My Ftse 100 Tracker Doing Stupendously

[unklmic]

Any thoughts?

As people begin to accept that houses are coming down, I'd imagine that those reasonably intelligent people with investment property will sell (for what ever they can get) - and might shart buying equities with the proceeds? This could cause equities to rise.

Obviously, falling prices mean less profit for retailers. People will default on loans - should cause drops in financial institutions - but by how much!?

If there is a HPC, does that mean there will be a stock maket crash, a high probability of significant falls, a rise, or is there no correlation between the two? Anyone know what happened to the FTSE during the last HPC?

I am not to keen on the idea of selling all stocks and shares and buying precious metals, kinda putting all eggs into one basket - but if that is were the smart money is if there is a HPC...

Thanks!

[zzg113]

My Ftse 100 Tracker Doing Stupendously, Time to sell?

Yes, on the principle "No-one ever went broke by taking a profit". FTSE is due for a fall.

[planit]

FTSE is due for a fall.

<{POST_SNAPBACK}>

I disagree FTSE 100 make much of their money abroad. If the pound drops their overseas profits look better.

Also if you look at the yeild compared to BTL it looks like great value (although anything would)

[doommonger]

I personally have sold my house and liquidated my shares. Will not repeat the housing market arguements. My view on the equity market is that it looks toppy. With a large part of the index made-up with banks (with high exposure to commercial and residential property and consumer lending) and oil (reliant on China). I personally am happy getting 5% gross a at the building society.

[Timmy Manson]

Well you asked for opinions so here's mine. Iv'e just taken profit, almost all in cash now.

Read a paper about 6mths ago arguing that the FTSE would peak this summer at approx. 5250 before beginning a 12-18mth cyclical fall as far as 4200. The arguments seemed sound and as the rally to 5250 has materialised I'm taking my profits.

Can't see many arguments for the FTSE to head much higher, can see lots of arguments for it heading lower.

If it falls back to 4750 and finds support I might buy in again. But for now I'm closing out my positions, putting out my deckchair and enjoying a lazy summer

Edited July 15, 2005 by Timmy Manson

[penbat1]

I personally have sold my house and liquidated my shares.  Will not repeat the housing market arguements.  My view on the equity market is that it looks toppy.  With a large part of the index made-up with banks (with high exposure to commercial and residential property and consumer lending) and oil (reliant on China).  I personally am happy getting 5% gross a at the building society.

<{POST_SNAPBACK}>

Dont you trust corporate bonds then ? What about investing in mid cap or smaller caps rather than big caps ?

Edited July 15, 2005 by penbat1

[penbat1]

Well you asked for opinions so here's mine. Iv'e just taken profit, almost all in cash now.

Read a paper about 6mths ago arguing that the FTSE would peak this summer at approx. 5250 before beginning a 12-18mth cyclical fall as far as 4200. The arguments seemed sound and as the rally to 5250 has materialised I'm taking my profits.

Can't see many arguments for the FTSE to head much higher, can see lots of arguments for it heading lower.

If it falls back to 4750 and finds support I might buy in again. But for now I'm closing out my positions, putting out my deckchair and enjoying a lazy summer 

<{POST_SNAPBACK}>

Market is often driven by sentiment more than anything else. One bull argument is that all the property smart money needs to find a new home. When shares slumped in the dot com boom, house prices rocketed so maybe the reverse is true.

Edited July 15, 2005 by penbat1

[Unexpected]

If all your money is in the FTSE tracker then perhaps selling half would be a good plan. Then you can be getting 5% from the bank with half your money and risking the other half (low risk) with the tracker.

[737]

If interest rates fall asset prices rise - and that should include both property and shares.

[MarkG]

If interest rates fall asset prices rise

Tell that to the Japanese.

A cut in interest rates would be a clear vote of no confidence in 'UK PLC'. Why would anyone want to invest here if the government believes the economy can't even handle a 4.75% interest rate?

Particularly when the pound would be dropping too: if the pound drops 20%, you need a 25% increase in share prices just to break even (and more like 35% after tax).

[echapps]

Here's why you shouldn't sell:

http://www.housepricecrash.co.uk/forum/ind...ype=post&id=875

The FTSE has a long way to run yet.

Edit:

This graph shows houseprices and FTSE in relation to GDP.

Edited July 15, 2005 by echapps

[penbat1]

If all your money is in the FTSE tracker then perhaps selling half would be a good plan. Then you can be getting 5% from the bank with half your money and risking the other half (low risk) with the tracker.

<{POST_SNAPBACK}>

Depends how long term the shares can be held for - these days at least 10 years is a good idea. The more long term the more a risk you can take. But it is a good idea to build up a cash buffer as well as rainy-day money.

Edited July 15, 2005 by penbat1

[Buffer Bear]

I took my profits the day before the terrorist attacks. Good timing, I think, although it was pure luck.

[Van]

Only a 3rd of the stockmarket's earnings come from the UK, so I'm not unduly worried about the FTSE just yet. Having said that, it was overbought and bounced off 5285 - exactly the level that it fell from back in 2001, so it looks like a short term retracement is in order, maybe back to 4900.

FTSE 4 year chart

Rather than sell up and incur possible tax implications, canny investors can find other ways to hedge their portfolio. How about shorting the FTSE to the sum of 2/3rd's of your holding?

If the market goes up, fine, you still make a bit of money. If it goes down, you make money from your short - cover your position when you think the market has fallen enough, and reinvest the profits from your shorts into your tracker.

Edited July 15, 2005 by Van

[unklmic]

Here's why you shouldn't sell:

http://www.housepricecrash.co.uk/forum/ind...ype=post&id=875

The FTSE has a long way to run yet.

Edit:

This graph shows houseprices and FTSE in relation to GDP.

<{POST_SNAPBACK}>

Thanks for the info echapps. If I read the graph correctly, there was a big dip in the FTSE during the last HPC?

Are things different this time?

[thom123]

Rather than sell up and incur possible tax implications, canny investors can find other ways to hedge their portfolio. How about shorting the FTSE to the sum of 2/3rd's of your holding?

Hi Van,

I'm looking to protect the rise in my FTSE tracker also and, as you say, I think it would be better to hedge than sell up (partly because I can see that a few people might illogically buy in now that it's risen).

How would I go about shorting it? Is there any other way of hedging (buying a put?). As an example, if the FTSE was 5,200 and I'd bought 10k at 4,800 and wanted to protect any gain over say 5,000, how could I do it? I've read a little about hedging but no-one ever seems to give a practical guide on how to do it!

Thanks,

Matt.

[Van]

Matt,

I am running a hedge on my FTSE tracker now, which over the last 4 years I've built up to it's current value of about £10k. To hedge this with a similar sized short, I run a £2/per point downbet with IG index. £2pp, with the FTSE currently at 5225, gives me exposure to £10,450's (5225 x 2) worth of FTSE short selling, which is a similar sized position to my tracker.

I also have some puts, but I find these to be not as effective a hedging tool as straightforward short spreadbets (they are better for speculative non-hedging positions imo).

In addition to my tracker, I also hold a portfolio of individual stocks, so my overall position is still biased towards being long, as I am quite bullish on the in the medium-longer term.

All I'm looking for is a 5%-7% pullback in the FTSE (say, back to 5,000).

My long term plan to to keep my tracker for at least 5 years, and keep adding a fixed amount to it each month. If the FTSE returns, say an average of 7% pa over this period, with a bit of defensive hedging, I can hopefully return 9-10%pa simply by hedging my portfolio the couple of times each year that the market gets overbought, and then reinvesting the profits of the short when market returns to a normal level on the technicals.

A warning, however.. if you are not very careful, this can easily open the door to spreadbetting on everything left, right & center (it's very easy to do once you have an account, believe me). Be very mindful of why and what you are spreadbetting on. Your aim is to protect you long term portfolio from the market when it gets overbought, not to go speculating on shares, oil, gold, football matches or anything else. Unless you are a highly skilled trader, that's a mug's game!

edit: last thing.. it's not quite a perfect match because my (and most) trackers track the FTSE all share index, which is not quite the same as the FTSE-100, but their performance is virtually identical, so it shouldn't make hardly any difference. Always worth checking the performance of each index beforehand, though. You never know when there'll be some significant divergence.

Edited July 18, 2005 by Van

[Van]

Unbelieveably, the stock market has returned 20% in the last 12 months and 30% in the last 24 months (or 23% & 36% if you reinvest dividends), yet still trades on a modest p/e of 13.5 for the current year.

So well done to anyone who has been buying stocks in the last two years when all the other mugs were buying property! :-)

Edited July 18, 2005 by Van

[oracle]

still think FTSE will be OK to run up to 5350,before a definite heading south...too much resistance to break that level on the first go....I'm with van that we'll probably see 5000 again after that.

I definitely think that we have an asset-swap under way which is why I think the market will be well supported....the only fly in the ointment now will be more geopolitical stuff(which is brewing up,making Dr.B's gold call a very shrewd one IMO)

[tune2001]

I thought the good doctor has said that gold had run its course. What about buying shares in gold mining companies?