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Survival of the knowledgeable.

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Super Contributor
If you want to survive the next 10 years in the markets then gear yourself around this simple fact. We are in the middle of a 20 year consolidation phase. Check out this price chart. http://i231.photobucket.com/albums/ee257/gvitali/dowchart2.jpg From the above chart one can clearly see that the DOW moves up in a 5% compounded rate band. However it moves in 20 year cycles, 20 years where the market moves sideward and 20 years where the market moves up at a 10% compounded rate. The Dow is therefore in a 20 year sideward movement until 2020 when it will reach the bottom of the 5 % compounded rate band before its starts its 10% compounded rate move to the top of the 5% compounded rate band until 2040. This is a normal boom and bust cycle. The JSE however moves in a 10% compounded rate band in tandem with the DOW's 5% compounded rate band. However the SA currency devalues at a 5% compounded rate band therefore reducing the effective JSE share market to 5% compounded in Dollar terms ( 10% share growth minus 5% currency devaluation = 5% effective share growth). If the currency becomes stable and does not depreciate the share market's growth band will reduce to 5% in tandem with the DOW. Markets move in tandem with each other so I don't see the markets moving up longterm until 2020. Market have to work out the excesses that was caused by the 20 fat years.
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Super Contributor
Firstly I think this is a load Secondly depends if you trading or investing. Thirdly you have to assume that relatively the same occurrences in the passed will continue in the future. Will the Dow still be dictating the market in the future?? it more than likely will be the Hang Seng.
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Super Contributor
Also if one selects certain companies that are offering extreme value or high growth one can get much better results that what the index offers. So i think as you say, the 'knowledgeable' is true, but one needs to know what the trends are, who's gaining and who's not, invest in the growing, propular companies that are making money, and you will be happy. you get companies that have amazing gains even when markets crash, the key is to find these.
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Super Contributor
Sure but then you are taking a big risk. You can loose everything if the company goes belly up. Big risk big returns or no returns.
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Super Contributor
That's not what I mean, one should only buy when there's a good margin of safety. I spent 5 years developing a model to select the companies in a specific way which reduces risk so that isn't a problem at all.
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Super Contributor
Your post is a good read. Taking out certain specifics one can not argue against the following: If you want to survive ... in the markets then gear yourself around this simple fact: We are in the middle of a 20 year consolidation phase (based on the DOW historic events). ... a normal boom and bust cycle. ... Markets move in tandem with each other so I don't see the markets moving up longterm ... Market have to work out the excesses that was caused by the 20 fat years. The last sentence is of great importance to investors.
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Super Contributor
Ok, that's always the best way to go, however I haven't the time to keep a hawk's eye on shares I buy. I prefer to buy top 40's, let others do the hard work. I have been in the market for 30 years and have learned the hard way, had many small companies go belly up on me. Now I deal mainly in top companies, I sleep better at night.
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Super Contributor
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Super Contributor
The companies i buy are not small companies, they are all very very solid and will not go anywhere. I dont think one needs to keep a hawk eye on long term investments if they're not the index. I think the only way to beat the index is to select the companies that are most likely to outperform, this doesnt mean small cap thats going through the roof, for example, i have shares in JPMorgan Chase (bought at a good price 2-3 years ago) and Merk (very solid global pharma company) these guys are very solid, i know what the guys will say that JPMC will go belly up soon, i want to see that though. haha... Others here is GND and RMH, and about 10 others, solid like anything and they're doing very well. not risky but not too conservative but over time it achives above 23% CAGR.
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Super Contributor
So Werner, can one assume that you don't have a "stop loss" on your RSA portfolio or individual shares as USA one probably fairly flat?
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Super Contributor
yes, RSA no stoploss at all, never needed it, not even in crisis was i worried (I trust the companies i have and have selected them so they're strong and solid), ok, there was some drop in prices on some but not anything that was too concerning, takes some nerves sometimes but adding to positions worked wonders in the recovery. USA quite flat, but its for the future and for geographic diversification.
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Super Contributor
Ok I see what your are getting at but have you done your homework when the Dow goes sideward for 20 years? Those you mentioned are quit big companies and track the overall. My strategy is to be short of shares relative to a full portfolio at these times and in cash earning interest @ 5-6%, and buy on dips and sell at a profit until the consolidation is over, which I said will be by 2020. The fresh blood will take the markets into a new bull run of 20 years. The fresh blood won't have the debt that the present investors have got, which is why the markets are going nowhere until 2020.
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Super Contributor
Fair enough about why your US exposure - and I share your thoughts on reasoning about being there.(I just love that market because of diversity for one)) In RSA I always had solid stocks except some of them achieved so much growth - actually scary and the thought entered my mind to activate a "stop loss" or two. (Yes even a longer term investor can be greedy!!)
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Super Contributor
My theory was slightly different. DOW goes up to 2035.and the cycle of correction and Bull run is 35 years..but never the less very similar. I would argue that 1966 was the "2000" year top last time round.
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Super Contributor
How long is your consolidation phase?
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Super Contributor
I reckon the consolidation will finish 2017 or so. Before the 1966 it was 1929 top. It will never split the 35 years perfectly but that's the time frame on each cycle.
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Super Contributor
Yes my US stocks are all very large companies, however when I bought them they offered very attractive deals, I truly admire their management and methods of business so long term I am very happy. Merck pays very good dividends, much better than a US bank account. Here in SA my strategy is to acquire aloud businesses that have excellent butanes models and growth prospects or huge discounts to intrinsic value. But another key is to consistently grow dividend income so that I have a continous flow of cash to invest in upcoming opportunities. That's about what I am doing, so I am not waiting on the sidelines or so, but don't just wildly buy anything, it has to offer a combination of discount to my calculated value, excellent management, growth prospects or huge discount. I believe if the shares are too expensive my system will not allow a purchase, so if I cannot find anything to buy I hold funds in cash or other assets like that. Maybe gold or other investments that I think are offering value.
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Super Contributor
Guys I enjoy chatting to you, thanks for this comment!
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Super Contributor
Suddenly your JPMC and Merk u look a lot more secure..lol
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Super Contributor
Yip, true... let's see what these latest developments does to the markets over a exile. I think it will be better than the other option.
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