Monthly Archives: July 2012

Does the Coppock indicator suggest a bull market?

The Coppock indicator is very useful for investors who are looking for the start of a new bull market.

The monthly ASX200 chart below shows the Coppock indicator in the sub-chart, where the entry signal is given by the change in histogram colour to blue. These are shown by the red arrows. The charts shows how useful this indicator was in picking the start of the 2003 bull market and also the start of the bull market from March 2009 (which was really a bear market rally).

From the above chart, the Coppock indicator is also giving a bull market signal now (at July 20). We do of course need to wait until month’s end to confirm this signal. The question now is if this early indication is a real signal or a false signal? Although Coppock is an excellent indicator it does on occasion give false signals. I have… Continue reading

Risk and Return

Despite our strong linkage to China, Australian investors are still very much influenced by the world economy.  With the economic situation in Europe in a desperate state, all hope has been that American growth will solve the problems of the world economy.  Unfortunately this is very unlikely.  Last night US Fed chairman Ben Bernanke publicly announced that unless Washington came to grips with the fiscal dilemmas of taxes and expenditure then in the future the US may “not be able to pay its bills”.

The USD and US treasury bonds are seen as safe havens.   But investor attitudes to the security of America may change unless congress can address the problem and because of the US elections changes are unlikely until early next year. 

Investors are now very risk adverse with safely of capital now imperative.  It was interesting that Germany has now… Continue reading

How competent are fund managers?

We often hear that the fund managers have a poor performance but just how bad is their performance? 

The first table is from Money magazine of July 2012.  It shows the data for the Top 5 Retail Australian share funds by 5 year performance.  These figures are net of fees and represent a return before tax. 

  • Fund name
5 year return Size Star rating
Clime Australian Value

4.66

$18m

*****

Zurich Inv Equity Income

    0.06%

$445 m

*****

Greencape High Conviction

– 0.15% $93m

*****

Zurich Equity Income Retail

– 0.29% $7m

*****

Greencape Ws Broadcap

– 0.53%

$52m

*****

These are all rated as 5 star funds.   While these are the top performing retail Australian funds, the average annual return for these 5 funds over 5 years is 0.75%.   

But what about the Nation’s biggest funds? From… Continue reading

Measuring Investment Performance

 Do investors understand the need to measure investment performance?

There is no doubt that investors who do not measure their performance regularly and objectively are often deluded into thinking that their performance is good while in truth it is not adequate to meet long term retirement needs.

I have been investing for many years but only really started to critically measure my investment performance about 12 years ago and it is fair to say that from that time my investment performance really improved and continues to improve.

How does an investor measure performance?
The obvious benchmark for an Australian investor who invests mainly in stocks is to use the index and I use the ASX200. That’s fine but there is a danger if you only use the index as a base line. For example in years such as 2008 the index lost some 40% of… Continue reading

Deflation and the secular bear market.

We are now in a secular bear market which started in 2000 in the US but here in Australia it started in 2007. We are apparently entering a deflationary phase driven mainly by sovereign and corporate debt, the consequences of which are likely to be higher unemployment, low interest rates, low growth and low commodity prices.  These are all ingredients for a world recession.

A secular bear market will be protracted by the effects of deflation and low economic growth.    Markets will be driven lower by falling corporate profits. Returns from equities for perhaps the next decade are likely to be very poor.

Australian investors are much better off than their American counterparts.  The US investor is faced with zero bank interest rates and Treasury bond rates that are less than the rate of inflation has no alternative but to invest in equities.  … Continue reading

What US recovery?

We continue to hear about the US recovery and how it is going to lead the world out of economic recession.  I am sorry but I just cannot accept this.  

The US investor who is faced with zero bank interest rates and Treasury bond rates that are significantly less than the rate of inflation has no alternative but to invest in equities.  As a result any news that is seen as slightly positive by the US investor provides a stimulus to the US markets. 

The US data suggest that there is a small but significant rise in the rate of home sales.  There is no knowing how real these figures are because a large amount of  distressed real-estate now in the hands of the banks  has been withheld from the market to try to avoid depressing it even further.  To me… Continue reading

France is now the biggest problem in the EU.

After the recent French elections, Francois Hollande now has more power than any other European leader and a free hand to govern how he wishes.  

Hollande is hell-bent on social reform. He has already raised the minimum wage and has made a commitment to cut taxes, raise the top marginal tax rate to 75%, place a tax on wealth, decrease the retirement age to 60 and make it harder for employees to fire employees 

Holland has the potential to cause huge damage to France, to the EU and of course to the world economy.

With a current GDP of 0.3% and a French unemployment rate of more than 10% what is this man thinking?  The public debt now exceeds $2 trillion and the debt to GDP is now 82%.

The current deficit is 3.2% and forecast to be 4.2% next year.  Public spending at 56% of… Continue reading

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