effect” has been coined to explain the phenomena that when Vanguard competes in an area, the expense ratios from their competitors tend to decrease.

Tracking the average Management Expense Ratio (MER) **for US Index funds** – Vanguard

Vanguard Superannuation in Australia

This month, Vanguard launched into the Australian Superannuation space with a product that is transparent and amongst the lowest fees for an accumulation account. The beauty of their offering is the straight up bundling of all their fees into one simple number – 0.58% of your super balance. Of course, Slack Investor would like a lower management fee – but this is a good start.

0.35% (Administration) + 0.21% (Investment) + 0.02% (Transaction) = 0.58%

The Vanguard MySuper Lifecycle product fees depend on how much Super you have. For a $50,000 balance, the total annual fee would be $290, for a $500,000 balance, the total annual fee would be $2900. The transparency is good – Drag out your own Super annual statement and try to work out your own total fees.

Using the ATO’s comparison of MySuper products tool for a few of the popular industry funds for a $50K balance.

	UniSuper	AustralianSuper	HostPlus	Hesta
5-yr Net Return	6.44%	7.07%	7.58%	6.53%
Annual Fee	$316	$452	$619	$510

Of course, fees are not the only consideration. Many of the Industry funds use some sort of stock picking, and may use private equity to enhance their performance. Vanguard Super is made up of a mixture of index funds. I do like the way that the Vanguard Lifecycle automatically adjusts your exposure to risk as you creep towards retirement. 90% growth assets till age 45, then tapering to below 50% when you reach 60. All this is done automatically by Vanguard.

The adjustment of exposure of the Vanguard Livecycle super between growth and defensive assets as you age – Vanguard

Despite this juicy offering, there is often a lack of engagement of Australian workers with their superannuation. Vanguard will probably have a bit of trouble gaining traction in Australia due to the size and popularity of their industry super competitors. This product is currently only for accumulation accounts at this stage. It is a decent starting point by Vanguard and l0ok forward to details of their pension option (coming soon!). I also am hopeful of a bit of the “Vanguard Effect” to put a bit of pressure on existing superannuation fees – which are still too high.

A note that Slack Investor is not sponsored by Vanguard (or anyone else!), but I own a few of their ETF’s and their original founder, Jack Bogle, is one of the Slack Heroes.

November 2022 – End of Month Update

Slack Investor is now back IN for Australian index shares, UK Index shares and UK Index shares.

Last month’s update describes why I feel glad that my 20-yr index timing experiment is coming to an end in 2024. The frustrating moving out … then quickly back in to my Index funds is getting tiresome. I am likely to become just a “buy and hold” investor for my small portfolio of Index funds.

This month, all markets found there were “Reasons to be Cheerful”. There were positive movements all round. The ASX 200 +6.1%, the FTSE 100 +3.3% and the S&P 500 +5.4%.

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).

Finding Value … and October 2022 – End of Month Update

In amongst the general carnage of the market, Slack Investor has been doing a little buying. An opportunity came up with an existing holding. Dicker Data (DDR). DDR is an Australian-based technology hardware, software and cloud distributor.

From time to time, a company will go to institutions and shareholders to raise a bit of working capital using a Share Purchase Plan (SPP). Dicker Data (DDR) needed to expand its warehouse facilities. Fair enough – but does Slack Investor want to part with more cash to invest in this company? Lets take a fresh look using the excellent Market Screener Financials Page. The Slack “basics” of a high return on equity (38.7% in 2022) and projected growth – on top of an established period of growth – are still intact – Tick

DDR – Historical (Black)and analyst projected income growth (grey) till 2024 – Market Screener

The price of DDR has been generally “beaten up” in the last 6 months as interest rates have risen and growth stocks have suffered. There are probably some more tough times ahead … but Slack Investor likes to take the “long view”. This business has a long term growth strategy and will probably persevere despite current headwinds – Tick.

DDR – Analyst projected PE ratio till 2024 – Market Screener

The current DDR Price/Earnings ratio is 22.9 – below recent values and projected to reduce further as income increases. – Tick.

Although analyst predictions can be wrong, on balance, the miserly Slack Investor was happy to part with a few dollars in this Share Purchase Plan as he could find some value in this business. There is every prospect that the DDR share price will increase in the next few years.

Finding Index value using CAPE

As with individual companies, the whole share market will oscillate between overvalued and undervalued. Slack Investor has written about the Cyclically Adjusted Price to Earnings ratios (CAPE) which use ten-year average inflation-adjusted earnings to take out some of some of the volatility of annual earnings. By plotting this CAPE over a period of time, we can look at how the whole sharemarket is currently valued in terms of historical data.

Historic CAPE ratios for ASX 200 – From 1982 to September 2022

Historic CAPE ratios for FTSE 100 – From 1982 to September 2022

Historic CAPE ratios for S&P 500 – From 1982 to September 2022

From the above, The ASX 200 (7% below av.) and the FTSE 100 (13% below av.) are “On Special” at the moment as their CAPE values are below their long-term averages. Even the S&P500, after a long 2-yr period of being “Over valued”, is now getting close to being “Fair valued”.

October 2022 – End of Month Update

Slack Investor remains IN for Australian index shares though it is still on watch after breaching its stop loss at the end of September 2022.

My last post described how I had left the UK and US Index in the middle of October 2022. I am now back IN to the US Index – and, for the moment, OUT of the UK Index. Although, I am keeping a weekly watch on the FTSE 100 in case there is a signal to return to the market.

This month illustrates why I feel glad that my 20-yr index timing experiment is coming to an end in 2024. After exiting the US and UK markets only 2 weeks ago, there has been a rally in both the US Index S&P 500 and (to a lesser extent) the FTSE 100. The momentum has been sufficient for Slack Investor to be “whip-sawed” back into the US Index on a weekly buy signal – I am starting to get “really over” this timing the market experiment.

For the experiment, Slack Investor uses a trend following (or momentum) system called the Directional Movement Index. The buy signal shows itself as a downward dip in the ADX (grey line) of the lower panel below. There are many ways of setting up this system. Slack Investor likes the “smoothing” that is enabled by a system that looks back over the previous 11 periods – but the complexities are best left for the Resources page.

*S&P 500 Weekly chart showing* a BUY signal on the Directional movement Index *weekly chart. The weekly price ranges are at the top and Average Directional Movement Index (ADX) patterns below – From* Incredible Charts

This month, there are positive movements all round. The ASX 200 +6.0%, the FTSE 100 +1.6% and the S&P 500 +8.0%.

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).