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Wednesday, 20 September 2017

Still haven't bought a house...

OK, so I'm still here busy squirrelling away more than 30% of my take-home pay and using a low-cost global index tracker (this is a change to previous posts, where I preferred separate regional indices, but the principle is the same) and a low-cost broker.

I've been looking at houses and calculating how much I would save by buying rather than renting. It turns out that it would roughly halve my costs (i.e. 100% of my rental payments are currently "wasted", whereas about 50% of the monthly costs of ownership would be "wasted" - i.e. interest repayment, property tax, property maintenance etc. using typical figures and current interest rates.)

Sounds like a no-brainer, right?

The thing that makes me worried, a little like the picture of this blog post, is that last point.

Interest rates.

I know that we're not living in a "normal" interest rate environment right now, but I have ~25 years to pay off a mortgage. It's very likely (guaranteed?) that those repayments are going to go up, as pointed out in a recent article.

What to do?

For the moment, I'm happy to wait and see what happens. My overriding hunch is that the piper will need to be paid (i.e. we've been living beyond our means in the developed world since at least the 80s and those debts will have to paid back), which means that interest rates will go up (or, similarly, that inflation will go up, but wages won't) and that demographics will kick in (alluded to in an earlier post).

Only the benefit of hindsight will tell...

Monday, 25 April 2016

And now Japan...

Japan has just crossed up through the SSTO and 21/89 EMA, so I'm buying the Blackrock Japan Fund.

That's all stock markets except the US now, so I'm about 25% invested in equities now.

All previous purchases are in the green for now, but let's see what happens...

Knowing my luck, everyone will sell in May and I'll be left holding the bag...

My sell signal is if markets drop below their 89w EMA and the SSTO

Friday, 8 April 2016

Buying Europe and UK...

European shares and UK shares (based on the FTSE100 and All-Share index) have both now popped up through the 21-week EMA and SSTO, so I'm buying them.

As before, this means using the following funds:

Blackrock UK Equity Tracker D Acc

Blackrock Continental Europe Equity Tracker D Acc

All that remains is the US, which I believe is over-priced, and Japan, which is still in a bear market. Japan could be on the buy list soon enough though...

Saturday, 5 March 2016

Buying Emerging Markets and Pacific ex-Japan...

OK, so I have to admit I was hoping for some better bargains than this, but I've forced myself to follow my own "rules" - Emerging Markets and Pacific excluding Japan have just crossed up through their 21 week EMAs and SSTOs.

That means I'm buying them.

All other markets (US; UK; Europe; Japan) look expensive to me, although I'm at pains to point out that I have NO IDEA what the future holds. This is purely a rule-following exercise.

Since I approximately follow the Permanent Portfolio (with personal tweaks of adjusting allocations based on long-run price averages and timing of equities and bonds based on long-term moving averages to avoid bear markets and buy into bull markets at the beginning when they are cheap), my current allocation to equities is 27.6% based on long-run price averages.

I break that allocation to equities down as follows:

UK = 16%
US = 20%
Europe = 16%
Pacific ex Japan = 16%
Japan = 16%
Emerging = 16%

Therefore, only (16% * 27.6%) = 4.4% of my total wealth has been allocated to each of these markets.

Never put all your eggs in one basket...

UPDATE - I realised I ought to have pointed out HOW to buy these markets!

I'm personally buying the following:

Blackrock Pacific ex Japan Equity Tracker Class D Acc

Blackrock Emerging Markets Equity Tracker Class D Acc

Through my TDDirect SIPP and ISA.

As always, Monevator has a fantastic comparison of most (all?) of the online brokers and the cheapest index trackers. Like him, I also prefer funds rather than ETFs, and you can see why here.

Friday, 8 January 2016

Hoping for some Stock Market bargains...

As you might have noticed, the stock market is throwing its toys out of the pram.

For me, and anyone else sitting in cash / out of stocks, this could represent another buying opportunity...

I'll be following my favourite long-term indicators in a test that I haven't yet had the chance to try out. They work well in back-testing, but we all know that the past is no guide to the future.

Here's a link to a chart of the FTSE100 over the past ~20 years. You should see two trend lines on the FTSE index itself, and another chart of two lines below it.

The red line on the FTSE chart is the 21 week EMA (exponential moving average). This is my "short-term" signal line. The green line is the 144 week EMA. This is my "long-term" signal line.

When the FTSE is high and falls through the 21w EMA, I think nothing of it. When it falls below the 144w EMA however, this is one signal to get out of the market. When the 21w EMA also falls below the 144w EMA, this is another, more serious warning.

The graph below the FTSE is the Slow Stochastic or SSTO. It's a moving average of the closing price vs. the opening price. I like to use a period of time between the short (21) and long (144) periods, so I use 55w and 34w. When the short-term line (blue) falls below the long-term line (red), this warns that the "pressure" is falling and that the FTSE is tending to lose steam.

Using these signals on the recent FTSE100 gives this timeline:

Jun 5th = FTSE falls through 21w EMA (no big deal)
Jun 19th = 34w SSTO falls through 55w SSTO (first hint of FTSE losing steam)
Aug 14th = FTSE falls through 144w EMA (warning sign to exit the market)
Sep 25th = 21w EMA falls through 144w EMA (2nd warning sign to exit the market)

It's going to be interesting to see how this plays out, but if it's anything like the last time these signals all appeared (2001; 2008), there could be some cheap stocks by the time it's over.

Here's how I'm going to buy back in:

When the FTSE moves up through the 21w EMA, this is the first sign of improvement.
When the 34w SSTO moves up through the 55w EMA, this is the second and final sign I'll use to move some cash back into stocks.
The final confirmation, although it's too late at this stage, is the FTSE moving back up through the 144w EMA.

Tuesday, 22 December 2015

UK House Price History since 1952...

This is more for my own curiosity...

Green line = Nationwide UK house prices, corrected for inflation, since 1952 plotted on a log scale (left axis). The trend line is exponential and therefore appears linear on this scale.

Purple line = UK population plotted on a linear scale (right axis).

Comments are from wikipedia's article on UK economic history.

Tuesday, 8 December 2015

Buying a House... (aka taking out a 25 year loan)

Buying a house, or more specifically, taking a 25 year mortgage (which is what most people need to do to buy a house), at the present moment is like taking a bet on interest rates. This is not a bet I feel comfortable making.

Take a look at the following graph:

It shows UK interest rates since 1694. There's something distinctly odd about the graph on the right, where we are now...

Taking a 25 year loan, which in the UK is generally only fixed for 2 years at a time (you could fix for up to 10 years, but the penalties for needing to repay early or remortage can be hefty) is equivalent to betting that the following will happen: