Tag: t_USEqSuperior

FTSE100 showing div stocks=slow

Posted on by tiger40490

FTSE100 offers many important observations/insights, but in this blogpost main focus is dividend stock picking.

https://www.hl.co.uk/news/articles/how-different-are-the-s-and-p-500-and-ftse-100 says

the FTSE 100 includes a lot of banks, oil companies and miners. These companies tend to be quite cyclical meaning they’re closely linked to the economic health of the country and tend to follow the ups and downs of the economy. They generally don’t have a lot of room for explosive growth. …  The S&P 500 trades on a price to earnings ratio of 22.2, which is much higher than the FTSE 100 – currently trading on a PE of 14.4. Additionally, the historic dividend yield on the S&P 500 is 1.8%, compared to 4.8% for the FTSE 100.

— DRIP
Note most comparisons of FTSE100 vs SP500 graphs ignore dividend. It is hard to verify but some authors say that DRIP would dramatically change the picture.

— hot tech stocks [hot money, low CDY] has a huge presence in SP500
I think four articles comparing FTSE100^SP500 (or DJIA) all singled out this as the biggest of many reasons for the superior 10Y performance of SP500.

Coincidentally, Vance of DBS said the Singapore STI suffers the same weakness. “Sunset industries”.

— survivorship bias and natural selection ..
If we compare two ETFs tracking FTSE100 vs any tech-heavy index, we need to ask which index is adjusted more often. Tech-heavy, frequently adjusted indices tend to benefit from survivorship bias and natural selection. If no adjustment allowed, then the fatality rate (of tech stocks) becomes more apparent.

I guess (without evidence) that a tech-heavy index ETF would buy low sell high more often, due to index adjustments. The passive ETF manager would follow the index, to swap out laggards and swap in rising stars.

This blogpost is about indices, but here is a digression. ARKK and TRBCX are more tech-heavy than SP500, and more actively managed. I don’t have the bandwidth or skill.

[22] j4 buy@every correction/crash

Posted on by tiger40490

Warning: [[irrational exuberance]] gave lots of data against this /tactic/ — Invest at every correction or crash, invest in bigger amounts than you have recently done in normal times. If decline continues, then decide whether to buy-n-Forget or invest more.

ETF quickGrab: buy-low +! due diligence is a more concrete plan.

— J4: ECR compound return .. widely accepted, even on non-U.S. markets [1].
This perception basically assumes that after every decline, perhaps after a few years [1] of zigzag, market would eventually transition to a “fast_window”, where annual return stays above average for months or years.

Some traders focus on the shorter horizon and target to capture a few months of fast_window. In contrasts, authors (big influence on me), financial advisors, financial planners, bank staff … focus on a longer horizon of a few years to a decade. But regardless of horizon, all of them agree on one thing — the fast_window.

— J4: DCA robot.. See my blogpost on DCA
j4: DRIP robot is related

DCA and DRIP assume that even after a market /rally/, it’s not unwise, not risky, to let the robot continue investing _small_ amounts.

— [1] Warning: this analysis only applies to U.S. equities. Non-U.S. markets can experience a long trough before (hopefully) entering a fast_window.

[22] dice2b tossed atMost 8x]%%lifetime

Posted on by tiger40490

During a period of uncertainty (up to half the days), I tend to imagine a dice being tossed. It is usually an inconsequential, small dice because the market doesn’t really change direction. However, in every cycle, the real big dice is tossed. Everyone, including those who got out of the market early, has their fortune determined by that toss. Some tosses are so huge that they cause a seismic shift , where the public’s perception of and belief in various eq markets undergo a fundamental adjustment.

I don’t have good examples. Perhaps the Great Depression or the Japanese stock bubble of the 1980s, or the dotcom bubble?

Q: until I pass away, how many times would the big dice roll?
A: Not 10 times. Fundamentally, each stock market cycle lasts 5-10 years, not 1Y. Each decline will likely be global, and followed by a slow n uneven[1] recovery.

[1] Some regional (stock) indices would recover faster. (So far it is U.S.) Others may take decades. I feel the _relative_ ascent or /displacement/ of specific markets [eg: bio sector, EV sector, energy sector, India market, Korea market, junk bonds, muni bonds,,,] often take place during such seismic shift. Therefore, the seismic shift could function like a shake-up across market boundaries. Some markets would crash deeper; some markets would decline much longer; some market would recover earlier; some markets would recover stronger and reach new highs;;

Q: how long will U.S. market maintain its preeminent position?
A: At least 3 more cycles, possibly all the way till I pass

Therefore, contrary to some naïve thinking, the /dreaded/ decline of U.S. eq (esp. relative to other regions) is not based on 100 (major) tosses over the next 50Y, where each toss has the potential to cause a seismic shift, and provide the inflection point of that dreaded decline. In fact, no regional eq market has shown any promise as a /challenger/ to U.S. eq.

Based on my reasoning, RSPs [including DCA] into U.S. eq market (not other markets) will continue to match the U.S. market, and do reasonably well.

[19]U.S.beat`all markets over3Y+ #Nsdq

Posted on by tiger40490

Alan Tan … said U.S. stock market shows self-renewal.

see also the older blogpost [14] long-term +ve trend: U.S.only

My conviction is based on 1) data 2) explanation.

  • Data: I guess U.S. market dwarfs Europe and Japan markets, among the established, mature markets.
    • Explanation: Hkex, in my view, is dominated by China-themed stocks [H-shares, P-chips] and viewed with suspicion except in Chinese-dominated communities [like SGP, MYS]. Globally, I think China stocks are perceived similarly to India stocks, Russia stocks, Korea stocks, Latam stocks.
  • Explanation: global mind share — U.S. equity enjoys disproportionate mind share among the investing public as well as the professionals. When a new investor think of stock markets to invest, U.S. stocks and indices are the first to consider and often the default choice. If investors form a pyramid, then the base layer (largest number) investors would choose US stocks in addition to their homeland stocks. The base layer won’t bother with Europe or Japan stocks.
  • Explanation: passive investing — Increasingly more investors choose passive index funds. I believe there are many more index funds for U.S. market than non-US markets. Also the U.S. index funds are more mature and have longer track record, attractive to the less confident base layer of investors.
  • Explanation: optimism — majority of U.S. stocks are owned by Americans. Americans are more optimistic. Even non-Americans are more optimistic about U.S. stocks than their homeland stocks !
  • hypothesis: global herd instinct — I now believe that herd instinct is in America’s favor.
  • hypothesis: Many professional funds [offered by banks, insurers, pensions] have a theme like regional theme or sector theme … I think they invest in U.S. stocks more than non-U.S. stocks.
  • Explanation: hot money — There’s more hot money than before, such as those BRIC citizens. Hot money follows mindshare
  • Explanation: Majority of the symbols listed in the U.S. are U.S. companies. They are often more profitable than companies in other countries.
  • Explanation: in a down turn, some U.S. blue chips are perceived as safer, defensive.
  • Explanation: USD — is perceived as a safe haven currency and a default currency. JPY and EUR? no big stock market to match America’s

I’m slightly more “independent” in my thinking. For yeas my U.S. allocation among my equity holdings was around 10% to 20% no more than 25%. I also flipped through the influential [[irrational exuberance]] written before the dotcom crash.

==== shorter trough, faster recovery
I like Jay Seide’s summary — the broad U.S. stock index always rebounds after a big correction. See [[irrational exuberance]]. Using whatever arbitrary criteria, let’s say there have been 20 crashes over 20 years. Among them, this rule has seldom been broken — recovered within 3 years, usually within a year.

However, Longest trough in Nsdq100 is 17Y

Q: why U.S. stocks show better trough i.e. faster recovery?

— reason for China’s long trough: retail investors tend to bid up the price too high, resulting in a super-long trough. In contrast, U.S. market has more institutional investors. Vance of DBS pointed out that China markets are increasingly open to foreign institutional investors
— [warning] data sample size is very small
There are not 500 regions where only one region (US) is head and shoulders above the rest (like Linus Pauling who twice won Nobel prize unshared).

There are not 90 (non-overlapping) trough periods in a data sample where the shortest 5 all belong to the U.S.

— [warning] regime change
— [warning] index composition differences ..  Vance of DBS believes the index component is one reason. He said STI has mostly sunset-sector stocks. However, I would say hot tech stocks tend to become overhyped leading to longer trough.

[14]eqMufu: long-term +ve trend: U.S.only

Posted on by tiger40490

Even though worst trough is much better in SP500 than other regional markets, and the long-term strength is more evident in the U.S, I would still say that other eq markets have long-term positive trends.

Warning — longTermStrength is widely used but ambiguous, compared to other concepts like worstTrough, durability@appreciation, marketReturn etc. As such it is an inferior focus for my blog.

Q: in my FSM portfolio, should I increase my US eq exposure ?

My past mufu investments were largely equity-centric. I never held a mufu beyond 7 years. The following personal experiences (despite the books I read) completely reshaped my view —
* any security I invest in, tends to show zero uptrend zero downtrend.
** Even if there’s some trend, it’s always dwarfed by the noise.
* equity market is heavily manipulated by big players, so I sometimes feel there can’t be any uptrend.
* bonds do show a bit of (rather low) uptrend but has non-trivial volatility

I also learned to dismiss the “advice” of various poorly trained Singapore financial advisors that “over 3 to 5 years this unit trust should make money”. Therefore the only safe “investment” is bank deposit.

About 1/4 to 1/2 of my mufu investments remain underwater after many years, and I often lose hope and liquidate. Now I think that’s all based on an incorrect view. Now I feel over a longer horizon like 10, 15, 20 years (retirement planning), US equity market do show an uptrend, as shown in historical performance.

Q: what if there’s a crisis like 2008. There are indeed big corrections every 5 years or so in equities — indisputable.
A: now I feel still the 15Y return is positive! Even if the drop in the final year is 30%, the previous years’ gains should exceed that — only on the US market.
** Japan, Europe … seem to be much worse — all gains could be wiped out in the last year.

Q: how about outside the US?
A: I feel the uptrend is evident in historical data from US market only. Japan, Europe and EM are not so clear.