Friday, 26 September 2014

Bad timing, nasty volume spike, where now?

US Market

My return to the US market could not have been timed much worse. I started losing money as soon as I bought my shares. And then on the Monday the Dow did its first big dive. I backpedaled hard but it was too late, the money had gone.

Should I have held on? I think not. Why? A friend sent me a copy of MoneyWeek Trader published on 24 September suggesting that the financial disasters emerging at Tesco could be the catalyst for financial meltdown. I personally do not believe that Tesco is a big enough player on the World markets to have that sort of impact.

I had spotted another event that, to my mind, had greater market breaking clout. That was the great yawn that Apple's latest new product offer engendered. For years now Apple has pushed forward the frontiers of technological innovation.  Perhaps not in terms of actual hardware or even software novelty, but certainly in terms of marketing, style and fashion. If that company had lost its touch this could spell the end of the rapid turnover of products in consumer's pockets. If automatic upgrading comes to an end there will be a big slow down in turnover and businesses all over the world will suffer. The end of the line for that particular gravy train?

Even more significant to my mind was Friday's market action. Just look at that chart. Friday 19th showed a shooting star on massive volume. These volume spikes are warning that a big change is about to happen. And although Wednesday saw a recovery after the 215 point drop on Monday and Tuesday. Yesterday saw the sellers back with a vengeance. There is a support line close by and it looks as though today will see a bit of a recovery (based on the futures data). But I don't expect this to last.

UK Market

My UK portfolio is holding on to its gains pretty well despite a really ugly UK market. But I can't see that going on much longer. So a tidy up is needed there too.

GVC has come up with yet another sparkling set of results. As might be expected profit taking is pulling the price back. But I'll just hold on. There was yet another special dividend on top of an already chunky quarterly pay out. I just don't want to let go of this holding, not for any emotional reason but because of the dividend I am getting. I built up my position over a long period so It's hard to say what return I am getting, but on a purchase price basis it is running between 12 and 14% and it keeps going up. Even at current prices the full year's dividend looks like a yield of about 9%. You can't argue with that - the only possible fly in the ointment is unexpected bad news.

Friday, 19 September 2014

My confidence returns

I have not been out of the market for long. I cashed in my profits on September 9 and here I am, just 10 days later, climbing back on board.

My selection is different. The China market is not such an obvious good bet so my share picks are spread between China and other US stocks. This is partly because my favoured Vector Vest selection systems are throwing up some China shares. I have also repurchased some shares from my last batch that just look good. Here is the current list. VMIC IG SINO MOBI AMCF GILD LUV GBX SKX AVGO BIDU BITA XRS.

There is one share I must mention VMIC. If I had held that through the recent bad patch I would have tripled my, already substantial, profits on the share. A staggering 133% in total. Instead I let it go after I had banked 32% (and that was in 2 weeks). However there was no way of knowing that was going to happen. On the whole I made the right choice for without that share's move I would have lost half of my profits. I play this as a game of averages. Finding just the one big winner is playing the lottery and I try not to do that.

(Though my stake in GVC is just that. I played a lottery number and it has paid off. But shares that look like that are hard to find.)

The Scottish referendum has proved to be a one day wonder and I have a number of Scottish friends, who live in England, that have breathed a sigh of relief. The market has not really reacted at all. Yes it has shot up but it would probably have done that anyway.

Monday, 15 September 2014

Just in time?

Liquidation day

Last week I pulled out of the US/China market banking 5% profit in about 6 weeks. It looks as though I was just in time. At worst I would have lost two thirds of my accumulated profits in the three days following disposal, As of today, following a slight recovery, I would have lost about half. Of my 20 positions only 7 are up on the liquidation price. And only one, VIMC has made significant headway.

Of the portfolio 12 were winners and 8 losers over the six weeks while I was holding them. Biggest profits were made on BITA 59%, VIMC 33% (That would have gone on to make 58% if I had held on). Two more holdings made more than 20% and another 2 made more than 10%. On the downside there were four 15-20% losers.

I think this is an endorsement of my shotgun approach to picking shares. I look for a selection system which has a good backtest record, and a sector that looks promising and then buy a large assortment. There will always be losers as well as winners and, in advance, its impossible to distinguish the sheep from the goats. You buy the flock and hope that the majority turn out to be sheep.

Market situation

Just at the moment the major markets (US, UK, DAX) seem to be stuck in a rut. The BRIC markets have taken a tumble of over 5% and Hong Kong is looking ugly too. China is struggling. Only the Nikkei is making progress. For a change here is the FTSE All World Index which shows the current pull back.

Both long and short term US treasury bonds are falling in price signalling higher interest rates. The chart below shows that bond prices have been weak since the beginning of last year but have recently staged a rally. It looks as though that rally may be faltering. Higher interest rates spell doom for the stock market.

All in all a depressing picture. I am glad to be sitting on the sidelines with my US portfolio.

My UK selection continues to hold firm and I have made my target 17% return on that holding since April. The shares I bought starting in July are up about 8% in 10 weeks. I like the fundamentals of my shares so I am sticking with them but I will run for cover at the first sign of trouble, as I did with my US shares.

Here are some more San Fransisco murals

Tuesday, 9 September 2014

Loch Ness Monster Sighted

I have made no secret of my scorn of the news as a guide in guessing what will happen in the markets. But is my cynicism misguided? With days to go before the Scottish referendum and the first signs that the vote for a separation might be going the way of independence seekers the headlines scream that the pound is collapsing in value.

Indeed the pound has fallen by an eyewatering four and a half percent against the dollar in the past three months. But consider the following table

Percentage currency movements against the US Dollar
3 month 6 month
GBPound -4.50 -3.50
Euro -5.25 -6.50
Yen -3.50 -2.75
Ausie Dollar -0.75 2.75
Canadian Dollar -0.75 -1.50
NZDollar -2.50 -2.50

I would argue that far from spotting the Loch Ness monster we are seeing something altogether more frightening. The currencies below the gap, in that table, are know as commodity currencies while those above the gap are not. The commodity currencies are holding their own against the USDollar, just.

The movement of the pound, far from showing exceptional movement plods on in the midst of its peers. All those non-commodity currencies are showing a serious weakness.

I interpret the figures as a frightening flight of money to the US. Frightening because US bonds are seen as THE safe haven in times of trouble.

The US Stock markets may be in the region of all time highs. But with smart money running for cover should we be following it now? Based on what we are seeing in the currency markets perhaps we should be getting our running shoes on..

My portfolio

I'd like to think not because I am doing so well and, at last, am outperforming my benchmark, the FTSE 100 when measured by my portfolio overall.

My US/China shares have been the big contributors in the past few days. Have  look at the table below. Even if you subtract the losses already taken on a few weak shares, I am still up almost 7.5% in about a month and a half.

Unfortunately I have to set early year losses against this and when those are included I am still down 3.5% on my US/China portfolio since April. But it would be sad if the progress I am making to wipe out those losses comes to a grinding halt.

24-Jul MNK 15.5%
24-Jul act 12.4%
29-Jul BIDU 5.1%
29-Jul BITA 69.2%
29-Jul NTES 8.5%
29-Jul NOAH 0.4%
29-Jul FENG 0.8%
29-Jul YY 26.8%
29-Jul VNET -1.6%
29-Jul VIPS 4.0%
29-Jul XRS 31.2%
29-Jul WBAI -4.1%
11-Aug STV -14.2%
11-Aug KNDI -12.9%
11-Aug HOLI 4.1%
28-Aug ATHM 2.6%
28-Aug VIMC 38.9%
28-Aug CSIQ 14.2%
28-Aug TEDU 19.2%

Average 9.1%

San Francisco Murals

Here are a couple more of my photos of murals in San Fransisco. (see yesterday's post).

Wednesday, 3 September 2014

The World with its erupting boils, the blithe spirit of the stock market (and a couple of pictures)

I'm writing these posts less frequently. Probably because it's summer time and in theory less is happening. In fact there a lot is going on.

The World with its erupting boils

The world is in turmoil. A million refugees have found themselves displaced by the Ukrainian conflict. Hard to say what is actually happening because of disinformation being generated by both sides. I said, at the time of the Russian annexation of Crimea, that I thought that Putin is testing the resolve of his opponents to see how far West he can push the frontier of his sphere of influence. Nothing has happened to change my view. Putin has found that his enemy is irresolute and it looks as though he will be able to push forward to capture the Eastern portion of Ukraine. He'll then be able to move on to test other weak spots that were formally parts of the Soviet Union.

The crisis in the Middle East is more frightening. Bush and Blair created an crack in the fabric of the area and militant Islamists are taking full advantage of the vacuum that has been created. It is sad but true that only in Egypt, where the old military dictatorship has been revived, that an effective counterattack has emerged. The vicious Assad regime is fighting back in Syria but it lacks friends and the West has supported rebel groups allowing Islamists to take the initiative. Similar slippage has occurred in Libya which now seems to be sliding into anarchy. The government of what remains of Iraq is struggling and an alliance between its Shia majority and Iran seems to me to be a likely outcome. Iraq's moderate Sunnis are trapped between a rock (the Shia majority) and the hard place (Islamist Sunni insurgents). So far the problems have been confined to the area but it is only a matter of time before they spill out to affect the rest of the world.

Blithe markets

And through all of this the world's stock markets, buoyed by a continuing flow of almost free cash provided by central banks, push on regardless. Only today the FTSE made a new high for this cycle. The S& P continues higher and higher. Only sensible strategy: make hay while the sun shines.

But I wonder what it is that Western governments know about the underlying realities of their economies that makes them feel the need to go on providing the crutch of QE.

My portfolio

It is my UK portfolio  that has done best. Just look at the table below. It shows how much my selections have moved since I bought them, or since April 6 (for those I have been holding for longer). GVC has also had thrown in 4.7% worth of dividend. I sold OMI for a small loss but overall I am more than happy with my little band of companies.

21-Nov PLE -8.2%
05-Dec GVC 15.9%
01-Jul EXI 2.3%
01-Jul WIN 0.8%
01-Jul BRIT 4.1%
01-Jul CAML 3.8%
11-Jul GEMD 21.4%
22-Jul RNWH 24.0%
05-Aug PUR -10.1%
11-Aug NFC 8.7%
11-Aug AMER 0.8%
28-Aug CRPR 3.8%


My US/China portfolio is not doing so well. It has had  dodgy patch which came to an end yesterday. That said it is up over 2% in a month. The recovery of the Chinese market has probably contributed. You may remember that I bought just as China spiked. My shares managed to make gains as the market retreated but then there was a pull back.

What I found in San Fransisco

I have been sorting through my photos of a trip to California we took a couple of years ago Among them are some pictures of the fabulous murals, some professional, starting with those created by Diego Rivera in the 1930s and continuing to the radical productions of anonymous artists working today. 

I plan to share some of these with you over the next few posts. Today I have one by Rivera and another that celebrates the beginning of that sadly misnamed phenomenon: The Arab Spring. I hope you enjoy the pictures.