GoSeigen million challenge!

Honest reporting on shorter-term trading activity and ideas
GoSeigen
Posts: 33
Joined: November 8th, 2016, 11:14 pm

GoSeigen million challenge!

Postby GoSeigen » December 14th, 2016, 11:34 am

[Originally posted on TMF "Trading My Way To A Million" board, message #1084 date 10/06/2016 16:02]

This thread will hold my version of the board's challenge. Here are my rules:

1. All posts will be on this thread.
2. I will update whenever I trade and on this post's anniversary each year.
3. If I forget to post please poke me!
4. This is a real cash portfolio. I've cheated by using a fund that I started around the same time as this board was opened: my first trade was on 20 Apr 2010. Thus the first few trades are historical.
5. Total cash remittances to date are £4,181.66, a bit more than ukpoker's original £3,000. The cash consists of the personal savings of my daughter which as a precaution I moved out of bank deposits into gilts during the bank crises of 2010 and 2011.
6. The portfolio holdings are/will be relatively concentrated but consist of my strongest conviction stocks only.
7. I aim to produce a better return than 3% net net net by timing my trades based on my analysis which at present consists broadly of: a. assessing relative asset class valuation via risk free yields and risk spreads, b. watching broad macro and demographic trends, c. Technical Analysis and then d. identifying appropriate buying and selling opportunities.
8. I aim to trade infrequently, looking for multi-bag returns from risky assets, and improving yield outlook while holding safer assets. Therefore apologies if nothing much of interest happens on this thread!


Since 2010 the fund has grown to £17,127.79. Below is a list of the cash flows for IRR calculation, then the current asset allocation, finally a list of all trades to date.

My conviction trade of the moment is to accumulate bank stocks, while remaining highly defensive. Thus the current allocation is mostly cash with some shares in RBS and Barclays, both of which are trading well below NAV almost ten years after their crisis.

To reach the target million, I have to double the portfolio value six times. At the current IRR that will take around 18 years to achieve. That's roughly how long I have been posting on TMF so who knows, I may get there in the end! But somehow I doubt it. A more interesting measure will be number of postions held. So far, the portfolio has held four positions: roughly 100% gilts, then 100% B&B bonds, then 100% cash, and now a growing exposure to bank shares.


GS

Date          Transaction   Symbol        Unit Cost     Quantity      Fees          Value
---Cash flows---
10 Jun 2010 Deposit CASH £2,973.66
10 Jun 2011 Deposit CASH £1,208.00
10 Jun 2012 £0.00
10 Jun 2013 £0.00
10 Jun 2014 £0.00
10 Jun 2015 £0.00
10 Jun 2016 Value -£17,127.29
IRR 27.87%

---Asset allocation---
Cash -13707.79
Stocks -£3,419.50

---Trades---
20 Apr 2010 BUY TR27 0.9657 2017.44 £51.76 -£2,000.00
5 Jan 2011 BUY TR27 1.0102 2213.36 £31.46 -£2,267.40
10 Sep 2012 SELL TR27 1.256 4230.8 £1.85 £5,312.03
10 Sep 2012 BUY BBN 0.505 10000 £50.00 -£5,100.00
25 Sep 2014 SELL BBN 1.65 10000 £50.00 £16,550.00
8 Apr 2016 BUY BARC 1.491096 1000 £19.41 -£1,510.51
6 May 2016 BUY RBS 2.13 800 £20.47 -£1,724.47

GoSeigen
Posts: 33
Joined: November 8th, 2016, 11:14 pm

Re: GoSeigen million challenge!

Postby GoSeigen » December 14th, 2016, 11:40 am

[Originally posted on TMF "Trading My Way To A Million" board, message #1107 date 14/07/2016 11:26]

Since the purchase of bank shares in April and May 2016, banks have continued to underperform the wider FTSE100. I see this as a negative sign regarding my purchases and a bearish sign for the market overall. The FTSE itself has had a good run up in the past few weeks. I therefore feel it's prudent to hedge my bank share purchases and this morning have bought XUKS to do so. Trade details follow:

Date          Transaction   Symbol        Unit Cost     Quantity      Fees          Value
14 Jul 2016 BUY XUKS 486.244 600 £11.95 -£2,929.41


Portfolio value stands at 16588.81 at time of writing.


GS

tabhair
Posts: 13
Joined: November 4th, 2016, 4:07 pm

Re: GoSeigen million challenge!

Postby tabhair » December 14th, 2016, 12:34 pm

I also hold an over-sized position in Barclays. In a market that is very over-valued, the banks are one of the few investments in the broader market that are trading at reasonable multiples. Even with the increase in price, it's still only selling at 9x normalized earnings. Still cheap, but the valuation gap has closed quite a bit in the last month.

At this point though, I feel RBS is probably the more compelling opportunity at the moment. It has the greater discount to book than Barclays. It has more hair on it than Barclays, but I think the current management have a plan and are doing well in executing. I think in a years time, the capital position will be better, the bad news of PPI/DOJ will be in the rearview window, and investors will start thinking about dividends and start moving back in. Of course, the price should be higher at that point.

Bubblesofearth
Posts: 46
Joined: November 8th, 2016, 7:32 am

Re: GoSeigen million challenge!

Postby Bubblesofearth » December 14th, 2016, 3:49 pm

GoSeigen wrote:[Originally posted on TMF "Trading My Way To A Million" board, message #1107 date 14/07/2016 11:26]

Since the purchase of bank shares in April and May 2016, banks have continued to underperform the wider FTSE100. I see this as a negative sign regarding my purchases and a bearish sign for the market overall. The FTSE itself has had a good run up in the past few weeks. I therefore feel it's prudent to hedge my bank share purchases and this morning have bought XUKS to do so. Trade details follow:

Date          Transaction   Symbol        Unit Cost     Quantity      Fees          Value
14 Jul 2016 BUY XUKS 486.244 600 £11.95 -£2,929.41


Portfolio value stands at 16588.81 at time of writing.


GS


IIRC from TMF you were bearish on the market earlier this year when the FTSE was around 5500.

At what point do you think you reverse this position and become bullish stocks?

Just curious.....

BofE

GoSeigen
Posts: 33
Joined: November 8th, 2016, 11:14 pm

Re: GoSeigen million challenge!

Postby GoSeigen » December 19th, 2016, 1:55 am

Bubblesofearth wrote:IIRC from TMF you were bearish on the market earlier this year when the FTSE was around 5500.

At what point do you think you reverse this position and become bullish stocks?

Just curious.....

BofE


Hmm, I've been bearish stocks at all levels of the FTSE for years! In spite of that overall skepticism I have attempted to stock pick while maintaining an almost market-neutral hedged position overall, hence purchases of banks in this portfolio.

I'll become generally bullish stocks when any old fool can make money from them i.e. when their 10-year expected return is a lot better than the current 1%pa for the S&P compared to 2.5% for 10yr-UST.

GS

LongbeardRanger
Posts: 13
Joined: November 7th, 2016, 10:25 am

Re: GoSeigen million challenge!

Postby LongbeardRanger » December 19th, 2016, 9:24 am

GoSeigen wrote:I'll become generally bullish stocks when any old fool can make money from them i.e. when their 10-year expected return is a lot better than the current 1%pa for the S&P compared to 2.5% for 10yr-UST.

GS


Hi GS,

Good to see you posting here - I always enjoyed your posts on TMF and learned a lot from them.

Would you be able to explain the basis of your views on expected returns on the S&P? (Not questioning the conclusion - just want to understand what it is that gets you to a 1% expected return.)

Thanks
Phil

GoSeigen
Posts: 33
Joined: November 8th, 2016, 11:14 pm

Re: GoSeigen million challenge!

Postby GoSeigen » December 19th, 2016, 10:01 am

LongbeardRanger wrote:
GoSeigen wrote:I'll become generally bullish stocks when any old fool can make money from them i.e. when their 10-year expected return is a lot better than the current 1%pa for the S&P compared to 2.5% for 10yr-UST.

GS


Hi GS,

Good to see you posting here - I always enjoyed your posts on TMF and learned a lot from them.

Would you be able to explain the basis of your views on expected returns on the S&P? (Not questioning the conclusion - just want to understand what it is that gets you to a 1% expected return.)


Thanks Phil for the generosity.


I'm going to be unhelpful and point you to an ageing post by John Hussman which deals in detail with valuation issues:

http://www.hussmanfunds.com/wmc/wmc140414.htm

I'm a great fan of Hussman's work and if you like what you read, then follow some of his links and look at his Weekly Comment archive. You will find him banging the same drum over and over, but there are some gems in his writings.

Oh, and BTW he's been "wrong" about equities for some years now...


GS

LongbeardRanger
Posts: 13
Joined: November 7th, 2016, 10:25 am

Re: GoSeigen million challenge!

Postby LongbeardRanger » December 19th, 2016, 10:06 am

GoSeigen wrote:I'm going to be unhelpful and point you to an ageing post by John Hussman which deals in detail with valuation issues:

http://www.hussmanfunds.com/wmc/wmc140414.htm

I'm a great fan of Hussman's work and if you like what you read, then follow some of his links and look at his Weekly Comment archive. You will find him banging the same drum over and over, but there are some gems in his writings.

Oh, and BTW he's been "wrong" about equities for some years now...


GS


Thanks - that is fine. I am aware of Hussman's work but have not read it in detail (though I have read a couple of pieces arguing his approach is mistaken). Time I read what he actually said, I think!

This strikes me as a potentially interesting topic for discussion, but perhaps not on this thread as I don't want to derail it too much.

toofast2live
2 Lemon pips
Posts: 102
Joined: November 4th, 2016, 2:24 pm

Re: GoSeigen million challenge!

Postby toofast2live » December 19th, 2016, 1:38 pm

Hussman :lol:

Predicted the 2000 crash and the 2007 crash, he reckons, as well as mini crashes along the way.

And his Strategic "Growth" fund?

It's delivered about -5%pa over the last 10 years :shock: and under 2%pa since formation in 2000.

He predicts returns of only 1%pa on the S&P500 over the next ten years, based on current excessive valuations. Well, thanks Huss - given your record and that prediction you're a great advert for a tracker. Or just about anything other than your funds ;)

GoSeigen
Posts: 33
Joined: November 8th, 2016, 11:14 pm

Re: GoSeigen million challenge!

Postby GoSeigen » December 19th, 2016, 1:56 pm

UK municipal debt is rarely available to buy. I spotted some Liverpool Corp 3.5% irredeemable available at 64p and snapped up a few for this account. Yield is about 5.4%, a 3.3% spread over the dated gilt with most closely matching duration [3 1/4% Treas Gilt 2024]. Not too bad in this low-interest environment. Trade details follow:

Date          Transaction   Symbol        Unit Cost     Quantity      Fees          Value
19 Dec 2016 BUY 79HJ 64p 4500 £63.47 -£2,943.47


Portfolio value stands at £17,485.24 at time of writing.


GS

GoSeigen
Posts: 33
Joined: November 8th, 2016, 11:14 pm

Re: GoSeigen million challenge!

Postby GoSeigen » December 19th, 2016, 4:07 pm

GoSeigen wrote:[3 1/4% Treas Gilt 2024]


Sorry, that should be:

[3 1/4% Treas Gilt 2044]

GS

Bubblesofearth
Posts: 46
Joined: November 8th, 2016, 7:32 am

Re: GoSeigen million challenge!

Postby Bubblesofearth » December 20th, 2016, 3:41 pm

GoSeigen wrote:I'll become generally bullish stocks when any old fool can make money from them i.e. when their 10-year expected return is a lot better than the current 1%pa for the S&P compared to 2.5% for 10yr-UST.

GS


It is interesting that 10 yr UST is now yielding a full % point more than 10yr UK gilts. Not sure the S&P expected return is 1% though. The dividend yield alone is 2% so unless you expect fairly savage dividend cuts (maybe you do?) that seems pessimistic. That said the rise and rise of the US markets post-Trump is starting to look very sentiment driven which is rarely a good thing.

Whilst UK gilts offer a lower GRY than UST of similar duration the UK stock market dividend yield is somewhat higher than the US market, nearly 4% last time I checked. So the argument that UK stocks are expensive on estimated future cash-flows (ref Hussmans valuation) relative to other asset classes is questionable. Of course if the US markets fall we'll follow.

The other issue I have with Hussmans analysis is that it's all just a bit too clever. There are plenty of equally clever people arguing the opposite. In the end the best judge is the markets and, so far at least (the S&P 500 is up over 20% since the time of the link you gave), Hussman has been wrong.

BofE

toofast2live
2 Lemon pips
Posts: 102
Joined: November 4th, 2016, 2:24 pm

Re: GoSeigen million challenge!

Postby toofast2live » December 21st, 2016, 7:11 pm

Hussman is slightly less successful over 15 years than my building society deposit account. He's a screaming giggle. Entertaining, intellectually compelling but a freaking giggle.

Of course in his 17th year he may be correct, but boy would he have to be mega correct. By my calculations even the perma bears at Capital Gearing and Personal Assets have done better with a similarly gloomy World view.

Hussman is a great advert for NOT TIMING THE MARKET.

Moderator Message:
This thread is supposed to be about GoSeigen's goal of growing £3,000 to a million. Let's stay on-topic, even though GoSeigen himself was the first to raise the topic of Hussman. MDW1954

DiamondEcho
Lemon Slice
Posts: 369
Joined: November 4th, 2016, 3:39 pm

Re: GoSeigen million challenge!

Postby DiamondEcho » December 22nd, 2016, 10:11 am

GoSeigen wrote:
Bubblesofearth wrote: At what point do you think you reverse this position and become bullish stocks?
BofE

...I'll become generally bullish stocks when any old fool can make money from them ...


When fools rush in, it's invariably time to flee to the hills. Reminds me of the run-up to the dot-com crash.

This might also be of interest re: the CAPE-Ratio on the FTSE [article from today]:
'The FTSE 100's p/e ratio is 33, the historical average is 15. So are shares hugely overvalued?'
http://www.telegraph.co.uk/investing/sh ... vervalued/

tjh290633
2 Lemon pips
Posts: 241
Joined: November 4th, 2016, 11:20 am

Re: GoSeigen million challenge!

Postby tjh290633 » December 22nd, 2016, 11:02 am

DiamondEcho wrote:This might also be of interest re: the CAPE-Ratio on the FTSE [article from today]:
'The FTSE 100's p/e ratio is 33, the historical average is 15. So are shares hugely overvalued?'
http://www.telegraph.co.uk/investing/sh ... vervalued/


The answer is that some are and some are not. The miners and the oils have a big influence.

There are always shares that are undervalued, like WMH at the moment, which has suffered the biggest fall in my portfolio this year, followed by TW. Gambling is not going away and neither is housebuilding.

TJH

1nv35t
Lemon Slice
Posts: 257
Joined: November 4th, 2016, 8:18 pm

Re: GoSeigen million challenge!

Postby 1nv35t » December 22nd, 2016, 12:15 pm

DiamondEcho wrote:This might also be of interest re: the CAPE-Ratio on the FTSE [article from today]: 'The FTSE 100's p/e ratio is 33, the historical average is 15. So are shares hugely overvalued?'

Historic earnings yields of 6.7% (inverse of PE) compared to more recent 3% is a reflection of historic interest rates/inflation being higher than of present.
So are shares hugely overvalued?

No, just priced in reflection of current circumstances (interest rates/inflation and growth rate expectations).

runnygum
Posts: 9
Joined: November 4th, 2016, 9:35 pm

Re: GoSeigen million challenge!

Postby runnygum » January 3rd, 2017, 1:27 pm

GoSeigen wrote:UK municipal debt is rarely available to buy. I spotted some Liverpool Corp 3.5% irredeemable available at 64p and snapped up a few for this account. Yield is about 5.4%, a 3.3% spread over the dated gilt with most closely matching duration [3 1/4% Treas Gilt 2024]. Not too bad in this low-interest environment. Trade details follow:

Date          Transaction   Symbol        Unit Cost     Quantity      Fees          Value
19 Dec 2016 BUY 79HJ 64p 4500 £63.47 -£2,943.47


Portfolio value stands at £17,485.24 at time of writing.


GS


Nice buy, as you indicate as this rate and low risk, you should hit your million... eventually..
Sitting on cash is not a bad idea. Bargains do come up from time to time, like commodities early in 2016 etc..
Im more a LTBH bod, I dont like selling stuff. I rode BLT from 1800 down to 590 odd and back up now to 1300+ never considered selling as the long term outlook is/was still positive.

Lootman
Lemon Slice
Posts: 570
Joined: November 4th, 2016, 3:58 pm

Re: GoSeigen million challenge!

Postby Lootman » January 3rd, 2017, 2:12 pm

GoSeigen wrote:UK municipal debt is rarely available to buy.

The big appeal of municipal bonds in the US is that they are mostly or totally tax free to investors. This means that the yields can be lower and still be attractive, but also means that they are of little interest to non-US investors.

Whilst the interest on US Treasuries is free of local tax, the interest on muni's can be free of federal, state and local tax. In high tax states like NY and CA that is a considerable benefit and boost to the market.

If the UK government ever wants a vibrant and liquid muni bond market here, they need to make them tax-free. Absent that I think issues like the one you cited will remain rare.

I suppose the good news is that UK cities probably cannot declare bankruptcy. US cities can and do.


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