If you see an ant, look for the other ten thousand..(m)
Anyone who has lived at a rural address, will know what I mean. Most of the time the stray ant or 3 that you spot on your kitchen worktop has come from a community some way from your house, but not always. It pays to check!
Monday mashup – parking your money
Gloom for epidemiologists but booming stock markets
I know some people don’t pay too much attention to the global Covid-19 case numbers but I suspect everyone is aware that the total number of daily new cases continues to rise and the rate has been accelerating for some weeks. I suppose my readers will be aware of the ongoing lack of progress in holding back case numbers because of the news over the weekend about trips to Spain.
I start with this gloomy comment because it is the main context against which we have to judge stock market valuations which have recovered back to and even ahead of pre-Covid levels in some sectors.
Whilst there is some good news on vaccines and therapeutic medicine with Professor Holgate (and colleagues) in Southampton, whose work on hay-fever and allergies was gospel to me in the 1980s having been in the news with his later work on beta-interferon, such science will not bring results in the next few weeks, perhaps not even this year.
Now as the medical news, being very bad in the short term, is disconnected with the recent stock market trends, one can have a short term tactical approach. As I have said before, one can ‘make hay while the sun shines’ even if you can see the tornado in the distance.
But if you see a decent return, say 10% to 15% over a few weeks or months on a well chosen fund and you decide to take the gain, where do you put the money? This is the question that I have been thinking about recently.
Where to park gains?
One has various choices of defensive assets: cash (no return worth talking about), fixed income (incredibly expensive at the moment and credit risk rising), absolute return and macro or market neutral funds (most of which appear not to have worked in the recent past) and gold (already up in value with a good tailwind of investor support). That is a good short list but there is no stand out ‘best’ option.
I have been happy to invest in physical gold for some months for multiple reasons that I have explained in other posts (call or mail me if you are a subscriber and want clarification).
Although the majority of defensive funds, like absolute return, macro strategy and simple cautious multi asset, don’t offer that much protection in a systemic crash, some managers do seem to have developed the right timing skills.
I have invested in the JP Morgan Global Macro Opportunities fund for some years and it has done what it promised, although a little erratically.
I recently identified during research with a subscriber the BlackRock European Absolute Alpha fund. This seems to have benefited from some great timing decisions in the fixed income market by the managers at the start of the year.
These are examples of funds that would have protected you well in March this year, but that is not of course any guarantee that they will work next time! If you use them as examples, you can no doubt find alternatives that might meet your needs.
Investors need to form their own view of what suits their needs best when reserving money from gains. Some may spend it! Others may just hold funds on deposit and accept the trivial rates of interest. For those who like to get a return whatever and can afford some risk, gold and the best defensive funds are worth considering. Actually, I will be doing all of the above!
Monday mashup – new How To article published!
At the request of a subscriber, I have written a comprehensive guide to using the excellent Morningstar X-Ray analysis. It can be found here. It is for subscribers only. If you don’t subscribe, you can see this sort of content for GBP20 a month.
Those of you who are taking training sessions will already have some familiarity with this report but may not feel confident that you ‘get’ what it is telling you. I hope the guide helps.
In writing a document like this, I have to strike a balance between readability, length and detail. I don’t make compromises to allow for education or intelligence – I assume my readers are educated and bright people! If you think I have missed something or explained it badly, please offer feedback.
Most of the later permanent content of the site, now over 100 articles, was written ‘to order’, so if you want something added to the Glossary or explained in more detail, please let me know
Monday mashup – a half of two halves
In other words, global stock markets have had two very different quarters in 2020 so far. Collapse to the end of quarter one, bounce back (in most markets) in quarter two. This in no way reflects what has happened to global economies, of course.
Here is a headline from Trustnet, last week:
Gold, growth and tech: The charts showing what you should have bought in 2020’s second quarter
The article underneath reported on returns from all sectors and geographies.
The market totally out of favour, both for equities and fixed income was the UK. I have been saying for ages that the world looking at the UK now thinks it is a lost cause economically. The risks of Brexit have been compounded by the perceived weak handling of Covid 19 in England (generally the American media thinks Scotland has done better).
Now some readers may think I have ‘gone native’ as I left the UK to live in Europe quite a while ago now. But I am not referring to European commentators in the main, but to US ones. Two analysts at Bank of America even suggested that the UK may have to be re-classified as an emerging market and they supplied data to back up that suggestion. The level of government debt is rising to levels not seen since WW2, for example.
It is easy to report on where one should have invested and I hope my readers have noted my enthusiasm for technology and innovation funds and for gold, but picking the place to invest long term starting now is much harder.
When the media wrote that the Asia Pacific region was a ‘basket case’ in 1996, I started recommending it to investors and they made very good money for over 20 years. I am wondering if the UK is the ‘basket case’ now and therefore offering great value to investors?
What do you think?
Monday mashup – lazy days of Summer?
Where I live, there have been no quarantine (lockdown) restrictions for some time, except for special situations like going to the doctor or dentist or visiting a hospital when masks and proper disinfecting are compulsory. The weather is warm and humid with thunderstorms and today is a National Holiday – the anniversary of the crowning of the one and only King (Mindaugas).
It feels like Summer in every respect, that time when global stock markets usually go a bit flat as the big players take holidays, volumes fall, politicians stop meeting and messing things up and I suppose everyone usually feels a bit less like working overly hard.
This year things will be very different depending on where you are. The relaxing of lockdown restrictions and opening of travel borders will allow many mostly younger people to try and forget Covid-19. That same opening up will, I am sure. re-ignite infection rates in places that were otherwise well in control.
As has already been demonstrated in the USA and Australia, there will not be so much a second wave as a resumption of hostilities. I get the feeling that the fight with the pandemic may be somewhat like the Great War, when gains and losses ebb and flow for years and many lives are sacrificed with the ‘donkeys” (ie leaders) mainly to blame for their ignorant and selfish leadership.
Yet, in spite of all that global stock markets are valuing companies as if nothing happened. This is in my opinion, and that of many others, simply because there is a glut of money (not real wealth) and it has nowhere else to go.
I suspect that over the Summer weeks to come, recent steady increases in share prices will stutter along upwards. The news flow on global economies will be terrible and there will be massive insolvencies and job losses but initially the market will pay no attention.
It is in my judgement certain that fundamentals like the need for businesses to make profits and borrowers to repay debt in a viable capitalist system will re-assert themselves.
At that stage, the market correction may be more dramatic than even what we saw in March 2020.
One can ‘make hay while the sun shines’, but one must get that hay under cover before the hurricane hits.