ALL ORDS went nowhere for 7 YEARS!

[tomtom33]

Every year I work the percentage gain or loss for the year on the final day of trading.

This year the ALL ORDS closed down 15%.

We are down a whopping 40% since our highs in October 2007 some 4 years ago.

Worst of all, the ALL ORDS hit 4111 back in Jan 2005, so for 7 years we have gone no where.

Just out of curiosity does anyone want to take a punt on where the ALL ORDS will finish on the last day of trading in 2012?

Happy New Year Everyone and good luck with your investments, cheers.

That's about the same time that Kevin Rudd and the Labor Party got elected.

 

[So_Cynical]

That's about the same time that Kevin Rudd and the Labor Party got elected.

Tom there is an absolute plethora of Labor bashing threads here at ASF, i know its hard for most of the oh so right wingers that post here to control their desire to bash and beat down the Labor Govt at every opportunity....so please, since its your first post, could you try and restrain your self to bashing Labor in the 10 or so active Labor bashing threads we already have.

Thanks and HNY.

 

[Smurf1976]

It's a secular bear market - just like the one the USA has been in for the past 12 years.

Starts with high valuation (P/E) and ends with low valuation. There's been plenty of them throughout history with, in the case of the US, a typical duration well over a decade.

 

[ChrisJH]

Dec 31 2012... 3200 tops. if not below 3000.

I called it. The history books can thank me later.

 

[Aussiejeff]

Worst of all, the ALL ORDS hit 4111 back in Jan 2005, so for 7 years we have gone no where.

I wonder why INFLATION never seems to be mentioned when it comes to comparing YOY "values" of shares/indexes/companys?

Wouldn't it be reasonable to say that a share index "value" of 4111 in Jan 2012 would actually be "worth" significantly less than the same 4111 in Jan 2005 - adjusted for 6 year's worth of inflation?

After all, isn't the ALL ORDS share index "value" simply a way of gauging the average "value" (and hence performance) of the selected basket of companies included in that index?

Or doesn't inflation matter?

 

[Bill M]

Or doesn't inflation matter?

Yes it matters. I don't have the exact figures but lets assume inflation to be at 3% P/A over the period. At that rate that 5% gross dividend gets wiped out totally as well. So not only did the ALL ORDS go nowhere for 7 years you didn't get paid for holding it either. Yet the Super Funds are all still encouraging people to put a higher allocation into shares.

 

[Ves]

Yes it matters. I don't have the exact figures but lets assume inflation to be at 3% P/A over the period. At that rate that 5% gross dividend gets wiped out totally as well. So not only did the ALL ORDS go nowhere for 7 years you didn't get paid for holding it either. Yet the Super Funds are all still encouraging people to put a higher allocation into shares.

Dividend payments have generally grown in excess of inflation during this period, so I am wondering how you have come to this conclusion?

For instance WOW dividend in 2005 $0.59 per share vs $1.22 in 2011.

Looking at Yahoo charts data: if you purchased in at the peak price in 2005 of $17.35 in November you would have a dividend yield of 3.4% on cost.

In 2011 this is now 7.03% per annum on your original investment. If you re-invested the dividends through their DRP this would be potentially much higher. Grossed up for franking credits this is 10.01%.

Without adjusting for inflation this is 17.7% growth per annum.

Bear in mind that this is not a future prediction just an analysis of the past.

There are examples of the opposite (or no growth) aplenty but the emphasis is on holding quality companies and buying at the right price.

The next 12-18 months is looking perfect for such an approach.

Disclosure: I have never held and do not hold WOW shares.

 

[Julia]

The next 12-18 months is looking perfect for such an approach.

I'll be interested to look at this perfect period at its conclusion.

 

[Smurf1976]

I wonder why INFLATION never seems to be mentioned when it comes to comparing YOY "values" of shares/indexes/companys?

It's like the argument that says "house prices never fall" or something like that - we've all heard it from the real estate industry many times.

Whilst it may technically be true that house prices rarely decline by large amounts, they do have a habit of going sideways for long periods which, after inflation, represents an outright crash in real values.

If your investment isn't going up at least as quickly as inflation then it is in practice going down in terms of real value even if nominal values are constant or slowly rising.

Same applies to the share market. I'm no guru, but it has long been my understanding that we should expect a P/E for the market as a whole of around 7 at the end of the secular bear. That's not a typo - 7 and there's plenty of examples historically (mostly from the US) on the net which back it up.

 

[Wysiwyg]

Same applies to the share market. I'm no guru, but it has long been my understanding that we should expect a P/E for the market as a whole of around 7 at the end of the secular bear. That's not a typo - 7 and there's plenty of examples historically (mostly from the US) on the net which back it up.

Certainly, in any asset purchase, emphasis needs to be on timing and getting the timing right makes a huge difference as time goes by. Like the share trading systems that work well in a bull market . But gee, the financial system is a lot of *smoke and mirror stuff and there are no guarantees of an "investment" being fruitful in the long run.

* Smoke and mirror stuff like property is a safe investment and share investment for dividend returns are sound.

 

[Bill M]

Dividend payments have generally grown in excess of inflation during this period, so I am wondering how you have come to this conclusion?

Oh really? This thread is about the ALL ORDS, not individual stocks. Sure, I can pull double digit dividends out some companies too but again we are talking about the ALL ORDS. So the conclusion comes from the Vanguard Index Australian Shares Fund. "The fund seeks to track the return (income and capital appreciation) of the S&P/ASX 300 Index before fund fees and expenses." ( This is not far off the ALL ORDS.)

Look at the attachment, the best case scenario is the 10 year period, it returned only 4.3% P/A distribution. Put in a bit of franking credits and that will bring it up to about 5% gross. So there ya go, not really what I would call a good investment, cheers.

Link here:http://www.vanguard.com.au/vnl/factsheet/PER/viasf.pdf

 

[Ves]

Yet the Super Funds are all still encouraging people to put a higher allocation into shares.

I misinterpreted this as you wanting further discussion as to some of the reasons why they may be doing this or in fact why some people might still be using the stock market as part of their wealth generation plan.

My apologies for getting off-topic.

The All Ords index is currently yielding 5.48% according to Commsec.

This is most likely a fair bit higher than the relative time period of seven years ago. Can someone confirm this?

edit: a pure buy and hold of the exact all ords seven years ago would obviously differ from a tracking and re-weighting such as that of an index fund.

I admit; that we are possibily not clear enough on what we are trying to resolve here.

 

[McLovin]

Excluding dividends, the market hasn't moved forward by much in real terms for ~40 years.

 

[wayneL]

Excluding dividends, the market hasn't moved forward by much in real terms for ~40 years.

I seem to recall reading in one of those Buffet type books that historically, the only way companies generally grow above inflation is by the useful retention of earnings, hence the man's preference for companies that do so.

That's IIRC

 

[Bill M]

I admit; that we are possibily not clear enough on what we are trying to resolve here.

Hi Ves, not really trying to resolve anything here. I am just highlighting the fact that the ALL ORDS went nowhere for 7 years and that if you take inflation into account then your dividends were eaten up too.

About the Super Funds, they are run similarly to a Mutual Fund. They have Managers who get paid lots of money to try and improve your return. Yet the majority can not even beat the index, reference here:
---
"The truth is that a majority of mutual funds fail to outperform the S&P 500. The exact stats vary depending on the year, but on average, anywhere from 50%-80% of funds get beat by the market"
---

So with that on board and knowing the majority can't even beat the index, why are these Super Fund Managers suggesting that a higher allocation into shares is better? I would hate to have been with the unlucky 80% of Fund Managers that get it wrong because then my returns would be negative over the last 7 years.

Note: Although the link above quotes the S&P 500 the situation here with the ALL ORDS wouldn't be much different.

 

[young-gun]

Every year I work the percentage gain or loss for the year on the final day of trading.

This year the ALL ORDS closed down 15%.

We are down a whopping 40% since our highs in October 2007 some 4 years ago.

Worst of all, the ALL ORDS hit 4111 back in Jan 2005, so for 7 years we have gone no where.

Just out of curiosity does anyone want to take a punt on where the ALL ORDS will finish on the last day of trading in 2012?

Happy New Year Everyone and good luck with your investments, cheers.

all ords to 3000, chinas collapse is imminent, there wont be many positives after june/july next year. european leaders are already calling for a very tough year ahead, and if theyre calling it tough, it actually means its going to be horrific.

 

[young-gun]

That's about the same time that Kevin Rudd and the Labor Party got elected.

 

[DB008]

all ords to 3000, chinas collapse is imminent, there wont be many positives after june/july next year. european leaders are already calling for a very tough year ahead, and if theyre calling it tough, it actually means its going to be horrific.

+1
China slow down will have an effect on us here in Oz.

l'm going for 3400.

 

[Starcraftmazter]

Bear market bearing down on us all. It will continue into the next year and the next 2 decades.

Once baby boomers are done, if the world still exists by then - then perhaps we can have another bull market.

 

[Smurf1976]

Based on historical averages, my understanding is that the bottom for the US markets should be sometime around 2017 give or take a bit either way. That's 17 or so years from top to bottom, measured in terms of P/E not absolute prices.

As I said, I'm no guru - I'm just repeating what I've been reading for quite a few years now.