Should I Buy ASX Shares Now?

I wasn’t however smart enough to focus my buying on the small cap stocks that got hit. Returns since in that area have been spectacular. It has also shocked me the speed and magnitude to which they rebounded and all this happened.

L1 Long Short Fund Ltd (ASX:LSF)

Since it all happened so fast my buying was more focused on LICs which also saw their discounts widening substantially. For me mainly (ASX:LSF), which spent plenty of time at a 33% or more discount to pre-tax NTA, and much larger to the post tax measure. This may be a surprise to some as I have been quite critical of them in the past about the fee structure. However in March the fee drag was less of an issue as I shall explain.

I still own, it is looking like the buyback will be quite accretive to NTA. They are going a bit slower than what I like but may end up acquiring more than 5% of all units back at a 25% discount to NTA over a 12 month period. That effect reduces a lot of the drag from their management fee. Even now after the huge bounce it will still take a while for them to get back to their high watermark and for any performance fees to kick in.

From boom to gloom to boom in 2 months?

If had a $1 for every time I have seen the below market cycle sentiment picture the last 2 months I would have a lot of dollars.

What strikes me as weird is the confidence to which investors stated in various times in March where we were at in this cycle.

The most amusing of course was in February when the ASX200 falls from 7,150 to 6,850 and they quote Buffett about time to be buying in gloom. You usually know when to disregard it as those early calls often quote “Buffet” instead.

Just 2 or 3 weeks later things got more interesting when the ASX200 was 5,500. You could find many confidently expressing that this was clearly the denial phase, therefore clearly you should be selling a lot of your portfolio. At the same time though many were saying clearly capitulation has occurred so it makes sense to be buying a lot. Confused yet?

As I write now I seem to be coming across more comments that markets will keep going up because too many investors are bearish. Yet if I am seeing more and more investors saying this doesn’t that mean more and more investors have already turned bullish?

I am sure I have confused my readers now on this market sentiment analysis stuff, I have certainly confused myself anyway by writing this.

A good example of how fickle sentiment is might be how I have felt using twitter this year for following stock market news and opinions. As I said at the beginning of the year it gave me the sh*ts because everyone was bragging about how their portfolio rose 88% in 2019! That swung around so quickly though, FOMO was replaced by FEAR. Mid to late March I had to switch it off a lot of the time because it would have psyched me out of doing any buying whatsoever. A few more days of reading the news and various opinions might have seen me convert to a doomsday preppers lifestyle.

Certainly the markets have changed a lot again since March 23rd.

Now once again I think if I get too plugged into stock market forums etc I will be convinced to take on more risk. Seems like the Aussie thing to do is get your line of credit on your house (or your stimulus payments / $20k of early retirement fund releases), leverage that into a margin lending structure, then open up a CFD account using Afterpay, to punt on Afterpay (AFTPF) going to $100 a share.

YouTube is going gangbusters with “market experts” opining on stocks, their follower counts are surging. You can search there for “ASX shares to buy”. You can find your favourite video with 80k views and join 500 odd people commenting to get comfort of what to do next. Get your “non-advice” answers from a youtuber that has seen it all in markets. Veteran 22 year old’s that were old enough to have survived the great market panic of late 2018 so therefore know what to do now.

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Disclaimer: These views on excessive premiums to NTA have been made before on this blog. Not much has changed so I have been wrong on this before and may well be so in the future!

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