What to do when the music stops

Transcription

1 What to do when the music stops An investor s checklist for a correction It s not hard to see that global asset markets are very toppy right now. But investors also need to know what tools to use to protect their wealth and profit in tough times.

2 General Advice Notice Acvtest Pty Ltd is a corporate authorised representative (No )) of Primary Securities Limited AFSL Acvest Pty Ltd and Alan Hull are authorised to provide general financial advice in respect to securities. All information provided in this presentation is general information advice only and must not in any way be construed or relied upon as personal financial advice. No consideration has been given or will be given to the individual investment objectives, financial situation or needs of any particular person when delivering this presentation. The decision to invest is a personal decision and involves an inherent level of risk, and you must undertake your own investigations and obtain your own advice regarding the suitability of information provided here today.

3 In 2007 I missed the top of the market by 14% and re-entered from mid-july

4 Is there any question about where we are now? The GFC looks like a speed bump

5 And global Stockmarkets began to wobble in early February...led by the U.S. markets

6 Late last year when the NASDAQ broke out, I said it was time to start preparing

7 Review your buy and hold (income) stocks Good income stocks bought a long time ago don t need to be hedged - ie. Banks Income stocks bought recently, funds or derivatives need to be actively managed Alternatively they can be hedged or sold It is very important not to kid yourself about what is and isn t an income stock

8 Buffett s favourite holding time is forever Telstra? The 4 big Banks Think like Warren Buffett look at his choices... Gillette Boring old business models Big is beautiful GE Coca-Cola Low-tech is the go This is qualitative

9 And timing plays a major role when acquiring income producing shares

10 Thus a Company s dividend yield goes up as its share price drops

11 Look to the weekly asset class share list

12 Get ready to hedge - the DOs and DON Ts CFDs are not good for hedging - an OTC product with considerable issuer risk - they are banned in the US - a traders tool Options - buy Puts or write Calls - you need to know what you re doing - liquidity is a major issue in Australia Warrants - buy long term Put Warrants - know what you re doing - liquidity issues

13 ETFs - never been stress tested and there is potential issuer risk - so whilst you may not lose money with inverse ETFs, they could be suspended by the regulators Futures are my preferred method - a zero sum game and they are exchange traded - their leverage is very efficient for hedging And U.S. Futures will achieve superior performance in a correction and have much higher liquidity than local Futures

14 Get ready to short sell - the traders tools CFDs - use money you re prepared to lose - big is beautiful - use multiple providers ETFs - again they have never been stress tested & whilst you may not lose money, they may be suspended from trading Short sell ordinary shares - I strongly prefer U.S. stocks for this purpose And there s Futures, Options or Warrants

15 Growth shares... Should have trailing stop losses in place Plan to take profits as markets rise and not contemplating legging up positions Property... Stress test it - can you cope with higher interest rates and lower valuations? You don t want to be forced to sell property Now is the time to be borrowing money

16 Cash... Cash deposits and low risk fixed income investments like Government bonds are safe at this point, but earn low interest Gold... An insurance policy against a monetary crisis - be prepared to pay a premium Physical gold and paper gold - varying estimates of leverage - best is 50 to 1

17 In a crisis you want to own physical gold or even better...shares in gold producers

18 It has a dual personality - metal or money All of this applies to your children as well - are they insured for loss of income?

19 This is where we are now - wobbly with the potential to crash after rising exponentially

20 This is the first crack...i am mostly in cash Finalise arrangements for hedging and short selling - set up accounts, etc Remember... U.S. Futures are my preferred method for hedging - they are a zero sum game and their leverage is very efficient for hedging If you are contemplating selling any property assets then now is a good time

21 Start of the downcycle - still some hope left and some industry experts advising to buy on weakness - a period of high volatility

22 Should definitely be out of growth shares Given the similarities to the last boom, be prepared for financial banking crisis Use multiple accounts for cash deposits and have actual physical cash reserves Start hedging long term income shares Start short selling but be prepared to deal with volatility - don t be too aggressive

23 Halfway down at the steepest point - the truth comes out and catastrophic events

24 At this stage we are caught in an avalanche and all hope is lost - complete capitulation The crowd is now panicking and this is when they wil take action or ask for help Short sell aggressively but be aware this is when derivative issuers will fail - U.S. SP-500 Emini Futures are safe & liquid Expect Government intervention - rescue packages, stimulus, lower interest rates

25 The brakes are on and the panic phase is over - but sellers are still in ascendancy

26 Start closing out short positions but leave hedging in place - watch Gold stocks as they are often the first to turn around...

27 Markets are starting to bottom as the bigger, braver kids start buying shares

28 Trend trading is useless and even growth investors should be hunting value stocks

29 Make sure you own physical gold and/or stocks in gold producers - this is when a monetary crisis is likely to occur Now would be a good time to start shopping for investment properties Start buying and adding to your long term buy and hold income portfolio Prepare to move wealth into tangible assets as inflation can devalue cash

30 There are clear signs of recovery and the bottoming action is now pretty obvious

31 It s now safe to close out hedge postions Technical traders can start using short term trading tactics to open long trades Markets will recover fast as optimism is part of our human survival mechanism So follow the crowd & spend your cash! All asset classes will be cheap as you ll be buying at the bottom of a major cycle

32 Some general considerations... Currency exchange - how long is a piece of string? But some general guidelines such as; asset sell-off = US dollar strength

33 The media - if it bleeds, it leads And so it is with the financial media

34 The financial services industry - they are the cheer squad and always talk up the Stockmarket and never promote selling Industry economists are in the same boat

35 The ASX is in danger of becoming a backwater - maybe it s there already

36 Lack of buyer support for individual stocks making blue chip investing not so safe... So local investors need to start adopting an international approach to investing

37 You can use SP-500 Eminis in your SMSF but you do need to make sure you don t use leverage - ring and ask me how Opening an international trading account is easy and the cost of brokerage is the same as you pay now - ring and ask me I have a range of services to help guide you through a downturn and invest in overseas markets - ring and ask me

38 Please visit my website (see the blue brochure) where you can enrol for the full online version of my seminar - Preparing for the Correction... My direct phone number is