S&P 500 | Slack Investor

December 2018 – End of Month Update … and Moving Day

What a month! … In amongst the Christmas and New Year Celebrations, Slack Investor has been forced to get OFF the couch!

Slack Investor is on the SELL and is leaving the US, UK Index Funds – for now. He remains tentatively IN for Australian index shares – ASX 200.

Trumpishness and Brexit, future US rate rises, and stock valuations in the US add to the uncertainty and wild fluctuations. The FTSE 100 is down 3.6% and S&P 500 is down a whopping 9.2% for the month. Time to sit things out and wait for the next uptrend in the markets. It is always sad to see the end of a long successful trade and the run in the US S&P 500 has yielded 153.8% over 9 1/2 years. In Australia … we would call this a great innings and clap the US Index off the field … A fantastic Bull Run!

My efforts with the FTSE 100 are far less spectacular with an overall loss of 7.4% – However, I am glad to be out of that market with all of the Brexit confusion.

The Australian ASX 200 had a reprieve after passing through its stop loss last month, but it is still hanging in there. As the share price is still below its stop loss, I was ready to let it go this month. However, a “Bullish” pattern emerged on the weekly chart.

The Falling Wedge

The “Falling Wedge” is a classic part of Technical analysis … it can be “Bullish” (Reversing the downtrend) or “Bearish” (Continuing the downtrend)- depending on what happens with a breakout of this pattern.

Weekly chart of ASX 200 – A Falling Wedge pattern is formed by drawing a trend line along the top of 2-3 of the descending high points and a support line connecting 2-3 of the low points.

The weekly chart above shows a distinct breakout from the “falling wedge” pattern (Labelled 5646). This MAY indicate a reversal of the downtrend. The ASX 200 Index is now on a weekly watch and if the share price falls back into the “wedge” at the end of the week, I will put out a post and exit the stock.

The recent price plunges have made for a dismal calendar year 2018 for stocks. Without including dividends, ASX 200 -6.9%; FTSE 100 -12.5%; and the S&P 500 -6.2%.

I naturally hope for a change in trends and wish a prosperous New Year to you all.

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index). I will update my portfolio holdings page in the next few days.

Optimism

Slack Investor has always been on the “glass half full” side of life – but acknowledges the decided benefits of pessimism.

The nice part about being a pessimist is that you are constantly being either proven right or pleasantly surprised.
George F. Will – from source

Slack Investor would much rather hold shares than not … and be involved with companies that are growing and part of the economy than using more passive investments such as cash. However, he must keep his eyes open occasionally – and keep a watch on major market trends.

ASX200 Weekly chart – From incrediblecharts.com

Let’s firstly have a look at the markets that Slack Investor is involved in. The ASX200, FTSE100 and S&P500 are all in a distinctive downtrend. Typical is the ASX200 weekly chart shown above. This downtrend may go further but Slack Investor is seeing some signs for optimism – At least in the Australian market.

There is a high level of uncertainty in global markets at present. Europe has Brexit and Italy. The US has investigations into Donald Trump’s election campaign. China has the threat of a trade war with the US. But my sense is that the market has become risk averse rather than fearful. There is no sign of panic selling as yet. But investors are clearly on the defensive and prepared to sell off vulnerable stocks.
Colin Twiggs – Trading Diary

But, all is not lost … Despite large amounts of emotion in the market. The fundamentals of emerging economies are still good. Vanguard estimates that a recession in 2019 is not likely – that the more likely scenario is a slowdown in growth, led by the U.S. and China.

Shane Oliver, head of investment strategy at AMP Capital, said “history tells us” a major bear market requires a recession in the U.S., but that is not happening. He advises that U.S. monetary conditions are “far from tight,” with fiscal stimulus still in play and no signs of excessive market conditions that normally precede a recession.

Marcus Padley is also on on the side of the optimists and concludes that the current situation in the ASX is more of an opportunity than a disaster. He notes that average correction for Australian markets is 13.72% and takes 109 days. The current correction has been 13.2% and it has taken 59 days -Brutal! On that basis, we have already completed an average correction in half the usual time. These corrections are never fun and test even the most strident of investor. But Slack Investor IS an investor much more than he is a trader.

Slack Investor has already had a hard look at his portfolio … and said goodbye to some … and is hanging on to most – as he thinks that most of his individual shares represent reasonable value at current prices. I’m sitting tight for now with a bit of cash in the bank should things turn around, Sadly, more decisions will have to be made at the end of the month – but for now, I am grateful for the good things in life … Happy Christmas to you all.

November 2018 – End of Month Update … and Hayne … You my Man!

Slack Investor remains IN for US, UK Index Funds. The jury is still out for Australian index shares.

Nervousness has crept into all markets as uncertainty on world trade (Thanks Donald!), Brexit, future US rate rises, and stock valuations prevail. The FTSE 100 is down 2.1% and S&P 500 is up 1.8% for the month.

The Australian ASX 200 is down a further 2.8% to 5667 and has slipped below its designated monthly stop loss of 5724. This is usually an automatic sell for the ASX 200 index. However, Slack Investor is hesitant to trade against momentum and the orange buffoon (President Trump) and President Xi from China have just come to a “Partial Truce” on their trade war for 90 days at the G20 summit. This “temporary certainty” will be good for world stocks and a bounce in most stock markets will probably happen on Monday 3 December – ASX 200 you have had a temporary reprieve!

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

Hayne Train Eases into the Station

Slack Investor Hero Royal Commisioner Kenneth Hayne – modified from SMH

Established Slack Investor Hero Royal Commissioner Kenneth Hayne wraps up his enquiry into the finance sector after 8 grueling months and 770 000 documents. and concludes his epic and momentous gathering of evidence. His interim report has suggested big changes to a flabby and rorting finance industry.

Through persistent effort, a new Slack Investor rolled gold Hero has also emerged. Senior counsel assisting the commission, Rowena Orr QC has covered herself with glory from the Royal Commission fray (With a special mention to her alternate senior counsel Michael Hodge, QC).

Through persistent effort and an understated forensic style , Ms Orr has been responsible for grilling a parade of witnesses to reveal a shabby record of commissions, bribery, unfair payments, improper board oversight and rorts that have brought shame to the Australian Finance Industry.

… marshalling her facts patiently, leaving people in the witness box with nowhere to run from her logic, where they don’t know they’ve been filleted until they leave the room – from The Guardian

For example, When Ms Orr cross interviewed the Chief risk officer of ANZ’s digital and wealth arms, Kylie Rixon, about the raft of bad advice given to customers by bank financial advisors.

“One in every 20 pieces of advice given to customers failed to meet the requirement that the advice was likely to be in the best interest of the client?” Ms Orr asked.

“For the sample selected, yes that’s correct,” Ms Rixon said.

Later, Ms Orr asked: “What’s sampled in an audit is meant to be representative of what’s happening across the business?”

“Yes, that’s true,” Ms Rixon replied. – from abc News

Power to your Ms Orr. With hearings finalized, Commissioner Hayne and his team withdraw temporarily from the limelight to write their report. Slack Investor looks forward to their recommendations.

October 2018 – End of Month Update … and corrections

Slack Investor remains IN for US, UK and Australian index shares.

What a splash in the face this month was – with many rushing for the exits. All Slack Investor watched markets took the cold bath with big price drops all round. The ASX 200 index down 6.1%, the FTSE 100 -5.1% and S&P 500 -6.9%. However, this sudden downturn didn’t breach any of Slack Investor stop losses and he remains idle for another month on his index stocks.

It is a different story on his individual stocks though, as many took a sharp price dive and the portfolio needs a bit of re-assessment. I trade individual stocks in a different way to the index stocks and it isn’t as rules-based.

Each individual stock has the advantage that it can be assessed as a business. A breach of the monthly stop loss for individual stocks means that I have to look at each company and make a decision on whether to keep – or to ditch! The first thing I do is take a close look at the business (current price, PE, yield, future earnings, return on equity). I then ask myself ” would I buy the share at this price? If so, I then look at the current momentum of the stock and, if it is still heading south, then I think that there is something going on that I don’t understand – and try to sell at the next opportunity.

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

Department of Corrections – Part 2

The Trumpkin might like to lay off blame for the latest slump in US Stocks to the Federal Bank – but, in the same way that his tax cuts were good for the US economy, his talking up of a trade war and tariffs with China is causing concern in the US market – From News.com.au

The newspapers are full of scary stories about the stock market when prices take a sharp dip. Corrections are normal and just part of share trading – the market ramps up a little fast due to “excitement” and then quickly falls as people “panic sell”. Slack Investor discussed corrections earlier this year and doesn’t like to get involved with these short term trends. However, I will act if I must.

It is reassuring to listen to experienced investors such as Colin Twiggs, of Incredible Charts fame, who reflects on this most recent correction.

Truth is, there is no single reason that could justify the dramatic market falls. … Market sentiment has simply shifted. The scale has tipped and more investors are taking profits than new money coming into the market. When that happens, prices fall. And falling prices become a self-fulfilling prophecy, scaring off new investors and panicking investors with a short-term outlook. – The wisdom of Colin Twiggs

Chart showing the regular dips in stock market price over the past 5 years – ASX 200 and MSCI Wolrld index – Despite corrections, the trend is up. This is still a bull market! – from Shane Oliver, Switzer Daily

Slack Investor does not have a short term outlook. The share trading art is to stay invested in a stock when there is a relatively short-term correction – and to get out when there are more serious issues with the economy. Shane Oliver again

Corrections in the order of 5-15% are normal; in the absence of recession, a deep bear market is unlikely – From Shane Oliver AMP Capital

OK then … I’m heading back to the couch … but not before taking the opportunity to do a full review of my individual portfolio stocks this month. It might free up some capital to get into some bargains that the correction has revealed.

September 2018 – End of Month Update … and 2018 SPIVA Results

Slack Investor remains IN for US, UK and Australian index shares.

Justice Kenneth Madison Hayne reflects on the “Inexcusable greed and dishonesty” shown by segments of the finance industry – Image modified from the Brisbane Times

September heralds a change of season and there is some nervousness creeping into the Australian market (ASX 200 index -1.8%) as the Banking sector continues reeling from the interim report on the finance sector by Royal Commissioner and Slack Investor Hero – Kenneth Hayne . Wall St is steady (S&P 500 +0.4%) and the FTSE 100 has bounced back a little (+1.0%). However, the Slack Investor stop losses are not breached and decisions are put away till the end of October.

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

SPIVA … What’s the score?

Image result for roy and hg festival of the boot — Peerless sporting commentators Roy and HG – from The Roar

It is the end of season for winter football codes in Australia. Slack Investor welcomes back Roy Slaven and HG Nelson for brightening up his weekend and helping him keep score with their commentary on the “Festival of the Boot” – This is a distraction, but you can get a taste of the genius of Roy and HG here, here or, for a great Australian Bradbury moment here. For the “Festival of the Boot” here. It might be a sign of my perpetual immaturity, but I just don’t tire of these gentlemen.

One of the scorekeepers in the financial world are a group of boffins known as SPIVA (S&P Indices Versus Active). For 16 years they have been collecting world financial data and comparing actively managed funds to passive (Index) Funds – Slack Investor has looked at their findings before.

Their 2018 June report continues on the theme where (for a 5-yr period), almost 69% of Australian active funds failed to perform better than index funds. In the US, actively managed funds perform even worse with 84.23% of funds under performing the index over 5 years.

Over 5-years, 68.69% of AUSTRALIAN EQUITY FUNDS UNDER PERFORMED THE S&P/ASX 200 (Index ASX 200) – as of Jun 30, 2018 – From SPIVA Report 2018

The data reveals that there are some funds that beat the index, but they tend to invest in small to medium sized companies. As Roy and HG would say … You would have to be in the “Dream Room” to ignore the power of the SPIVA message.

August 2018 – End of Month Update … and the recent advantage of being Slack

Slack Investor remains IN for US, UK and Australian index shares.

Power to the US – It might be bewildering from afar (and probably from within!) – but Wall St booms again with a 3.0% monthly rise. A small rise in the Australian Index (+0.6%), and the UK Index sinks with a -4.1% fall. All Markets are staying clear of their designated stop loss limits – So Slack Investor puts away any Index decisions for another month.

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

A recent bit of Beneficial Slackness

Slack Investor as long been a fan of Rudyard Kipling’s poem “If” and it is worth a read in full. But in particular the stanza

“... If you can meet with Triumph and Disaster

And treat those two impostors just the same; … ”

– Rudyard Kipling -1910 – Source

I like to think Slack Investor is in tune with the ebbs and flows of fortune – and he was on the good side of a stroke of luck this past week. In my last monthly update July 2018 I wrote of my worry with my holding of Altium (ALU) shares. I feared that the declining share price in July might indicate that there was bad news ahead at their reporting date. The upshot of the post was that I would leave this sort of stuff to the day traders and continue with the Slack plan of only making sell decisions at the end of the month.

The imposter of trumph prevailed on this occasion with a rise of ALU share price of over 30% on the day of their positive results announcement (FY18 Revenue up 26%).

Altium Daily share chart at 02/09/2018 – From Incredible Charts

With an estimated 2019 P/E ratio of 53.4, there is no doubt that the stock is relatively expensive. But, it is a growth stock with some very good tail winds. With the “internet of things” there will be more and more household appliances connected to the internet and to each another.

The current Australian household has an average of 14 connected devices under the one roof – this is expected to grow to over 30 devices by the year 2021. – from Andrew Mitchell – Livewire

Altium sells design software for printed circuit boards (PCB) which appear in all of these devices. ALU has been increasing its market share for PCB design software from 18% to 22% in this past year – and aims for 30% by 2025. These are good omens and I am happy to be an owner of ALU. To risk one more quote from “If”

If you can keep your head when all about you

    Are losing theirs and blaming it on you,

If you can trust yourself when all men doubt you,

    But make allowance for their doubting too;

– Rudyard Kipling -1910 – Source

Yes Mr Kipling I will keep my head – and make allowance in a Slack way – by adjusting my monthly stop loss upwards for ALU to $24.85.

July 2018 – End of Month Update … and Upcoming Reporting Season

Slack Investor remains IN for US, UK and Australian index shares.

It has been a good start to the financial year in all followed markets. Rises in the Australian Index (+1.4%), the UK Index (+1.5%), and the US index up a remarkable 3.6%. Slack Investor is cautious – but not afraid. Bull Markets are where the investor makes money. Stop losses are the insurance that enables sleep at night.

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

Reporting season for end of FY 2018

Related image — Robert Hays as Ted Striker apprehensive about landing the plane in Flying High (Airplane!) gif from source – may be subject to copyright.

Despite the general market indicies doing well, July 2018 has seen some of the big Slack Portfolio achievers in the last financial year lose a bit of their froth. Although not quite as nervous as Ted Striker, Slack Investor is a “on alert” about the impending reporting season. The animated gif above is from the classic 1980 film Airplane (or Flying High) – and the full movie is most worthy of a viewing when the tension of the season becomes too great.

Australian companies are obliged to report on their earnings at least twice a year within two months of putting a line under their balance sheet. As 30 June marks the end of the financial year, the main reporting season takes place during August when most companies release their full-year results to the market. The accountants have been busy collating the figures and the management team has crunched the numbers and are ready to give updates on their company earnings and project some earnings outlooks. The CEO may offer his take on any changes to the economic environment at the shareholder meeting.

The day of this report release is usually the most momentous …

51 per cent of the two hundred and sixty major results (Last year) saw their share prices move more than 3 per cent on the day of their results. 35 per cent moved more than 5 per cent and 11 per cent moved by 10 per cent. – Marcus Padley in this report

There are strict rules on keeping this financial market sensitive information “in house” till the date that the results are announced. This way, everybody gets this information at the same time. Sounds fair … but sometimes information inadvertently leaks out and a decline in the share price is noticed before the actual reporting date … or, it might just be that after a sharp rise in price, the short term traders are just taking profits. There are a lot of possibilities – and it appears that something is going on with one of my major holdings Altium (ALU). There is a distinct decline in price since financial year 2019 started.

Daily chart Altium – from Incredible Charts

Regardless, I will leave action to the short-term traders, as at the end of July, ALU finished above my monthly stop loss ($19.16). Slack Investor has a plan and remains above the daily market murk and has an approach that has got him through so far. Let the market do what it must do – and if, at the end of the month, the stock price is below the monthly stop loss – then sell.

In Flying High (Airplane!), Ted Striker had a pretty good result. He overcame his fear of flying, landed the plane safely and won back the affections of his ex-girlfriend. Slack Investor is not aiming for this Hollywood finish but I have overcome my fear of rapid price declines – they are just part of investing in growth stocks.

I am diversified, have a plan and have stop losses for protection. (OK … slightly flushed with the exhilaration of reporting season!)

June 2018 – End of Month Update … and end of Financial Year Review

Slack Investor remains IN for US, UK and Australian index shares.

The Australian Index (+3.0%) has had a good month. While the UK Index (-0.5%) and the US index (+0.5%) have ended the Australian Financial Year (FY) in a steady fashion.

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

Goodbye FY 2018

Slack Investor loves a review … and the end of the financial year is always a good time for introspection. Overall, it has been a good year to take some calculated risk and be involved in the satisfying world of investing in companies through the share market. Safe money in a bank is returning under 3% per year.

ASX 200 – Despite a mediocre performance by the Australian Banks (which make up a large porrtion of the ASX 200), You would have to say it was a good year for the Australian Index (+8.3%). If you take into account dividends, the ASX200 accumulation index increased a bumper 12.7%.

Weekly Chart FY18 – From Incredible Charts

FTSE 100 – It was a bit of a struggle for the UK Index this year (+4.4%) with a lack of clarity on what Brexit will mean for the UK economy. Slack Investor left the index briefly as it plunged below a stop loss at the end of March, but rising momentum in April got me back in.

S&P 500 – The US Index was heading for a monster year with President Trump reducing taxes … and then he started talking about new trade tariffs There were also concerns about high valuations. But, overall, +11.8% is a very fine return in the current low interest environment for cash.

Financial Year Slack Investor Resolution – A recent ASIC report found that nine out of ten self-managed super funds recieve poor financial advice from their advisors … So start educating yourself in financial matters … become your own advisor!

May 2018 – End of Month Update … and the Productivity Commission creates new Hero

Slack Investor remains IN for US, UK and Australian index shares.

The Australian Index (+0.5%) has been a bit of a laggard with the banks still generating bad news and signs of the Australian property market starting to slow. The UK Index (+2.3%) and the US index (+2.2%) have continued to have solid growth.

The good news on the Australian Index (ASX 200) is the opportunity for Slack Investor to crinch up his stop loss from 5629 to 5724. A small movement upwards, but I always like doing this as it means that the Index has now set a new “higher low” The explanation for this technical stuff can be found here. A new “low” (or minimum) has been established at 5724 and this is my new stop loss on the monthly chart

Monthly chart for the ASX 200 – From Incredible Charts

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

Productivity Commission gives the Super Industry a bit of a “Ginger Up”

I have been a fan of Australia’s Productivity Commission (PC) ever since I read their 2010 report into the sorry state of Gambling in Australia. The report is full of thought provoking and shameful material like- Australia is the world leader in number of poker (slot) machines per capita and Australia leads the world in gambling losses per person – but I digress…

The “Ginger Up” refers to an ancient horse racing practice that I wont elaborate on here – but it does make me squirm! The PC have just delivered their draft report on the state of Superannuation in Australia. God bless them .. they have put in “black and white” the rorts that exist in Australia’s good but not great superannuation system – and they have created a new Slack Investor hero.

The lead author in the report is the Productivity Commission deputy chair Karen Chester who has delighted Slack Investor with the following refreshing quote. Ms Chester’s attitude was like a snowball in the face after the my last depressing post on the mostly self interested world of banks and financial advisers.

Karen Chester – Photo from Quentin Jones

“the only thing I care about is member outcomes” from source

The Productivity Commission identifies two structural problems with Australia’s super model. The unintended creation of multiple accounts and the entrenched underperformance of some of the super funds that are allocated to the employee.

From Productivity Commission Superannuation report.

“Members are really lost in the weeds of product proliferation with 40,000 products. They’re bamboozled by poor disclosure and … poor advice.” Karen Chester from source

I am hoping that Ms Chester will get the final report out with haste. Slack Investor loves the smell of the draft report. The Federal Government would do well to take up her recommendations. The info graphic above puts some real world figures on what might happen if the PC recommended changes to Australia’s superannuation model are adopted.

It is a promising sign that the current Finance minister seems to recognize the problem.

“Super has become worse than a honey pot; it’s a trough.” – Financial Services Minister Kelly O’Dwyer source

Slack investor will look at the “trough” and PC draft recommendations in the next post. There are things you can do right now to protect your super.

April 2018 – End of Month Update … and the Hayne Train

Slack Investor remains IN for US, UK and Australian index shares.

After all the doom in March, the Australian Index (+3.9%) has had a great April. The UK Index (+3.4% since our buy IN in the middle of the month) has also bounced back. The US index (+0.3%) has been steady – but Slack Investor is still on high alert – considering high company valuations in the US at the moment.

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

The Hayne Train – Financial Royal Commission

Slack Investor is always looking for a new hero and it just might be the Honourable Kenneth Madison Hayne AC QC.

The driver of the Hayne Train and new Slack Investor Hero Hon. Kenneth Hayne. – from source

The driver of the Hayne Train is in charge of the new Royal Commission into Australian Financial Services. Commissioner Hayne is very ably assisted by a crack team of lawyers. Kenneth Hayne seems appalled by some of the practices in banking and the financial industry that his commission is exposing. Slack Investor also has a very poor opinion of the bulk of the financial advice industry and is heartened by recent goings on at the Royal Commission. Perhaps the state of financial advice in Australia is best summed up by the seemingly toothless industry watchdog ASIC (Australian Securities & Investments Commission) in a report in January 2018.

ASIC found that in 75% of the advice files reviewed – the advisers did not demonstrate compliance with the duty to act in the best interests of their clients – from ASIC Report 18-019MR 24 January 2018

Wow! … this is a real scandal! Our Australian government regulator that has oversight for financial services and consumer credit has found that three out of four people who go to see a financial advisor receive advice that is not in their best interests!!!

The ASIC report received relatively little press on its release in January and it has taken Kenneth Hayne’s team to forensically go through some astoundingly bad practices of banks and financial advisors for this issue to finally gain some traction with our government, press, and the Australian public – Things have to change!

Power to you Kenneth – you Slack Investor Official Hero (Calling it Early!) … keep exposing and I will present some more of your most excellent initial findings in the next post.