Interactiv Brokers questions

[Jerome]

Indeed I tested this Swiss IBAN thing the other day and it works. Thanks for the tip. Super fast too.

Concerning the valuation of indices, there are three indicators that work well. At the international level, the PE Schiller ratio and the P/B ratio. In the USA, there is also the 'Buffett ratio', i.e. the ratio between American indices and GNP. Most indices are indeed expensive at the moment, except in emerging countries and Japan. In the latter, unlike the former, there is also quality. In Europe, prices are quite reasonable overall. You can find a bit of everything there, expensive, fairly cheap, and not always quality.

To find stocks I use screeners and sometimes I feel around a bit at random.

[PloutosNX]

Hello Jerome,

Of course, the advantage with the IBAN is the payment in 1 day! I am happy to have been able to bring something to the site!

I thought you were using a screener, but with which platform or do you have several? I haven't found one that allows enough flexibility of use, but maybe I haven't looked in the right place.

I'm going to look at these two ratios, Shiller PE and P/B. I had started looking at the PE, but it seems to me that it's very difficult to find this type of opportunity in a market that is fairly liquid.
Would you have any reading to recommend to me regarding the explanation of ratios and finding the most attractive markets? I am currently with Benjamin Graham's book and I have not yet been able to immerse myself in Jeremy Siegel's.

Good day,
Xavier

[Jerome]

For valuation ratios I advise you to read my series of articles that talk about it (see tutorial menu). However, this does not concern the market but the shares. So I do not discuss the PE Schiller ratio.

Otherwise you can also read this:

Research_2016-01_Predicting_Stock_Market_Returns_Shiller_CAPE_Keimling-1

For screeners I use those of financial times, free, but access to company data is paid. I also use the one from quant investing, paid.

 

[PloutosNX]

Hello Jerome,

I hope you are well. Sorry for not being more present and taking too long to respond.
I did the poll just this morning! If you allow me I will open a new topic to be able to give an opinion on certain points that you raise.

The more I advance in my research and understanding of the markets, stock valuations, dividends, etc., the more questions I have!

Referring to one of your articles, you talk about using a SHORT position on the S&P500 when the momentum is negative. Which ETF do you use to make the SHORT and with what momentum value? Do you use a weighted value with a higher share based on time (eg 6-3-1 month at 20-30-50%)?
This is similar to technical analysis and I remember reading that it was the best way to lose... am I to understand that in some cases you make exceptions and that TA is a good complement to the fundamental analysis and stock picking that you generally do?

I am currently still deepening my knowledge without taking action.

I have continued my research on stock valuation ratios, but I remain stuck on how to find, select and define which stock to put in a portfolio.

Would you be willing to show how you go about finding an interesting stock using "financial times" or "quant investing"?

I also read that you talk about the banking sector and that some valuations are interesting, but if we take UBS as an example, the stock is at a low price (compared to 2007) and the dividends are high. Is it a good investment? Or the pressure it is under internationally and the penalties it pays would not be a very negative factor?

Good day,
Xavier

PS: I might open other topics to avoid continuing to load this one and it becoming a "dog".

[Jerome]

So this excellent sentence was from you! Very last participant 😉

Yes, of course you can open topics. That's what it's for.

The ETF for the S&P is the traditional SPY, the most used in the world. It costs next to nothing and is hyper liquid. If you can't short it, then buy SH.

You are right. Trend following is TA and as you know I am not a fan of the latter. It is indeed a good way to lose money.

However, several renowned authors, who in any case cannot be classified among the gurus of TA, have proven that trend strategies can work. I am thinking for example of Jeremy Siegel in his bible Investing in Long-Term Stocks (https://www.dividendes.ch/lectures/), James O'Shaughnessy in What works on Wall Street (excellent work) and the various research of Mebane Faber. See also my series on diversification (https://www.dividendes.ch/2017/08/comment-diversifier-son-portefeuille-pour-se-prevenir-des-risques-de-marche-120/).

I use these trend-following in my asset allocation primarily to know if we can buy or if it is better to wait for a more favorable moment because the market is still bearish. This certainly does not allow you to work miracles in terms of performance, but it helps to reduce the volatility of the portfolio, especially if it is associated with a capital protection strategy (see tutorial).

More specifically to your question, I also have a small line of alternative strategies in this allocation that actually goes a little further by shorting the market, but only when it is both very expensive and in a bearish phase. I consider this position more as a kind of hedge than speculation.

Mebane Faber uses simple 200-day MAs for all assets. After several backtests, I had the best results with simple MAs with durations that vary somewhat depending on the assets. In addition, I convert the assets to CHF before calculating the MAs. For SPY I therefore use 224 days.

For UBS, please read my analysis, everything is said there. (under articles/analyses or via the search bar)

For screeners, this would probably deserve an article… You just have to give me a little time 😉

[PloutosNX]

Hello Jerome,

So this excellent sentence was from you! Very last participant 😉

Anonymity is not what it used to be :-P. You were able to end your survey with a sentence that stuck with you 🙂. I made at least one spelling mistake… (the key and not the key)

The ETF for the S&P is the traditional SPY, the most used in the world. It costs next to nothing and is hyper liquid. If you can't short it, then buy SH.

I don't think I have the skills to "short" a normal ETF yet... I thought you had to use a derivative (ETF SH). I think you need a "margin" account with IBKR for this and not the "cash" version. If you have the courage to start explaining, I'm interested, even if I don't think I'll be diving into that waters any time soon.

You are right. Trend following is TA and as you know I am not a fan of the latter. It is indeed a good way to lose money.

However, several renowned authors, who in any case cannot be classified among the gurus of TA, have proven that trend strategies can work. I am thinking for example of Jeremy Siegel in his bible Investing in Long-Term Stocks (https://www.dividendes.ch/lectures/), James O'Shaughnessy in What works on Wall Street (excellent work) and the various research of Mebane Faber. See also my series on diversification (https://www.dividendes.ch/2017/08/comment-diversifier-son-portefeuille-pour-se-prevenir-des-risques-de-marche-120/).

I use these trend-following in my asset allocation primarily to know if we can buy or if it is better to wait for a more favorable moment because the market is still bearish. This certainly does not allow you to work miracles in terms of performance, but it helps to reduce the volatility of the portfolio, especially if it is associated with a capital protection strategy (see tutorial).

I haven't had time to read Jeremy Siegel's book yet, but it seems to me that using AT wisely in addition to AF allows you to get into position better.
I will reread your series on diversification

More specifically to your question, I also have a small line of alternative strategies in this allocation that actually goes a little further by shorting the market, but only when it is both very expensive and in a bearish phase. I consider this position more as a kind of hedge than speculation.

Mebane Faber uses simple 200-day MAs for all assets. After several backtests, I had the best results with simple MAs with durations that vary somewhat depending on the assets. In addition, I convert the assets to CHF before calculating the MAs. For SPY I therefore use 224 days.

This is what I have seen with the MM200 in days or the MM9/MM10 in months, they allow you to protect yourself from a market fall, but not a sudden fall (when you are "LONG")... there is also the opposite effect which says to get out when it is best to stay. I am still thinking about what other indicator we can associate it with to have a better trend follow-up by filtering out bad signals (finding and using non-correlated but relevant information). What software do you use to convert asset prices into CHF? I don't think you do this manually or is that the case?

On this subject I came across the link several times where you proposed a Premium indicator that is no longer active. Will it soon fall into the public domain after a certain number of years? 😉 I am curious to know what mix of signals you used to create this indicator. My goal would not be to use it, but to understand the approach and compare it to what I have already tried. I will repeat myself, but collective intelligence allows you to do much more than alone. If I compare it to my favorite field which is Hardware and Software development, I have always analyzed and studied what others were doing in order to be able to improve my projects and question whether the way I use was suitable and the best or not and that is how I was able to develop more in-depth skills quickly. My work has been made public under a free license in order to protect and prevent anyone from appropriating my work, but which leaves the possibility of improving and studying it.

For UBS, please read my analysis, everything is said there. (under articles/analyses or via the search bar)

I should have thought of that before asking this question! Sorry for my lack of diligence in reading all your analyses.
But this allows me to bounce back, because when you wrote this analysis the UBS action was at least from October 2018 between 16.46CHF – 17.6CHF and today (July 2019) between 11CHF – 12.2CHF, but if we look at the graph for an AT we have been in a descending market since 2015.
The valuation is therefore better with a PER of 9 and a yield of 6.1%, but the problem remains identical to your analysis of October 2018 (debt, free cash flow, etc.). I am therefore doubtful, one way tells me yes and the other to stay away for the moment.

For screeners, this would probably deserve an article… You just have to give me a little time 😉

Very gladly and why not inaugurate with a "live video"? Even if I am, like you, rather in favor of written articles. I look forward to reading you about screeners.

Kind regards,
Xavier

[Jerome]

I will be brief

1) yes you need a margin account at IB to short

2) I do everything “manually” or rather on Excel

3) trading auto signal: partly based on minis/maxis. But I don't use it anymore for various reasons.

4) UBS: as you say, the problem remains the same… it doesn’t change in such a short time

A++

 

[DSwissK]

I advise you to buy calls on SPXU to hedge your US portfolio. It is a very aggressive strategy but it is a relatively cheap insurance to protect in case of crisis. It helped me a lot during the mini crash last December.

 

Obviously, if there is no decline by the expiration date of the option, it is money thrown out the window... like all insurance.

[Jerome]

I also know SPXU that I used with my trading signal at the time. It is a leveraged alternative to shorting SPY or buying SH. You have to support the leverage effect… Not a huge fan of options either, like all insurance, as you point out.

 

[Mystic]

Jerome,

What do you think of brokers who work with IB but have a white label? I am thinking in particular of Lynxbroker.fr, for example.

They are certainly more expensive in trading but depending on the size of the portfolio and the frequency of trades, it can be cheaper than being with IB.

Of course, lynxbroker.ch is in German. For the French version, you have to wait until IB has received a license in Ireland so that you can open an account in French again (.fr site).

However, isn't this a good middle ground between Swiss banks and IB?

In addition, what is the difference between BATS Europe (BATECH), CHI-X Europe Ltd Swiss (CHIXCH), Swiss Exchange (SWX), Turquoise CH (TRQXCH) and VIRT-X (VIRTX) exchanges?

[Jerome]

I don't know Lynxbroker. The rates seem reasonable but still more expensive than DG, right? Compared to IB, we should see, as you say, according to the frequency of trades and the size of the portfolio. However, even for small b&h portfolios, there is a certain margin in favor of IB, it seems to me, even if we had to count the monthly penalties for no trades. Indeed, the minimum transaction fees at Lynxbroker are relatively high.

Regarding the stock exchanges, I am not an expert on European stock exchanges, but I believe that BATS Europe and CHI-X Europe are now one entity, where a very large quantity of European stocks are traded. SWX is simply the Swiss stock exchange. Turquoise CH, no idea, I don't know. VIRT-X I think it no longer exists, but at the time it belonged to the Swiss stock exchange and you could trade European blue chips there.

 

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