Yes, it's that time again to calculate the Market Risk Premium for the ASX200 and it's massive.
Usual methodology applies. Last 2.5 years of daily returns of ASX200 gives us an average capital gain of 6% (alot better than Septembers 2%). It has almost tripled. Add on the average dividend yield of 4.625% and you get a total return from the share market of almost 10.70% (that's great guns)
The average 10 year bond rate has reduced to 3.70% as investors like the look of our bonds as well (I don't really know why...ultimately the price of bonds will drop like a stone).
All up, it means that the market risk premium is now at 7%. Wait for the correction...it should be coming.
Wednesday, January 15, 2014
Tuesday, January 14, 2014
Is first 5 trading days of the year a good sample for the ASX200?? Looks like it
Read with interest some reaserch regarding the month of January (and the first 5 trading days of the year) being a good reflection on avaerage returns for the entire year. The research was performed on the S&P500 and seemed to be compelling over the last 30 odd years.
I decided to have a look at the last 12 years (2002-2013) of the ASX200 to see if a similar effect was going on here.
The results were mixed. Regarding the month of Jan being a good indicator, only 7 out of 12 years had a positive correlation between average returns in Jan vs average returns over the entire year (Data was daily returns from yahoo finance).
However for the first 5 trading days in Jan, 10 out of 12 years were correlated (which is a little more interesting)
Behavioural finance in all it's glory. People start like they want to finish. In that case, battern down the hatches for a negative 2014.
I decided to have a look at the last 12 years (2002-2013) of the ASX200 to see if a similar effect was going on here.
The results were mixed. Regarding the month of Jan being a good indicator, only 7 out of 12 years had a positive correlation between average returns in Jan vs average returns over the entire year (Data was daily returns from yahoo finance).
However for the first 5 trading days in Jan, 10 out of 12 years were correlated (which is a little more interesting)
Behavioural finance in all it's glory. People start like they want to finish. In that case, battern down the hatches for a negative 2014.
Monday, January 6, 2014
Smarttrans...is it smart?
Was reading in the Afr a puff piece regarding an IT/mining company called Smarttrans. The article was basically saying that there Revenue was up this year due to app sales in China and Bitcoin mining.
If the Bitcoin stuff wasn't a red flag already, I decided to delve into the annual reports to see what secrets prevail.
A couple of things.
1. Chairman of directors resigned in November 2012.
2. Not a lot of independence on the board. A few are ex managers of the the business and related entities
3. Revenue recognition is a worry. Basically the annual report specifies the company recognizes revenue when goods or services are delivered to the customer. No refernce to using the standard comment when "collectibility is reasonably assured". Combined with statements like "push" marketing for apps, there are concerns that revenue may be overstated.
4. 59 million in accumulated losses.
5. Accounting Queries. 2013 annual report had an asset sale of 2 million included under revenue..
6. One of the biggest assets is capitalized mining expenditure.
7. Cash flow is a Concern. Without the 2 Million in asset sales and a 2 million capital raising, the cash flow would have been negative.
Other comments: in my opinion, it is very hard to make money from apps. When 12 year olds are writing apps for mobile phones, it is pretty clear that there are no barriers to entry in the app world. If this is where Smarttrans is heading, I fear for its long term viability. As for the Bitcoin stuff...as I understand it, anyone can mine bitcoins..it's just an algorithm. Dangers are that the Bitcoin price will drop, which it has already, as countries start banning its use or start policing it. Also, there are only a fixed number of bitcoins that will ever be produced..and who knows whe the tap will turn off.
But hey, I could be wrong.
Note: not an recommendation to invest/ not invest in Smarttrans. Please see your financial advisor before investing.
If the Bitcoin stuff wasn't a red flag already, I decided to delve into the annual reports to see what secrets prevail.
A couple of things.
1. Chairman of directors resigned in November 2012.
2. Not a lot of independence on the board. A few are ex managers of the the business and related entities
3. Revenue recognition is a worry. Basically the annual report specifies the company recognizes revenue when goods or services are delivered to the customer. No refernce to using the standard comment when "collectibility is reasonably assured". Combined with statements like "push" marketing for apps, there are concerns that revenue may be overstated.
4. 59 million in accumulated losses.
5. Accounting Queries. 2013 annual report had an asset sale of 2 million included under revenue..
6. One of the biggest assets is capitalized mining expenditure.
7. Cash flow is a Concern. Without the 2 Million in asset sales and a 2 million capital raising, the cash flow would have been negative.
Other comments: in my opinion, it is very hard to make money from apps. When 12 year olds are writing apps for mobile phones, it is pretty clear that there are no barriers to entry in the app world. If this is where Smarttrans is heading, I fear for its long term viability. As for the Bitcoin stuff...as I understand it, anyone can mine bitcoins..it's just an algorithm. Dangers are that the Bitcoin price will drop, which it has already, as countries start banning its use or start policing it. Also, there are only a fixed number of bitcoins that will ever be produced..and who knows whe the tap will turn off.
But hey, I could be wrong.
Note: not an recommendation to invest/ not invest in Smarttrans. Please see your financial advisor before investing.
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