My fortunes rise and fall with the market

Having pulled the daily market closing data to update my EW Timing Indicator I plotted the daily market movements so far for 2009 against my daily net worth figures. As expected, my NW moves in lock-step with market movements, and a plot of net worth against the Australian All Ords index shows a linear relationship with a correlation coefficient of around 0.89 - I suspect the correlation would be even higher except that I sold off about 25% of my stock portfolio a couple of weeks ago. That change is visible in the second chart which plots both the All Ords Index and my Net Worth over time. The NW slope back up during the past two weeks has been less than the market, which means that unless I reinvest in the market as it recovers (and my gearing levels drop to more reasonable levels) I wouldn't get back to my previous maximum net worth if the market reaches it's previous peak.




According to the fitted linear relationship, each one point increase in the All Ords index boosts my net worth by around $175. Which explains why it was a lot more enjoyable watching the market rise from 2003-2007, than it has been watching the "Great Recession" take it's toll over the past 18 months.

Subscribe to Enough Wealth. Copyright 2006-2008

Dumb and Mrs Dumber

Last year I saw the CEO of Bris Connections on a nationally televised business show answering questions about the risk of "mom and dad" investors buying the partly-paid shares in his company for only a few cents, and not realising that there were two $1 calls due on the stockholders in the next year.

Sure enough, there are now many investors crying foul and trying to sue all and sundry for not saving themselves from their own greed and/or stupidity. For example, one couple bought 200,000 of the shares for only 0.3c each (total outlay $600+$19.95 brokerage), They are soon due to pay up the first $290,000 call on their shares, which would allegedly cost them their home (presumably because they could be sued if they don't pay the call amount, and their only asset is their $450,000 house).

Now, I must admit I find their claim of total ignorance a bit hard to swallow. The relatively large brokerage cost on a $600 parcel of 0.3c shares and the daily volatility of these shares suggests that this was a purely speculative gamble, rather than a long-term investment. And despite their claims that the online brokerage site didn't "warn them" that they would have to pay another $2 per share when the calls fell due, they would have seen that that shares were partly paid when they placed their order.

Anyhow, there was plenty of publicity (such as the CEO interview) to ensure that the calls due on these shares were public knowledge. It appears to be just another case of greedy investors taking a punt on a highly risky investment, and then trying to sue anyone involved in the transaction that has big enough pockets (usually a bank).

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Is that the end of the tunnel, or an on-coming train?

I recently posted about a experimental market timing indicator I think may help me execute "dynamic asset allocation" in the future, rather than just employ a simple "buy and hold" investment strategy.

In response to that post, Chris has asked

"with the recent rally, are you getting close to a buy trigger?"


My answer is, yes, the data is getting close to my trigger conditions - today the market adjusted close was above the current trigger level of 3422 for the first time. According to my current version of the model, if it closes at or above 3422 for another four days in a row the bear market has bottomed out according to the "EW indicator" ;). I don't actually have any free cash to invest (unless I wanted to boost my margin loan LVRs back above 90%!), so all it will mean to me is that I dollar cost average my superannuation contributions into the Vanguard High Growth Fund as soon as they are contributed by my employer, rather than accumulating some cash.

I noticed that today Mark Mobius (a prominent investment manager with a cool surname) also "called" the start of the next bull market. I'll give it another four days to make sure ;)

It's funny how the market may have bottomed out just as I was dumping a large portion (around 25%) of my stock portfolio! I seem to have reasonably good "insight" into the market, but absolutely no ability to make profitable use of that knowledge.

Perhaps I just have an inordinate amount of "bad luck" when it comes to investing - if I'd rolled over my index put options back in Dec '07 and was now sitting on a pile of cash ready to invest close to the market bottom, I'd look like a genius. Instead, the average annualised ROI on my total investment portfolio (including non-stock investments) since 2003 is currently just under 0%pa!

Date Adj Close*
23-Mar-09 3,483.10
20-Mar-09 3,405.00
19-Mar-09 3,416.80
18-Mar-09 3,386.20

data from http://au.finance.yahoo.com/q/hp?s=%5EAORD

Subscribe to Enough Wealth. Copyright 2006-2008

The Story of Story and Clark Pianos

Having just bought a second-hand 1970 Story and Clark piano, I was interest in learning a bit more about the company that had made my piano. It turns out that Story and Clark has a long and interesting history in piano manufacturing, and is still being used as a piano brand name after the company changed ownership several times towards the end of the twentieth century.

Story and Clark was founded in 1884 by Hampton L. Story, his son Edward H. Story and Melville Clark, an expert reed-organ builder. Story senior had started out working in a music store for $50 a month and saved enough to buy out the principal in 1859. He joined with various piano makers to start manufacturing Story and Powers pianos in 1862, then Story and Camp pianos and organs in 1868, before finally establishing Story and Clark pianos in 1884. The Story and Clark business thrived and opened a factory in England in 1892 and another in Germany in 1893.

Clark left the firm in 1901 to form his own company, and Story and Clark pianos moved to a new factory in Grand Haven, Michigan. Despite surviving the Great Depression and increasing sales during the post war years, the factory was eventually closed in 1984 and has since been redeveloped into over 60 condominiums priced from $159,00 to $795,00. The Story and Clark piano business had been sold to the Lowrey Organ Company in 1962, and sales slowly declined during the 1970s. When the factory closed in 1984, Lowrey split the piano and electronic keyboard businesses and sold them to different investors. In 1992 S&C pianos became a division of the Classic Player Pianos Corporation in 1990. In 1993 it was taken over by QRS Music Technologies, the descendant of the company founded by Clark in 1900! Pianos with the brand Story and Clark are still being produced, but are no longer manufactured in the US.



Story and Clark pianos can be dated by the serial number ranges listed below, with the numbers indicating the last piano made each year:

1895 1900 
1900 5335 
1901 7100 
1902 9100 
1903 11400 
1904 14000 
1905 15600 
1906 18400 
1907 21400 
1908 24100 
1909 28900 
1910 30700 
1911 40000 
1912 43600 
1913 47000 
1914 50200 
1915 53200 
1916 58000 
1917 62300 
1918 67000 
1919 72300 
1920 78800 
1921 84000 
1922 89400 
1923 95000 
1924 101200 
1931 129100 
1932 130000 
1933 131100 
1934 132400 
1935 134000 
1936 138000 
1937 142000 
1938 147000 
1939 152800 
1940 160000 
1941 168000 
1942 172000 
1943 173000 
1944 war 
1945 war 
1946 177000 
1947 180000 
1948 190000 
1949 200000 
1956 265000 
1957 272000 
1958 282000 
1959 294000 
1960 307000 
1961 321000 
1962 335000 
1963 349000 
1964 364000 
1965 379000 
1966 393000 
1967 407000 
1968 421000 
1969 435000 
1970 449000 
1971 463000 
1972 477000 
1973 491000 
1974 505000 
1981 582627 
1982 591528 
1983 609023 
1984 closed 
1985 closed 
1986 closed
1987 closed 
1988 closed 
1989 closed 
1990 700001 
1991 700420 
1992 701280 
1993 701970 
1994 702324 
1995 703128 
1996 703629 
1997 705400 
1998 707000 

References:

'The Piano: An Encyclopedia' By Robert Palmieri, Margaret W. Palmieri. Routledge; 2 edition (2003). Page 382

'Pianos and Their Makers' By Alfred Dolge. Dover Publications (1972). Page 376

http://www.qrsmusic.com/storyclark.html

Subscribe to Enough Wealth. Copyright 2006-2008