Education Ashley Ormond (aka Owen) newsletters

As @dunno suggested attached is a few old newsletters called the Fear and Greed Report written by Ashley Ormond (Owen).
He has written several books on investing, but his free newsletter made for some fascinating reading and during the GFC had a calming effect when others were screaming that its different this time certainly saved us making major errors.
Unfortunately, I don’t have all the newsletters due to HDD fault, this is what was able to be saved.
So, if anyone knows of anyone with the original reports please post them up here.

I hope you enjoy.

 

For longer term more passive investors who are interested in varying their level of accumulation using the Fear & Greed Index this is the one of the most relevant paragraphs from memory:

 

The second part is dangerous with many people in my view, but mainly new investors.

They assume because the market has been going up for a while, it must be overvalued and better to wait for a pullback.

Market proceeds to go up 30% then pullback 10%. Because it kept going up they then start to think the pullback is bound to be a big one. And a bigger correction is needed to justify them coming back to the market, having sat on the sidelines for some time.

The longer this goes on the harder it gets to start investing again.

 

In support of investing regularly, is to view investing as you would with your super.
With your super, you have a certain amount taken out of your pay packet each week, fortnight or monthly and it gets invested, nice and simple.
No market timing and just let compounding do its magic.

 

I agree especially when it comes to new cash to invest as it becomes available. Any strategy I used call it market timing if you will is with the use of leverage. Leverage due to the risk involved is reserved for those times when “fear” is high, when risk / reward ratio is significantly greater and margin of safety higher.

I’ve never used Ashley Ormond / Owens Fear & Greed Index personally but just posted his suggestion in relation to more passive type investors to add to the conversation.

Additionally now retired I no longer use leverage for anything. But have in the past made good use of leverage during the likes of the GFC and the bear market that followed subsequent to the initial false recovery.

Our much higher cash holdings at this time has little to do with trying to time the next major market fall but is simply a result of the investing stage of life we are at ie SORR etc.

Got off track a bit but if I was to use something like the Fear & Greed Index it’s only really the “fear” aspect of interest. As an accumulator that could be a signal to take advantage of some leverage. For a retiree in the SORR zone that could be a signal to invest some of the Cash being held to protect against such an event now that it has occured. Otherwise new Cash simply gets invested as soon as it becomes available. Simply plain old fashioned Dollar Cost Averaging.

 

An updated replication of the Fear & Greed index for the XAO


And for the US Market. (using same moving average offset and Std Dev as XAO chart)



Using MA offset and St Dev more relevant for US Market.

 

The US market is currently at a +1 St Deviation on the Fear & Growth index.

This chart shows the actual 10 year (capital only, excludes dividends) returns if you had invested in the US Market when the Standard Deviation was +1 or above (covers periods 1875 – up to 2009 which is the latest period we can calculate a forward 10 year return)


Minimum capital return 10yr CAGR -9.1%
Maximum capital return 10yr CAGR 16%
Average capital return 10yr CAGR 5%

Its also worth noting that the GFC started from approx the fair value line
In the US, not from an overvalued zone.

The strength of the F&G is in understanding where we are in the big picture, not for explicit timing.

 

The power of regularly investing is shown in below two tables.

Portfolio 1= IJR (US Small cap - US Version)
Portfolio 2= IVV (S&P 500 index - US Version)
Portfolio 3= EWA (iShares MSCI Australia ETF - US Version)

Timeframe is invest $100K from 2000 to 2010. Lost decade for US markets. Large cap in particular.




As you can see S&P500 portfolio 2 returned only 1.45%. But now let’s look at dollar cost averaging scenario where you invest $1000 per month in addition to initial $100k.




Much better return


Cheers
Oracle

 

The best thing I have ever read was the Ashley Ormonds fear and greed, in 7300 odd posts @Nodrog won me over when posting the 30 odd page newsletter outlining events from the mid 1800s to gfc. Why? Not for market timing, but more for nerves. Really set home that ‘this time it’s different’ really will cost you as a long term investor and there will be sunshine after the rain. For many it’s jargon but for some reason once I read the F&G outlining events and impact on index investing in stocks made more sense.
Also @dunno incredible work with the replication, I would love to be able to (be smart enough) do what you did there!

 

Discovered another one

 

Pretty powerful.
Conclusion says it all:

This study has shown many times over many years that 80% to 90% of fund managers fail to beat the overall market index
consistently, which is their only reason for managing equity funds in the first place. Any superior stock-picking ability that some fund
managers might have is more than wiped out by the massive fees and commissions ripped out of the pockets of ordinary Australians
who are trying to build wealth for their old age and for their families.

The net result is that ordinary investors who simply “buy the index” (by buying stocks directly, or through an ETF) can out-perform the
vast majority of active funds over the long term. In addition once investors take into account the additional taxes created by fund’s
unnecessary trading activity, and all the additional platform fees, advice fees and administration fees that fund investors may face, the
results for the vast majority of managed funds investors are even worse.

 

Unless of course you invest with Ashley Owen through Stanford Brown:

https://stanfordbrown.com.au/wp-content/uploads/2019/04/SB-June-Qtr-Review-2019.pdf

 

Thanks for posting.

Lots of very interesting insights of what goes on in a managed fund.

Couldn't find out what their fees are from their website, wouldn't be cheap.

 

Ashley Owens latest write up has some interesting historical stuff on Australian companies and share market during the Great Depression.





https://stanfordbrown.com.au/wp-content/uploads/2019/11/SB-Top-5-Nov-2019-Online.pdf

 

Very interesting especially regarding the dividend cuts! Massive

 

This is awesome. Sadly there isn’t much long term Aussie data like this around. Thanks for sharing mate.

 

Updated Fear & Greed chart.



The chart doesn't agree with all the hindsight market experts telling us that the fall was inevitable because of our overvalued market.

Market has gone from roughly average valuation to -2 Std Dev, that's approx. where the GFC finished. Difference with the GFC is it started from +2 Std Dev.

Our worst experience in Aus Market history was second leg of late 60's early 70's decline where we declined from roughly average to -4 Std Dev. To match a -4 Std Dev pricing today would require an index level of about 3,500.

We have met my definition of a bear market. Generally people are fearful that this time is different and they are scared they will lose everything, putting money into the market no longer makes sense to many that thought during good times that investing is easy and they would make a killing by buying cheap in the next down turn that they hoped for. Despite how the masses feel nothing out of the ordinary is happening in the "context" of market history.

6 Sigma (aka -6 STD Dev) that's where we need to really start worrying that this time is truly different. Until then its business as normal - follow my plan.

 

Thanks @dunno, was actually looking for my copy of the fear and greed excel file yesterday but for the hell of me cant find it.
I'm hoping you could post another copy here.
Once again thanks

 

Sorry, found it

 

Mind sharing?