Greyinvestor
27 Aug 2015
China market I agree with much of what you say TwoSporrans, but attach this;[link] you plot the five year graph, it suggests that the bottom may well be 2000, not 3000. So it could fall a way yet.I think that the Chinese people will do everything possible to drag their annual income up from $3,000 to more like $30,000. They'll just have to contend with a credit bubble along the way. Bank debt in China has grown enormously, and all the money in China will struggle with it. This is where I agree with you; the government will pull every lever mightily to keep the economy going, as will the western world.Frankly I wish that I had filled my boots even deeper, even if I have been astonished at the last few days of volatility. A volatile market is a normal market, but the degree of this is amazing. I think it's a backlash against the long period of unnatural stability, plus lowish volumes......I also believe that emerging markets are beginning to offer a little value. But it's not for the faint hearted and it's early days. The US economy looks strong enough to take a piffling rate increase, which will worsen the outflows from such markets.
TwoSporrans
27 Aug 2015
Re: Adding elsewhere China aversion makes sense given further deep falls may well follow on.Got some AAIF myself and might add, though favouring Schroder Asian Income of late as alternative to HFEL playing more on dividend growth than high dividends today.Actually bagged about £5k of SA on 'Black Monday'.AAIF is maybe 8% China weighted v 21% for HFEL and it's very overweight in Singapore at 25%.Like HFEL, it's now about parity in terms of discount to NAV.A lot of the Investment Gurus keep saying avoid China because it's growth slowdown is worse than Gov't stats state and is set to continue, maybe into outright recession.Hence, the reasoning goes, Chinese shares will sell off more; ditto [albeit less so] those of companies that sell into China or into other countries that sell lots to China: pretty much most of Asia.Ain't necessarily so.For one thing, most of the selling, maybe the vast majority, has been an unwind of leveraged, derivative type, speculative buying that was made on expectation that China was going to [in 2015] go international, not only with it's currency exchange/trading but with it's equities too.If the Shanghai/Schezen bourses were open to global capital, there would/will almost surely be a flood in of international fund capital; this is simply because the funds will then apply automatic weightings for holdings in Chinese equities.This internationalisation has stalled, not least for technical reasonsThe unwind looks to be pretty much done; the indexes are very close to what they were before the associated ramp up.Sure, there's still all sorts of risks out there and the quality of information + regulation leave much to be desired.But.....1. What about the "golden paradox": Company earnings often do very well during recessions, admittedly more at the back end of them.2. When was the real economic nadir in say US or UK? Was it 2007-8-9 or more 2008-9-10? [the latter] Did shares drop during 2008-10?No. 2009 and 2010 was when risk assets made a killing for investors; possibly the best opportunity to make investment profits in a lifetime.3. Real economic slowdowns elicit all sorts of responses from company cost cutting [especially CAPEX] to Government measures; the huge monetary stimuli still in force globally most obviously.China has more options/room for manoeuvre with $3-trillion in foreign reserves that the US or Europe had when their credit bubbles burst. Base rates are 4.5% I think. Gov't can marshal large rescue funds, as witnessed of late.4. China is in the process of rebalancing.So, there's recession in cement, steel, oil/gas [upstream, not refining] along with a choke on over-capacity property expansion.The consumer driven sector still looks to be growing fast.If you don't believe the Chinese take [caution always warranted on that] , there's a lot of feed coming out of Western/global companies that supports this.So, if all the Chinese shares have gotten sold off en-masse in this speculative unwind [which looks to be the case, as was in the West 2008-9] then surely there must be great opportunity/value emerging in the companies focus upon the right SECTORs of the Chinese and indeed global economies.I could ramble on but just putting over something to counter the rather simplistic message being broadcast by a load of the "experts" that Chinese investments will lose a lot of money over the next year or 3; just because the economy will slow down a lot overall.Go buy Europe [seems to be the an "Experts" consensual favourite], buy the dip, if you prefer.Not saying there's not opportunity there; there is, if you are selective.But I wouldn't go in particularly because the economic growth is reviving.Even to the insipid extent it MAY do, it's only doing so on the back of the Draghi Put; all that LTRO + QE + near ZIRP just about heading off Eurozone Recession; not to mention maxed out company cost cutting in the face of almost static productivity gains.Not a l
Greyinvestor
27 Aug 2015
Adding elsewhere I've been adding MYI and AAIF, but holding JEMI, SEDY and HFEL. My reasoning is that the mainland China market still seems very high; in fact the P/E is still around 60, I believe. I'm sure that HFEL only buys the cheaper, higher yielding stuff, but there is still a risk of falls in general.I've not sold a single share though, and have no intention of doing so.....this is a long haul investment.
alekhine
25 Aug 2015
Re: On the bright side... I bought a slice of this Trust many years ago and have regretted not adding to the holding.; my original stake is up 190%, without reinvesting dividends .... so yes I also added to my holding yesterday. Squeaky bum stuff, but I force myself to buy in falling markets.
robert ian
25 Aug 2015
Re: On the bright side... HFEL was one of my first ever investments approx 15 years ago have since added some and even with this fall i am averaging +25% on the investmentThe dividend is also a major factor based on the dividends received from HFEL in effect the shares now cost me nothing On my average cost is running at a 10% dividend yieldBased on the cost the first purchased shares are yielding a whopping 17% per annum next quarter divi coming in 3 daysThis goes to prove that shares are a long term investment and getting in to a major flap fueled by screaming media headlines is not the best thing to doAnother little point our media friends do not point out when scaring the living daylights out of people is that it is August and volumes are low due to holidays therefore although as was being bellowed loudly yesterday on radio and TV in the UK whatever Billions was ''wiped off' the value of FTSE 100 companies actual shareholders do not see a loss (or a profit for that matter) until such times as you crystalise your investm
TwoSporrans
25 Aug 2015
Re: On the bright side... Decent sized Director's lots too [10k+5k] PJF.I too only bagged another 500 shares yesterday [242p] - just saw the Futures twist up and couldn't resist.Tempted to wade in heavy this morning but holding off for now.With the Chinese equities still under the rice flail today [CSI 300 down ~8%], the rally is rather like a train departing minus its engine.Those director's buys are indeed rather reassuring though.Perhaps the 4.8% discount that opened up yesterday is narrowing today, bolstering this sporty rally.TS
PJ Foster
25 Aug 2015
On the bright side... So it's comforting to see a couple of the directors buying shares at this stage. I presume that if they thought a dividend cut was inevitable - now would not be a good time for them to buy. I ended up buying another small slice to top up yesterday. Could only afford about 500, but the 8% yield - what's not to like about that.Yesterday was my single biggest ever one day drop in the value of my share ISA, down £8k. I wonder if today will be my best ever rise (up 3k so far)Ho hum, sit tight, in it for the long term - it's the dividends that count.....Cheers,
TwoSporrans
24 Aug 2015
Re: Recent Falls FRTEBYou may well be right about this going to 220; why not sub 200 with the momentum now underway?Dax down 6.5%, S&P500 down 5.5% today.As nothing compared with the Shanghai A50 [the 50 top blue Chips] down maybe 16% now on the futures. That's a crash!!In contrast, the Apple CEO has spoken today of buoyant sales in China past few months and actually accelerated the past 2 weeks.Make of that what you will.A palaver indeed!!I've liquidated a modest slice of Property holdings to build cash for an imminent purchase here as there's the look of a capitulation in Chinese stocks and maybe elsewhere.HFEL 242p to buy right now but probably going under 240p this pm.That's about 37% off the 2014 top.How much is enough?TS
FRTEB
24 Aug 2015
Re: Recent Falls I posted this on 8th July: " This has been on my watch list for a while (14/12/14). Target price = 249. But don't follow me - DYOR. " And here we are at 248.50 as I type. Seems to be holding but is this just a pause for breath before another fall? Can't help but feel nervous about buying, what with all the turmoil on the markets, and China, and Greece (again), etc. Trying to decide whether to jump in with a first tranche or wait - think I can see low 220s on the HFEL chart and there is talk of lower lows on the markets before the year is out. What a palaver this investing lark is!
TwoSporrans
24 Aug 2015
Re: Discount emerged.....3.6% To the extent official Chinese figures on GDP growth and a raft of other measures are indeed bogus and the real economy is in fact now growing slowly or even into absolute recession, there is a mammoth problem there and a crisis for Chinese equities.Thing is, no other economy is isolated from such a fall in demand for products and services.China grew into the world's 2nd biggest economy and indeed became [post 2008] the biggest global export market for not only most commodities [much from other Asian states +Australasia] but a load of manufactured goods too.So no surprise that e.g. the German DAX is down another 3+% today. A tad surprised to see the French CAC down ~6% [futures] but it's probably playing catch up.As the US equity markets have.I don't think the US markets are more overvalued than the European or indeed many of the others. In many ways the US has the least ugly of the world's economies and at least the economic and company stats have credibility.Can one say that of China?Whatever, it's no coincidence that this, easily the worst trading day across Australasia for several years, follows on from the accelerated sell off in US stocks over Tues-Friday last week.This will have accelerated capital flight and like you say that has a knock-on depreciation effect on the currencies [though relativity little shown up this morning.]Worse still, the Chinese Gov't seems to have abandoned its efforts to prop up the stock market.I was staggered to see the A50 sell off over 10% this morning.My expectation was that the government would focus their buying on the biggest blue chips, along with measures to ease problems besetting them.The Chinese Gov't spurred on the real economy with a huge credit expansion since 2008 Western credit debacle [and off back of subsequent US QE programme]. Gov't debt is maybe 3*GDP now?The gamble seems to have been that:a. The West + Japan would succeed in a full reflation of their economies.b. China would also make a rapid transition towards becoming a consumer led economy, supplied largely by indigenous companies from an export dependent one.Neither condition has been met, that is obvious.what is far from obvious [to me anyway] is to what extent things have fallen short; especially so in the case of b.There's an abundance of stuff written by that paints China and the situation black; much of it by leading lights in the economic/financial/business spheres who have spent time over there. Equally however, there are those who present a relatively benign/optimistic picture and just as plausibly.Guess the truth is somewhere in the middle.I found the optimistic views more persuasive.Maybe I just believed what I wanted to believe; a pretty universal human frailty.Regardless of that, if an essentially solvent asset falls a lot in price, it must eventually offer good value for the medium/long term investor.HFEL is 80% invested outside the PRoC after all.Trouble is, there may be a very considerable fall left to go; maybe we need to see a global equity capitulation for this to be reached?Given you are 80% in cash, you are in an excellent position to take advantage of this.I'm less well situated but not far behind [providing my 70% C.Property holdings don't suddenly sell off] and probably better off than most PIs who will have portfolios heavily weighted in equities in UK/Europe/US companies and largely holding/hoping this is just a very transient correction in them based on jitters over the expectations for rises in the US base rate and other greatly overrated determinants spewed out day after day by the media.TS
allthatglistens
24 Aug 2015
Re: Discount emerged.....3.6% Interesting comments from you and "two sporrans". Another problem IMO is the discount controls blithely put in place in a bull market. The necessity not to sell shares to meet withdrawals is a big difference between open ended and closed and now management in their wisdom have removed that. I was wondering what was going to happen to Trusts in the next bear market with having to buy back their own shares and now I will find out. It can only impact detrimentally on performance.
Greyinvestor
24 Aug 2015
Re: Discount emerged.....3.6% This is certainly getting very messy, and I'm going to keep my head down for a few days.My big concern with HFEL is the divi. The capital will take a big hit today, the income is longer term but must be affected by falling currencies.Having said the above, emerging markets are firmly in value territory, with current P/Es around 10, I believe. They could go lower still but to me a multiple of ten or less is good value, in my opinion. China is a bit different; earnings could fall quite heavily if there is a slowdown.I know that I've said this before, but I think that the S&P is the problem. It's too high, and it's based on exceptionally high corporate earnings. Surely it must correct downward......and bring other indices with it?My guess is that all the margin lending trades will now come out of the market, so it could correct downwards quite quickly....
TwoSporrans
24 Aug 2015
Re: Discount emerged.....3.6% Thanks for the warnings on direct commercial property trusts.I think that the main reason the Invesco Trust went under was that it was very highly geared and could not repay loans sufficiently on time because it could not sell off properties in market with very scarce buyers.Anyway, commercial property can prove a particularly illiquid asset.Looks like a bloodbath in Asia this morning.I've taken off my limit buys and will stand off a while.Is this a full blown global equity sell off developing?As you are 80%+ in cash, your buys aren't mad.For sure, you can at least take a long term view on them.For me, the big thing is how well the HFEL dividend payouts can be [responsibly] maintained.In a deflationary debacle situation, even 50% of the current 7.5% yield will underpin capital values strongly.BBB rated corporate bonds are paying around that now.CheersTS
Greyinvestor
21 Aug 2015
Re: Discount emerged.....3.6% Good luck with your decision making.Everyone will think me mad, but I've been adding to my SE Asia holdings, as the falls accelerate.My personal holdings (fully invested) have taken a beating but my SIPP is easing down to 80% cash, from 90%.My big fear is the S&P. I see the US market as massively overvalued, and this being a rerun of the last SE Asian debt crisis. At some point the S&P will blow, and bring everything else down with it. In my view the boring high yielders will take the smallest hit.As to property, good luck. There is no sign of inflation, so they should be OK for now (they are generally inverse to interest rates). But I would point out one thing. I always read the P&L. In an awful lot of cases the dividend isn't being covered by rent; it's being paid out of the increase in NAV from property revaluation. I know it's been good so far, but I won't invest on that basis; I'll only buy if the rent exceeds the dividend. I learned the hard way from ALPH plummeting to zero and from the Invesco property investment trust going under (which still horrifies me - an investment trust going under!).
TwoSporrans
21 Aug 2015
Discount emerged.....3.6% As little as a week or so ago HFEL was still on a small premium; now it's on a discount to NAV of 3.64% [yesterday].Some small comfort as making further buys on price falls in a falling knife situation.Dividend payout is 7.5% at 262p price. [Assuming August payout of 4.9p/share repeats next 3 qtrs.]If the sell-off continues much lower it's going to exceed that of 2008.Does the Chinese bubble burst warrant this?The Chinese Gov't are attempting to support the Shanghai CSI 300 Composite at 3,500.They succeeded at today's close.Can they continue to do so?Maybe, if they do the general Asian sell off will continue.However, that might do little to stem the outflow of capital from these markets and hence the general depreciation of currencies; this will continue to pare down the HFEL price and maybe the dividend too.Then again, with the Schilling finally dropping in Germany as to what this means for their export driven growth and the recent PMI contractions in France, why should the Euro continue to appreciate v Asian currencies, with QE there in full flow too.Even the $US appreciation may be capped as the Chinese et al export their deflation there.Best I can see with buying HFEL or similar is to buy steady as she drops but keep lots of powder dry lest this develops into a full blown global equity bear market, which it is now threatening to.If that happens, HFEL will be going for sub 200p at the nadir; perhaps even around 150p in a nadir down spike of forced selling of leverage equity positions globally.I'm already running quite low on ready cash.Reluctant to sell any of my 70% weighting in UK Commercial property [as yet untrammelled] at this juncture.TS
