Peter Thornhill 2017 #2

The stockmarket is like going to the races everyday .
Sussing out nta,s and pe ratios like a dectective.
Unfortunatly my wife will not touch the share market at all.

i was down 500 dollars on qbe during the gfc , she saw the red numbers on the screen, few days later all sold and haven't been back.

We have been quite successful with property and she just likes all moneys into the offset.

My understanding is we would need to earn a couple of points higher than our interest rate to make the stockmarket a better investment. But im probably missing something.

I need something compelling , so i can even start a conversation about getting involved in the market again.

 

No it's not. Well at least it certainly doesn't have to be.

Read this thread and others here

 

Welcome - Motivated Money

 

Iggster - Be careful not to confuse economic performance with stock market returns. The correlation is very poor. For example, I mentioned the terrific long run performance of South African stocks (1900-2012) with real annualised USD returns of over 6% per year (better than the US), yet the South African economy has performed very poorly over the last century or so with real per capita GDP growth of around 1.1% (compared to around 1.7% and 1.8% for Australia and the US respectively). The inverse of this is also very obvious. Just look at China as the best example. Between 1988-2012, the real per capita GDP growth was an astonishing 9.5%. Common sense would mean that is great for stocks - but no, investing in China has been horrific with annualised returns worse than -5% in that time period.

There are a couple of reasons for this. Firstly, in a booming economy there tends to be excess capital that pours into the system. This can result in very poor capital allocation decisions and huge competition. The second reason is that a strong economy often means people assume returns will be strong so bid up levels to very high valuations which depress future returns.

The phenomena is not just restricted to countries. It is the same with sectors. Many fast growth sectors have turned out to be terrible investments such as radio stocks in the 1920s, airlines through most of the 20th century, and, of course, internet stocks in the late 1990s. At the opposite end of the spectrum - do you know the best performing stock in the S&P 500 between 1957-2012? Answer is Philip Morris. This is despite nearly half the population being smokers in the 1950s yet under 20% being smokers in 2012. Philip Morris, though, has had some huge advantages which have given it annualised returns of around 20% in that time period. Basically no new competition (try getting regulatory approval for a new tobacco company), a product that hasn't changed (they haven't had to invest in R&D), huge pricing power, and, due to frequent negative sentiment in the industry, often relatively low valuations. With these advantages, basically all the cash they've generated have gone straight back to shareholders through either dividends or share buybacks.

ps: I don't want this to become a conversation about the ethics of investing in tobacco (or other sin sectors), I just wanted to highlight the point about low growth sectors can make good investments if the underlying investment displays the right characteristics.

 

Agree with the above posters. Long story short, you can become wealthy on shares. While you can gamble and speculate and perhaps make money quickly (or lose it!), another way to view it could be as a marathon, not a sprint. Be in it for the long term, buy quality, be extremely hesitant in selling, because over time, share prices tend to go up, dividends tend to go up.

Come to the event in my signature with your wife, because I think you'll both get a lot out of it. @virgo organised this event, because she sees the value of the education, and I'm helping her out.
I have to say, completely wholeheartedly, that Peter Thornhill is a brilliant speaker. The usual price for the course is $410 at Sydney Uni Continuing Education, and if you miss this event in June you might need to pay full price if you ever want to attend.

Btw I paid full price back in February I thought it was worth every cent... which is why I want to spread the message.

I also have the facebook group - "Peter Thornhill share investing enthusiasts". Peter himself also sometimes puts his 2 cents in there.

 

I can't help but think that reversion to the mean plays out in most sharemarkets.

Australia is currently experiencing its lost decade as the US did from 2000 onward. Hence those who have been progressively adding to ASX over recent years may be pleased with the outcome as reversion to the mean does its thing.

Out of all valuation metrics I think CAPE has the most substance. The following CAPE forecasts from these exceptional researchers at Star Capital are well worth a look. Pay particular attention to Australia vs US long term forecasts. This would suggest that the ASX provides better value now:
Shiller CAPE Stock Market Expectations | StarCapital AG

Global Stock Market Valuation Ratios (Shiller PE, CAPE, PB...)

Although forecasts are just that I do think this data is of some use in helping one keep a level head by not getting caught up in herd mentality.

Take note that my earlier posts on intended buying are that of retirees having reached our income goals. We have the luxury of when to take on more risk if any. Accumulators however must continue to invest as sitting on the sidelines trying to time the market may see them missing the boat! DCA although appearing too simple and easy to dismiss as boring is a powerful tool provided one sticks with it in good times AND BAD.

Note that nowadays I'm an investor in "markets" not direct stocks. Direct stock investors can often find something of value anywhere at any time. It's just not something I want to do anymore.

 

Some food for thought and discussion with your wife @magpieseason -

Why Property is Better Than Shares

Why Shares are Better Than Property


Both have their role, game changes in this lending market however.

 

A reminder that all this deep discussion by us more nerdy types is not meant to detract from the simplicity of it all.

Here are a couple of comments by Peter T from the Thornhill Approach Facebook page setup by @Gockie:

If interested you can find this group by searching "Peter Thornhill share investing enthusiasts" on Facebook.

But please if you join no silly questions like "Peter - LIC xyz is trading at 52 week highs, should I buy it or not"? You'll unlikely get a responce from Peter (or from me either) to senseless questions like these.

 

Fantastic post

 

Ta... @austing... and to all PC'ers... i'm not trying to detract from PC at all, but sometimes it's easier to digest the LIC and Thornhill content "Facebook style" rather than trying to read and follow a 1000 post thread from scratch.
With facebook it's easier to follow the specific details of these conversations.

Here in these massive threads it all gets thrown together nearly free form and unstructured.


Ps. Not to take anything away... PC is great. But for these shares topics it's hard to jump into the threads for a newbie

The group was started as something just for my friends and I but then we opened it up...
Added bonus... the man himself sometimes posts...

 

Good points Mike.

In addition to the points you have raised
One of the issues really is the nature of the capital markets in many countries, historically the Anglosphere is where you want to be, with a couple of outliers like Sweden. Largely, in these countries the very best ideas, then businesses reach the public market.

Germany for example has tremendous businesses that remain private for centuries. These are some of the very best mid-small cap opportunities anywhere. The way German family controlling interests have maintained control over generations via trusts and foundations and taken a very long term, custodial view of ownership means they never make it to the bourse.

Then we look at a typical emerging market bourse. Some utilities, materials, some local banks. Who is going to best capture the return from the the economic growth of these countries for shareholders? This rubbish or the global developed multinationals? I know what the record shows. So if indexing you need at least some feel for what exposure to a given foreign market will actually get you, and think about what's actually behind the screen.

Thanks for raising PM as well....a wonderful example of the disconnect between 1st level thought and 2nd level reality!

 

Agree totally about emerging markets. I'm sticking to Developed International. A successful emerging market with a sound regulatory environment will likely eventually become a constituent of the developed market index. Hence I'm happy to wait till then when I know there's more chance of that market "delivering" rather than "promising"!

 

Hi @Gockie.

My post wasn't meant to suggest anything other than to remind others of the simplicity of it all. I wasn't even thinking along the lines of PC vs Facebook. If others want to hear directly from PT himself then they know where to go now.

 

The Facebook page with Peter actually responding is great.
Seems Pink Pantha @austing has a full time gig responding on here and there, I always thought Austing was Peter, got that wrong.

 

I should point out that I don't agree 100% with everything PT says about investing in case others think I've fallen victim to guru syndrome.

But like PT I'm a huge fan of dividend investing. However given that none of us know the future I prefer to incorporate additional risk management. Investing exactly the way PT does would impact my SANF.

Given my reasonable knowledge of investing for dividends etc what I learn more so from PT nowadays is lessons in life and emotional intelligence. Being younger than PT and given my behavioural shortcomings not just in investing but life in general those lessons alone are priceless.

 

Totally agree, to many people fall victim to guru syndrome and can loose a lot of money. Read all that you can, question everything till you're comfortable with your choices. And remember lic's may not play out like you think, so have a basic plan so when **** hits the fan, so you don't end up on a current affair blaming Peter thornhill and Austing for loosing your money.

 

Hey Gockie, are you completely out of property?

 

Just thinking......I assume the "never sell" rule doesn't stop me from rebalancing? What about a scenario where I am entering retirement and want more shorter term security, thereby increasing bond allocation?

 

@ErYan

Bonds and on a PT thread..you're in for it now

 

I'm sure he is just referring to whatever company now owns Pacific Brands.