Comment and opinion for retail investors in the UK
(about 2500 words, 13 minutes or less estimated read time)
I have commented before that September and October are statistically volatile months for equity market investors, so I thought you might want to have some prompts looking at the risks and opportunities that are present or on the horizon as we head into Autumn. The next few headings cover a few of topics that have been worrying me, so to be honest I am not going to be dwelling much on opportunities!
I know from recent conversations that not all readers find the time to plough through my longer articles and at this time of year, when traditionally not much significant happens in markets – crises are much more common in September and October – some will not look at the NotHarry site at all. Other subscribers enjoy reading all my posts, even when they are not offering especially new content.
Allowing for this mix of preferences, this post offers a commentary from someone other me, easily consumed over a cup of coffee as a YouTube video that runs for less than 11 minutes.
….to all of you who wished me well during my unexpected urgent medical episode.
I am now recuperating from a microdiscectomy operation which has relieved the disabling pressure on the nerve root feeding my right leg. I am not yet allowed to sit, apparently because that puts the most pressure on te lumbar spine, but am slowly increasing my walking to restore my atrophied leg muscles which thought they were redundant after 3 weeks when any attempt to use the ones on the right generated too much pain! I am writing this with the PC on a high chest of drawers! Typos may exceed the usual quota as I am not hooked into a large screen!
Immediately after I published my article suggesting that diversification was more tricky than just working through five continents and picking the largest markets, we had a really quite major set back in South Korea.
Looking at a graph on the KOSPI index and you will see a classic reversion to mean that has maybe not yet seen enough of an overshoot into the negative, plus we know that this was a market where a really large numbers of maybe ‘green’ investors had been chasing the semi-conductor story with borrowed money, so in itself not really an unusual event.
Why I mention it is that one might be owning a fund (I am) with a known South Korean bias and not fully appreciated (I did) that its excellent performance was driven by only two factors: sector focus (tech) and momentum. So any diversification based on geography and potential differences between say UK and the South Korean long term economic prospects, economic mix etc were, in the near term, totally eliminated by the factor elements of the fund porfolio composition. Of course, not all Asia Pacific funds would heve been concentrated in that way, but if the one you own was, it might be something you had not spotted!
(published early, as I am going to be in hospital for a few days)
This month, I offer some practical guidance for investors who have been banking portfolio profits for quite a while now. You will have taken on board the view that equity markets were expensive, especially US shares connected to the AI ‘boom’ (which shares have now started to decline in value in the main) and you are also concerned about the geopolitical risk factors in play, such as oil market supply problems, new tariffs from Trump, China’s push to get control of the Gold price and so on.
I know many readers have sensibly banked handsome profits and as a consequence have a higher than normal percentage of their invested asset base in cash. I myself am in that ‘club’ with upwards of 40% of my investible capital out of the market and on deposit.
If we are waiting for the time when stocks are cheaper, which could be sooner rather than later, what sort of purchases would most likely minimise market timing risk, an unavoidable aspect of introducing or re-introducing cash into the market for risk assets?
Many readers will know that I have had some slow burning spinal illness issues for quite a while and last week something happened that turned chronic mild pain into acute disabling pain.
The result was an emergency admission to the neurological wing of the local major hospital – all very speedy and lots of tests done which show some moderately serious degradation. Conservative care with medications and very gentle physical rehabilitation is now happening and if that has not worked by next week, an operation will likely be necessary. A neuro surgeon will be brought in to review the MRI scan. Healthcare here is in the main more easily accessed than in the U.K. (on the equivalent of the NHS, which is great)
Meanwhile I am in a perfectly pleasant hospital ward watching swifts circling in a blue Summer sky getting well looked after by lovely medical staff.
Anything new, you need to know about?
I am of course still watching the world and the dimented actions of POTUS, as I am sure are you! The global oil supply reserve is running down fast and the markets are still betting on a quick resolution. I stand by all I have written recently on the dislocation between market valuations, notably in the USA, and the pending economic realities. Enjoy the unjustified gains in equities but assume a correction will be more dramatic the longer the over optimism lasts. The speculators will not be running the market for ever.
I apologise that this post will be a little less edited and complete for now, as I am working from my iPad only. Internet here is good, but even in a newish ward, electricity supply for patients is I think deliberately very minimal, so I have not had my laptop brought in. It would feel a bit ‘over the top’ too, as I am no bustling executive type these days!
Meanwhile, my editing software does not work with full functionality on IOS. Hence the simpler layout of this post. Normal service will be resumed ASAP!
Readers have, I can safely assume, just lived through some very hot weather and I am writing this sat directly in the air conditioner ouput in my flat. I have today seen the fairly dire meteriological predictions that result from computer modelling of El Nino. Also on this very day, I also saw independent media content explaining that the US administration is shutting down it most authorative climate monitoring services, on the authority of that narcissistic dim-witted leader who is too busy looking to plunder more wealth for himself and his family to care about his fellow humans, never mind the planet and all future generations.
I am not proposing that we accept without question that global warming is a man-made event without question, merely observing instead that it would very probably be useful to have the best possible data available to scientists who might work out some solutions to what is obviously more of a problem than just discomfort.
I have kicked off with this observation because I intend to explore the question of how the world now deals with inconvenient truths, focusing on aspects that are relevant to investment markets. Maybe we are approaching the ‘last times’ of a very long investment market cycle, where only an ‘Armaggedon’ will clean up the many sins of the markets and allow a fresh start?
It occurs to me that eschatology may not be what some readers are looking for from this web site. Although I firmly believe, as you will know, that markets and ultimately the valuation of our investments are the distillation of human behaviours, not the pseudo science of economics, so feel justified in taking a tangential look at what seem to be absurdities in current marjet patterns, I can offer an alternative for those not interested who still want to do some useful reading to brush up their portfolio maintenance skills.