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To The Moon, Alice, To The Moon

March 1st, 2017

MarketClick on any image for a full sized view

Well, we had a huge day in the market today and I thought that it deserved a bit of discussion.  As everyone who reads the blog knows, I am very cautious on the markets right now given their level of extreme excitement, extreme greed, extreme overvaluation, and negligible expected forward returns.

Take a look at the graph above – in the RSI indicator at the top of this S&P 500 Index graph, you can see the huge turquoise area above the top line.  This indicator is telling us that there is extreme excitement and buying interest in the markets and that they are due for either a pullback or a rest with some weeks of sideways movement.

greedCheck out the Fear and Greed Index above – this is one of the highest readings I can remember seeing on this indicator.  Contrary to what you are hearing on tv, market do not go in a straight line like a rocket to the moon.

Fair ValueAbove is a spreadsheet I’ve posted on this blog in the past – it is one I use to gauge where the market is valued compared to its historical valuation levels.  It uses four  different valuation measures and comes up with a weighted average valuation.  Right now, it shows that the market is 13%+ overvalued.

Expected ReturnsThis is another spreadsheet that you have seen in the past here.  It is one that I use to calculate the expected forward returns for the S&P 500 Index over the next decade.  Based upon today’s valuation for the market, we should expect a forward average annual return of 3.86%.

I know it is fun to watch your portfolio value go up when the market is on fire like it is now.  However, it is equally as gut wrenching to watch the value of your portfolio go down when the market takes a major tumble.  That is why it is imperative that investors employ risk management techniques to make sure they keep the gains in their portfolio when the market goes down.

We are employing those risk management techniques, booking gains on certain holdings, keeping cash and short term bonds on hand to protect the portfolio from the inevitable downdraft that will take the valuation down toward or below its fair value.

Our strategy will be one we have used over the decades I’ve been managing money – use that cash and those short term bonds to buy shares of companies we want to own that have superior investment characteristics at liquidation prices from investors that did not manage their risk and are panicking during the inevitable correction.

Warren Buffet has said that “You pay a very high price in the stock market for a cheery consensus.”  And that “the time to buy is when there’s blood in the streets” (I believe he was paraphrasing one of the Rothchilds in the last half).

This is in essence what we are doing – employing the greater fool theory of investing:  we sell appreciated shares of stock to someone and book our gains, then buy it back from them later at a significant discount.

The market does not go in a straight line like a rocket heading to the moon – there will be a day of reckoning  when fear “trumps” greed.  But until then our strategy will be to continue to make money off the investments we have in the market, book profits when the fundamentals so dictate, and manage our risk so that we can take advantage of any corrections and the people who did not manage their risk.


Bonds Are Boring? Hardly

February 3rd, 2017

10 yr

Double click any graph for a larger view

With bond yields on the rise, the investment landscape has change quite a bit.  Last July marked a low spot in bond yields with the 10-year Treasury Note hitting a 1.34% yield.  You can see that low on the chart above and the subsequent steady move higher until the November election.  The move higher in yields after the election was the fastest move in yields that I have ever seen.

At that time, bond investors believed that the new administration would institute pro growth policies that would move the sluggish sub 2% GDP growth we currently have to between and 3% and 4% GDP growth.  That sort of growth is typically inflationary so investors were moving yields higher in anticipation of higher inflation.  However, you can see that since early December, investors have begun to waiver in that belief and yields have come down a bit.  However, now that the Congress is behind tax reform and regulatory reform, growth could very well pick up and yields could embark on another move higher.

If we are in fact moving into a period of sustained moves higher in rates, this could be the end of the 30+ year bond bull market that has taken yields on the 10-year from just shy of 16% to today’s 2.5%.  You can see this move in the graph below.

Screen Shot 2017-02-03 at 2.02.14 PM

The graph above gives you a long-term historic perspective.  But lets focus on the graph below that I have annotated with a red trend line that follows yields as they have fallen over the years:

10 yr bull 30 yr

The thing that bothers me is that yields have broken above the down trend line – IF this means the bull market is over, then from a purely technical perspective we could see a move to 5%.  You can see the blue line I have drawn at the double top in yields on the left side of the blue line.  The double top is a strong technical level that will act as resistance if yields approach 5%.

The real question is, from a fundamental perspective, would the economy support that level of yields?  It really wasn’t that long ago that we had 5% yields – in fact it was just prior to the Great Recession that started in 2009, commensurate with the subprime crisis.  If you were to look at GDP growth at that time, it was in that 3% to 4% range.

This is not a prediction that we are headed to 5% yields, but rather a recognition that it is possible if the new administration’s policies do in fact spur GDP growth (that is no sure thing – lots of variables enter into it).

So, for prudence sake, I want to give you some perspective on what we are doing in the face of rising yields relative to our clients’ portfolios that have an allocation to bonds.

Someone told me long ago that individual bonds are preferable in a rising yield environment.  However, bond mutual funds and closed-end bond funds (bought at a discount to NAV) are preferable in falling yield environments.  Below is some of the logic that we employ when making decisions in managing a bond portfolio.

  • Investors do not understand that they can lose money in bonds – they view them much like CD’s where a dollar in is a dollar out, plus the earned interest.
  • With a bond fund in a rising rate environment, the loss that they see on the principal of their investment can equate to multiple years interest earned, depending upon the credit rating and duration of the bonds in the fund.
  • Providing clients a portfolio of individual bonds, A rated or higher (whether taxable or tax exempt, subject to the needs of said client), allows us to structure a portfolio that has frequent cash flow for reinvestment as yields move higher and as the bonds mature at face value.
  • Even if there is some market value fluctuation, everyone knows that it is temporary, as they see those market values move to par at maturity.  You do not have this with a bond mutual fund where there is no maturity date for the bonds to reach.
  • When building a portfolio for clients, it is imperative to be sure that your positions are fully diversified with no concentrations in companies, industries or sectors.   I’ve seen several investment managers not take the same diversification precautions with individual bond portfolios that they do with equity investments.  In 2008, several managers had a significant overweight in financial industry bonds.  They were lured into them as the banks, brokerages and insurance companies were paying much higher interest rates on their bonds than similar maturity and rated non-financial industry bonds.  Their clients suffered significant and irreparable losses when Bear Stearns and Lehman Brothers collapsed.
  • Mortgage backed amortizing bonds, like GNMA’s, which are great for larger institutional clients because of their constant cash flow, are absolutely not right for individual clients.  The accounting for the principal and the interest is too complex and many individual clients view the entire P & I payment as income that they can spend – not a desirable outcome if they need to reinvest the principal for future income purposes.
  • In a falling rate environment, closed-end bond funds bought at a discount can be extremely profitable.  In the past, we have purchased both taxable and tax exempt closed end bond funds at 8% – 10% discount to NAV, collected the income, and held them until they reached a roughly 5% premium to NAV.  We easily made over double digit returns on this strategy without undue risk (we stick to investment grade corporates, governments, or muni’s).
  • Bond mutual funds also work very well in a falling rate environment.  You can purchase a fund with a long duration that will maximize your capital appreciation as yields fall and you collect the income stream as you wait.
  • If you were to have a portfolio individual bonds of similar duration as the bond funds, investors can be confused by the lengthy maturity date far into the future.  You therefore end up constructing the portfolio with shorter-dated bonds and therefore abdicating the larger capital gains that comprise a large part of long-term strategy in bond portfolio management.

One last thing I wanted to point out is bonds can have a place in an all equity portfolio as well.  There is a strategy that we utilize when a stock market correction runs its course –  we invest in high yield bond mutual funds.   The capital gains you realize from the high yield bonds as the stock market recovers are even larger than those from the stock market itself.  The high yield bonds are a higher beta way to capitalize upon the recovery with a portion of your equity portfolio – but we never allocate more than 5% of an equity portfolio to high yield – it just would not be prudent.  Check out the graph below:


This is a graph  of the S&P 500 Index showing the 2008-2009 stock market crash and recover in red and high yield bonds in blue.  You can see that the high yield strategy provides higher returns during the recovery part of the stock market cycle and then they revert to an equity level return as the recovery runs its course.




Why High P/E’s Matter

August 10th, 2016

Historic PEDouble click any image for a full sized view

I’ve written on the blog about the high Price to Earnings Ratio in the market right now – as you can see on the image above, from a historic viewpoint, we are at one of the highest levels in history other than during the crash and the subprime crash.  Its a funny thing, the peak reading during those crashes are after corporate earnings have fallen to minimal levels but prices hadn’t yet fallen to compensate for it.

We have had 18 months of earnings contractions while the prices for stocks have continued higher.  In other words, if you look at the P/E Ratio, you can easily see why it is climbing:  we have increasing prices (P) and falling earnings (E) so mathematically in a fraction, when the numerator is increasing and the denominator is decreasing your result is a larger number.

It dawned on my, though, that I haven’t really explained the math behind WHY high P/E ratios are a bad thing, and it all boils down to future expected returns.

As one of our clients like to say when he stops by the bank:  buy low, sell high.  The reason is that you make more profit when you for a price that is higher than where you bought, and the greater the spread between the buy price and the sell price is what yields you more profit.

Concepts like this seem simple but there is a real mathematical relationship between low and high, and you can predict what your returns will be using a formula developed several years ago by John Hussman.   I turned the formula into an excel spreadsheet so that I could project what future returns for the stock market will look like based upon today’s P/E ratio and one assumed to be in place at some point in the future.

Check out this image of my spreadsheet:

If you look at the full sized view, you will see that this formula includes  the historic stock market growth rate using the S&P 500 Index to represent the market, the dividend yield for that index, an assumed 10 forward investment horizon, the current P/E ratio for the index and the forward P/E ratio for the index from today’s Wall Street Journal Online.

You can see that using the formula shown on the spreadsheet, with the P/E ratio at today’s elevated levels, we can expect an average annual total return on the S&P 500 of 4.02% including dividends, significantly less than the historic average of 8.69% (you can see the calculation of that return in the pale yellow box on the right side of the image.  You can see that buying at these elevated levels depresses future returns.

But what happens if we have a market correction and the forward P/E normalizes to its historic reading of 15?  Here is that calculation:

Hussman 2

All else being equal, a correction in the stock market that dropped prices so that they caught up with earnings (decreasing prices and decreasing earnings in this scenario), your forward expected average return for the next decade is 2.23% including dividends (which are estimated to be 2.01%).  Buying near historic high valuations has a big impact on your future returns.

However, just as you might expect, if you are brave and buy into a correction when the P/E has fallen to near-bear market lows of 7, and wait for it to grow back to the historic average of 15, your results are completely different:

Hussman 3In this scenario where you did in fact buy low and sell high, your average annual total return is 14.59%.

In this blog, when I talk about the risk/reward ratio (I know I have and I likely didn’t explain what I meant to an adequate degree) this calculation is a good example of it.  Buying now when the valuations are high mean you are assuming the risk that the P/E falls toward its historic average but your expected return is barely above inflation.

But by buying when the market has corrected at a low valuation (albeit when its very scary to put your money into the stock market) and waiting for the market to just normalize to historic average valuations, your risk is low but your expected return is exceptionally high.

For this reason, we are maintaining our cautious stance on the market, being opportunistic when we get short-term pull backs and putting cash into the market, but being prudent and taking cash back out of the market when it moves back higher.  When will we get the big correction?  No one knows but you have to be prepared and invest your money wisely, buying low and selling high, not the opposite.  Its better to be wise and smiling than greedy and crying.

For all you classic rock fans out there, I’ve been listening to Willies Roadhouse on XM Radio – so bear with me as I play some of my favorites from there before we return to Styx, GNR, and other popular choices here on the blog:)




When Growth Becomes Value

July 26th, 2016

When a growth stock with a high P/E Ratio drops in price yet their EPS growth is up significantly from just six years ago, you get a Growth Stock at a Value price!

GILDDouble click on any image for a full sized view

Gilead Sciences is a top notch Biotech company that has seen its stock price tumble more than 30% over the last year along with most of its competitors.  The biotech industry had the unfortunate luck to be painted with the same brush as the drug company that overnight raised the price on one of its drugs 5000% when a new owner took over.  The political establishment jumped on this and made statements about punishing the industry when it was really just one bad owner who needed to be corrected.

At the current price, Gilead trades at a 6.75 P/E ratio when the stock market is trading at a 25 P/E ratio.  It projects that it will earn $30 Billion this year.

It has two bread and butter franchises:  one is an HIV franchise that has been revitalized with a new drug that is out performing expectations (according to analyst David Katz) and the other is a Hepatitis C cure (not just a treatment but an actual cure) that has been so successful for so long that the market for this drug is shrinking, albeit slowly.

This last issue, the shrinking market for its Hep C cure has the market up in arms and when earnings were released today investors sold off Gilead for a > 6% loss on the day because it lowered its revenue guidance from $30.5 Billion to $30 Billion.

I was one of the buyers today and made a bit under 1% for our clients in our growth strategy, doubling down on our current position – unfortunately, I was also a buyer when the stock was down a bit more than 25% but the fundamentals justify the purchase decision.

So I thought I’d give you some insight into the sort of analysis we do on a company like this that leads me to buy it.

1.  GILD has 61 products in Phase III trials per CMLviz (the last step before the FDA can approve a drug).  Investors should not be overly concerned about the Hep C market shrinking when somewhere in these 61 new drugs there could be one or more that will be block busters like the two principal franchise it currently has.  Having this number of drugs in Phase III trials is a catalyst for future earnings growth many company’s could only wish to have.

2.  We are buying this classic growth stock at a significant discount to the market (6.75 P/E ratio).  Normally, you only get to buy deep cyclicals at this sort of valuation, not a company earning $30 Billion this year with 61 potentially significant catalysts to earnings on the horizon.

3.  Investors get a > 2% dividend yield on a biotech stock.  In all the years I’ve been a growth stock investors, it has been tough to find companies that are growing their earnings faster than the market and the economy while paying a dividend yield  greater than the yield on the S&P 500 or the yield on fixed income investments.

4.  Check out this graph of productivity (Revenue per Employee):

GILD rev empGilead is off the charts compared to its competitors (graph courtesy of CMLviz)

5.  Check out this graph of efficiency (Revenue per $1 of Expense):

GILD rev expAgain, Gilead is off the charts compared to its competitors (graph courtesy of CMLviz)

6. Check out this graph of Revenue Growth (you can see why its a growth company):

GILD rev growthNormally, the earnings multiple valuation for a company like this is higher than the market multiple – because of the political impact, you are getting a growth stock for a value stock multiple.

7.  When I calculate the target price for GILD using our multi-factor valuation methodology, I come up with $148 or 80% potential upside.  Gilead is currently trading at the bottom of its 52 week price range.  The risk to reward ratio is clearly favorable.

8.  The Morningstar Fair Value price for GILD is $124 (making it 34% undervalued today) and their Sale Target is $168 (or 100%+ potential upside).  The risk to reward ratio is clearly favorable.

9.  When I perform our standard calculation for under-valued Vs over-valued, I come up with a fair value today of $126, making it currently 35% undervalued.  This is based upon an extrapolation of next year’s earnings estimates, book value, estimated sales, and estimated cash flow using a ten-year weighted-average of the Price to Earnings ratio, Price to Book Value Ratio, Price to Sales Ratio and Price to Cash Flow Ratio.

Given the superior operating performance of Gilead Sciences, Inc., its potential earnings growth catalysts, its above average dividend yield, its current undervaluation and the potential upside leading to a superior risk to reward scenario, Gilead is a buy in my estimation.

One thing to remember – even though a stock is cheap, it can always get cheaper.  If Gilead drops in price some more, I will be a buyer – investing is a long-term activity that cannot be constrained by a calendar.  Yes, I might not be a winner on this one stock by 12/31 when clients get their annual statements.  However, buying good companies with strong earnings power at cheap prices is the hallmark of how you make money investing in stocks.  You don’t always see the results tomorrow, but you will see the results with patience and conviction.


Brexit Bounce Back

June 29th, 2016

The common stocks that make up the S&P 500 Index have experienced their second day of recovery as investors now realize that the actual exit in Brexit will not occur for a long time into the future.

SPX 2016-06-29

Double Click on any Image for a Full Sized View

If you look at the graph above, you will see that I’ve drawn some Fibonacci Retracement lines that mark the high before Brexit was announced and the low two days ago.  As of close of market today, we have retraced 62% of the Brexit Breakdown.

Below is the action for today only:

spx today

You can see that the market topped out today about 45 minutes before close and the computers kicked in, sending it lower while the Stochastic was in overbought territory.  This indicates that we could open lower tomorrow as people take profits they’ve made on this short term swing.  It will not impact us because we intend to hold our beta plays until the market gets back to or above 2050 as fits with my stair step lower scenario for the market for the balance of the year.

As far as the purchases go that we have made during the recent drop, the strategy was two pronged:  continue to move money into companies that are primarily domestic in keeping with the turmoil in the rest of the world or to move money into defensive or recession resistant companies that will have less volatility on the downside in keeping with my market scenario for the balance of the year.

The defensive or recession resistant investments did not move up as much as some of the higher beta domestic investments, but that is expected.  Here is a sample of the performance of some of the purchases the past few days:

AT&T up 1.50%

Nvidia up 2.50%

Southwest Airlines up 5.45%

Waste Management up 0.97%

Dominion Resources up 3.21%

United Kingdom ETF up 0.79%

This is on top of the 3.5% we made on the Long Term Treasury ETF we used to hedge against the correction and give us the freedom to capitalize upon the market moves.

I’ll be back with more as the market makes it moves – and I hope you enjoy this Pitbul remake of the classic Rolling Stones song.


Brexit Breaks the Banks

June 27th, 2016

The common stock of the European Banks is getting crushed in this post Brexit selloff.  Our own S&P 500 is holding up better on a relative basis.

SPX 2016-06-27

Double Click on any Image for Full Sized View

The graph above is the one you have seen here on the blog a few times before.  It shows the S&P 500 Index for the past 18-months and how it has primarily traded in a 4% range during that time.

There are two important points to note on this graph before we look at the banks:  (1) the index has dropped below the bottom of the trading range in a definitive way; and (2) the index is sitting right on two major support levels – (a) the market closed today with the index at 2,000.35, virtually sitting on the psychologically important 2,000 level; and (b) after an intraday low of 1991, the market recovered above the 1998 level of the lower support as defined by the previous month’s trading activity.

With the S&P 500 down about 2% year-to-date, our market is not in a free fall.  If you don’t know what a free fall looks like on a chart, look at Barclays Bank:


And, how about Lloyds of London:


And we can’t ignore Royal Bank of Scotland:


These banks are off double digit percentages each of the past two trading sessions.  They trade for roughly 30% of book value.  This is a BIG warning sign that there is something really wrong in the global banking system.  The British banks are being hit by investors, but if you look at any of the other big European banks you will see that they have also sold off in a significant way, maybe not as bad over the past two days, but over the past year many of the most leveraged ones are down 50%.

The US banking system is far healthier than its European counter-part.  The banks here have significantly more capital and significantly less leverage.  That’s not to say that if there is a European banking crisis and the governments there have to inject capital to keep the banks afloat that it won’t impact our banking system – it will, the world is way to interconnected and most of the big banks are involved in complicated derivative contracts in the Trillions of dollars which are off balance sheet but a contingent liability none the less.  If even one bank goes down and cannot make good on its counter party obligations, the impact will be felt globally (if you haven’t rented the movie The Big Short, you should to get a flavor for what this could potentially look like if not managed correctly by the banks and the European governments).

As always, I have an indicator that has served me well beginning with the 1987 stock market crash which was caused by a disruption in the global financial markets, the TED Spread.  This TED Spread graph plots the difference between US Treasury yields and Eurodollar deposit yields.  As the spread increases, it indicates that investors perceive there is increased risk in dollar denominated deposits in European banks and require a higher return.  Back in 1987, the spread got to over 200 basis points.  During  the 2008 crash, it approached 475 basis points.  Today, it is sitting around 39 basis points, but up from 11 basis point at its low in 2010.


If we start to get a sustained move higher, that will be a sign that there is something seriously at risk in the global financial system – which will be a sign that its time to get very conservative in portfolio management.  For now, the steady trend higher, albeit still at low levels, causes us to keep track of this indicator as a prudent risk management practice.

But lets take a look at our top graph again, except this time I’ve added two short-term directional indicators to give us an idea of what might happen tomorrow:

SPX 2016-06-27 v2

The bottom two panels of the above image are the Relative Strength Indicator (RSI) and the Stochastics.  Both flash reversal signals when the indicator line drops below the bottom horizontal line.  You can see that the RSI (upper most of the two panels) is sitting right on the line and the Stochastics (bottom of the two panels) is still well above that line and falling.

If both were above the line and falling, it would indicate that we would likely have another down day in the market tomorrow.

If both were below the line it would indicate that the market is getting ready to turn higher – even if for just a short term bounce.

However, with neither one below the line but one sitting on it, you have a less than 50% chance that the market bounces higher tomorrow.

In spite of the odds, I have more than a feeling after having worked with this stuff for 35 years that we could bounce higher tomorrow, particularly since the index ran higher off the lows at the end of the day. The computers kicked in their buy programs when the market hit a triple bottom for the day which was a level that the index bounced higher from the previous two times (below is the chart of just today’s action on the index):

spx today

The overnight news will determine much of how we open tomorrow – it will be day three since the Brexit, so the media are getting tired of reporting on the same thing and will be looking for new news to make.  So absent another day of chicken little news casts, and if we get some stability in prices in Europe over night, our own markets should see some buying and bounce higher.  If there is more bad news, it will likely continue to fall.

Remember, invest what you see and not what you believe is our golden rule here on the blog.  We will see what tomorrow brings us and make investment decisions accordingly.


Brexit Investment Update

June 24th, 2016

Common stocks are under pressure today due to the Brexit vote to leave the European Union.

spx 2016-06-24Double click on any image for a full sized view

You saw this chart a couple of days ago when I was showing you the 4% sized trading range of the S&P 500 Index over the past 18 months.  Today, I am showing it to you again with the impact of today’s post-Brexit sell-off.

You can see that the index has move down toward the lower boundary of the range (the red bar on the far right of the chart), but that it is still well inside the two blue bars.

There is no reason to get overly aggressive based upon today’s move, but I have made a couple of trades in client accounts that would be classified as opportunistic:

1.  A couple of months ago, I told you that I was adding the Vanguard Long Bond ETF to client accounts as insurance against some unplanned for event.  When the market is near a top, any sort of negative surprise will send the market down and long bonds up.  Today, I sold it for a total return of just under 4% over the past 10 weeks.  This investment performed exactly as expected and gave us a premium performance over the stock market which is up 0.3% year-to-date.  Since this was added as insurance, today was the perfect day to cash it in.  We still have an allocation to intermediate term bonds, including treasury, corporate and mortgage, so there is still insurance in place – but those are more dividend plays until the market corrects more and we have additional need for cash to pick up targeted purchases at better prices.

2.  With the proceeds of the sale above, I added starter positions in two adated beta ETF’s (index ETF’s that mimic a portion of the S&P 500 that I view as being in the sweet spot investment-wise at the moment) just to take advantage of today’s sell-off.  I added the S&P 500 High Quality ETF and the Deep Value ETF to get some additional exposure to the stock market but with holdings that should outperform the broader market during the likely turbulent period ahead.  Both funds feature companies with solid balance sheets, strong dividends, and cash flow.

3.  And with the balance of the sale proceeds I added a short-term position in the ETF that mirrors the London stock market.  It was down more than 10% and we will either hold it for a short-term gain or hold it for an intermediate period depending upon the post-Brexit prospects for the British economy and its corporations.  The British Pound is at its lowest level in 30 years, so the companies headquartered in England should get a significant upward revision in earnings since they will be able to sell their exports significantly cheaper to buyers who have an immediately stronger currency (making the British goods cheaper by comparison).  Plus our buying the ETF at a 10% discount should make for a decent investment.

I have some other trades to make, but will probably sit tight and see what the market tells us before adding additional equity exposure. Over the weekend there could be scare stories hitting the news that will send the wolves to the gate and give us a lower purchase level next week.

Britain’s Brexit Breakdown

June 23rd, 2016

This Brexit schedule will guide you through the night of vote counting and reporting.  Credit goes to The Guardian for this guide:


10pm (6pm CST)

Polls will close, and on election nights this is normally the moment broadcasters show their exit polls and make their projection for the night ahead.

However, that won’t happen this time as there’s no exit poll for this referendum. Some banks are said to have commissioned private exit poll, but they will be kept for their employees.

So if anyone tells you they know what’s going to happen at this stage, they’re a chancer, unless they are an eagle-eyed watcher of sterling derivative markets. Sky News has commissioned a survey from YouGov of people previously polled, asking how they voted on the day. This will be released at 10pm, but this is not, repeat not, an exit poll and shouldn’t be treated like one.

If you prefer moving pictures (tsk!) this is the line-up from the broadcasters.

BBC1: David Dimbleby will anchor BBC1’s coverage until the early hours. Emily Maitlis will be presenting as well and Jeremy Vine will have his snazzy graphics. The BBC’s political editor, Laura Kuenssberg, and economics editor, Kamal Ahmed, will do the bulk of the analysis. If you’re not in the UK, you can watch the coverage on BBC World News.

ITV1: Tom Bradby will host the broadcaster’s coverage with the political editor, Robert Peston, and national editor, Allegra Stratton, speaking to politicians and pundits. Julie Etchingham will also present, and there will be live reaction from Brussels with ITV’s Europe editor, James Mates.

Sky News: Adam Boulton hosts, alongside political editor Faisal Islam, boasting a team of 50 correspondents at counts across the country.

CNN International: For international viewers, Richard Quest and Hala Gorani will anchor from CNN’s London bureau, with a touring “Brexit campervan” providing outside coverage. Christiane Amanpour will be with guests and analysts outside the Houses of Parliament, with correspondents contributing from Berlin and Brussels.

12.30am (6:30pm CST)

The voting is done by 380 council areas, not by constituencies, so it will play out slightly differently from election night. Sunderland (always the first in a general election) and Wandsworth are expected to declare first, and we can learn a bit from their results, depending on whether either campaign does better or worse than expected.

Wandsworth should have a very strong remain showing, with Sunderland showing a narrower lead for Brexit, about 55-60%. Anything lower than that for Brexit will be a great start for remain campaigners.

The City of London is expected to be among the first as well, declaring around 12.45am and likely to show a substantial lead for remain. The remain vote is likely to look high in the early hours of the morning. If it doesn’t, that’s a big problem for in campaigners.

Gibraltar and the Isle of Scilly will have high remain votes, but the voter numbers aren’t exactly huge. More telling will be results from Salford and Stockport, which will start to give us a sense of whether Labour’s safe seats in northern England are as pro-leave as has been predicted. That conversation could dominate the punditry for an hour or so.

Another to watch is Swindon, where leave will hope for a win, but a chunk of middle-income voters in their early- to mid-30s in the area – natural David Cameron voters – might push it towards remain.

Hartlepool, a leave heartland, is expected to declare during the hour, as is Merthyr Tydfil, which should also show a lead for leave.

Northern Irish results should start coming in, which will be interesting as there’s been very limited polling in the area. Most areas in Belfast should declare during the hour and instinct would suggest a remain lead, over concerns about the border crossing.

1am (7pm CST)

Gibraltar and the Isle of Scilly will have high remain votes, but the voter numbers aren’t exactly huge. More telling will be results from Salford and Stockport, which will start to give us a sense of whether Labour’s safe seats in northern England are as pro-leave as has been predicted. That conversation could dominate the punditry for an hour or so.

Another to watch is Swindon, where leave will hope for a win, but a chunk of middle-income voters in their early- to mid-30s in the area – natural David Cameron voters – might push it towards remain.

Hartlepool, a leave heartland, is expected to declare during the hour, as is Merthyr Tydfil, which should also show a lead for leave.

Northern Irish results should start coming in, which will be interesting as there’s been very limited polling in the area. Most areas in Belfast should declare during the hour and instinct would suggest a remain lead, over concerns about the border crossing.

2am (8pm CST)

This hour is a good time to start concentrating, so put some coffee on.

Westminster, Wandsworth, Ealing and Oxford may give remain the lead here. These are likely to be very safe areas for a remain vote, with high numbers of graduates and younger voters.

We’ll also start to see a number of Scottish results rolling in, from Shetland, East Ayrshire and Angus. If these show only a weak lead for remain, it might be time for Cameron to worry.

Key Welsh boroughs to watch are Blaenau Gwent and Neath Port Talbot, where the opposite is true: Vote Leave will want a good win here, especially in the area troubled by the steel crisis, which Brexit campaigners have linked to the EU.

Castle Point, a key Eurosceptic area in south Essex, will declare around 2.30am. About 70% of voters are in favour of leaving the EU.

Crawley in West Sussex, a bellwether seat in the general election and also likely to be pretty evenly split at the referendum, is also due to declare, as is South Norfolk, where the split should also be telling.

According to JPMorgan’s analysis, commissioned for investors, even if leave ultimately ends up victorious, the remain camp is likely to be in the lead until about 3am. If leave has a total vote share of about 40-45% at this stage, Stronger In will be celebrating.

But if that percentage for leave is more like 45-50%, it will be a very close run thing. Anything higher than that is an indication of a good night to come for Boris Johnson and Nigel Farage. Still, pundits are unlikely to call the race this early.

3am (9pm CST)

Boston in Lincolnshire, where 68% of voters are predicted to be in favour of Brexit, is likely to declare now. Cambridge, one of the strongest remain cities in the country, will declare here, though surrounding Cambridgeshire is very much out-land. Jeremy Corbyn’s distinctly Europhile constituency, Islington, will also declare during the hour.

Look out here for West Oxfordshire, home to David Cameron’s Witney constituency, so the result will be symbolic of something or other.

4am (10pm CST)

Time to hear from Tendring – home of Ukip’s only MP, Douglas Carswell, who represents Clacton – which is unsurprisingly one of the most Euroskecptic areas of the country. Great Yarmouth and Blackpool, both Brexit heartlands, could also bump up the leave share of the vote during the hour.

Harrogate, one of the most affluent areas of North Yorkshire, will be an interesting result to watch, especially if the leave campaign does better than expected.

Once South Staffordshire, Havering and Gravesham, all strong leave areas, are counted, the running tally should give a pretty fair idea of how the overall result will look, percentage-wise. Broadcasters may start officially calling the result from now.

5am (11pm CST)

Manchester will declare by 5am, almost certainly for remain. However, by this time, about 80% of authorities are expected to have made a declaration, and it would be a huge surprise indeed if the final percentages differed greatly from the running tally at this hour.

Bristol, one of remain’s strongest areas and also the country’s slowest counter, will declare by about 6am, but it’s unlikely to make a massive difference.

7am (1am CST)

The official result should be in by now – unless there are substantial recounts needed and it is close – and Jenny Watson, who chairs the Electoral Commission, will announce the final tallies in Manchester.