Some months back I met up for lunch with Kerry Balenthiran (@17_6YrStockCyc on Tweets) because by a strange quirk he happens to work in Windsor where I live. Over Pie and Chips and Ale we got to discuss his book about a regular 17.6 year Cycle in Stocks which he has shown repeats itself over and over. Part of me has some scepticism with regards to this kind of VooDoo stuff (maybe it should be called the Balenthiran Black Magic Cycle) but over the years and having learnt more and more about stuff like Technical Analysis, Economics and Psychology, I am actually quite ready to explore such claims and see how it all stacks up.
I have been poised to read Kerry’s book for many months but with all the usual demands of life on me (like Sleeping in the morning, elongated Coffee Breaks, trips to the PUB, watching Countdown - you know the sort of hectic schedule a Retired Bloke has…..oh, and writing stuff for the WD Website…) I had not got around to reading it until just a few days ago and I have finally got on with it. When I first picked up the Book I thought “oooh, this is a bit slim” but as I have got into it I realise that it is not the Quantity of pages etc. that counts but the Quality and the messages held within this Book are potentially of very high value - as I will no doubt explain as we go along.
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I have been meaning to crack on with this Blog for weeks but various distractions have conspired to stop me getting it done. It is a bit of a contentious subject as the Politics around it are beyond extreme but I just want to put into electrons how I see things playing out and how I will be managing around the Brexit Negotiation developments to ensure my Portfolio is protected. I have had a lot of painful discussions about this on Twitter but the upside for me is that they enable me to think through the Scenarios and to come up with a Roadmap of Options which will help me frame my approach.
In essence and at a High Level (there is no point in thinking lower than this - everything is unknown at the moment and most of the stuff anybody says or writes about this subject is useless speculation and 99% of the time it has a Political Agenda behind it on one side of the ‘debate‘ or the other) I think there are 4 possible Outcomes of the Article 50 Negotiation Process which we need to consider:
PLEASE NOTE - THE TEXT WHICH FOLLOWS WAS ORIGINALLY PUBLISHED AS PART OF A WEEKEND ‘CHARTS’ BLOG. ANYWAY, I THINK THE MESSAGE HERE IS EXTREMELY IMPORTANT AND I DECIDED TO PULL IT OUT AND CREATE A SEPARATE BLOG AS WELL. THE IMPLICATION OF THIS IS THAT I THINK WE COULD VERY LIKELY SEE A BIG RISE IN STOCKS AND I AM POSITIONING MY PORTFOLIO THIS WAY.
Regards, WD. You may have picked up from comments I have made on the Website, but more particularly on Twitter, that I am feeling extremely Bullish about Markets at the moment and I am more than Fully Invested with a Long Spreadbet on the S&P500 and I might even add to that position. There are 2 main reasons for this - firstly the recent Breakout to New All Time Highs on the US Major Indexes (and also on the FTSE100) is Technically a very Bullish event. In the early part of the Week just gone we had a bit of a Pullback but this already seems to have sucked in a new load of Bulls and it looks to me like Markets are turning up again - Friday was especially strong after a big Jobs Number in the US (I will move on to some Charts later where I will show these moves). Secondly, despite the confusion this Price Bullishness has caused among Investors, the Fundamentals look highly supportive of this move - and a Programme I heard on BBC Radio 4 on Thursday demonstrates this very well.
You may have picked up from comments I have made on the Website, but more particularly on Twitter, that I am feeling extremely Bullish about Markets at the moment and I am more than Fully Invested with a Long Spreadbet on the S&P500 and I might even add to that position.
There are 2 main reasons for this - firstly the recent Breakout to New All Time Highs on the US Major Indexes (and also on the FTSE100) is Technically a very Bullish event. In the early part of the Week just gone we had a bit of a Pullback but this already seems to have sucked in a new load of Bulls and it looks to me like Markets are turning up again - Friday was especially strong after a big Jobs Number in the US (I will move on to some Charts later where I will show these moves). Secondly, despite the confusion this Price Bullishness has caused among Investors, the Fundamentals look highly supportive of this move - and a Programme I heard on BBC Radio 4 on Thursday demonstrates this very well.
Looks like another disjointed and choppy week in the offing - first off we have Phil Hammond’s first Budget as Chancellor on Wednesday (will he Ham it up or make a Ham-Fisted job of it?……where’s that coat?) and then the US Markets are closed on Thursday for Thanksgiving and on Friday the US Markets are only open until 1pm (according to the Almanac).
The Budget could be an interesting one - to an extent it might be quite Business and Lower Tax friendly as an attempt (I doubt it will work) to head off any downwards pressure on Economic Growth with Brexit still assumed to be a drag on Activity. On that basis, it seems likely to me that the UK Markets could do ok leading up to Wednesday and on Budget Day itself perhaps there will be some Sector-Specific surprises that can cause some large Intraday moves - although many of the measures have probably been trailed already. Among those I have noticed are more Government Investment in Infrastructure (Roads, Tunnels, Bridges, Railway Lines, etc.) and there is a lot of talk about reducing Air Passenger Duty (APD) which might be popular for holders of Airline Stocks like EZJ, DTG, FLYB, IAG, RYA, etc. and perhaps even some Travel Companies (TCG, SMWH, TUI etc.). Housebuilding is ‘Political Football of the Decade’ and it seems highly likely there will be measures to help more Homes get built - this and the Infrastructure Boost are a big part of why I bought more GFRD recently as this covers both angles (and looks pretty decent Value anyway).
I had intended to issue Part 2 of the TopChop Psychology Blogs tonight but a couple of weeks ago I read an article from Chris Dillow (@CJFDillow on Twitter) from the Investors Chronicle dated 7 October - 13 October 2016 (the one with the front page title of ‘Supersize Returns: EUROPE’ and the stereotypical German funny hat and lederhosen……) and tonight I reread it and decided it was actually saying something quite important and worth us all thinking about. With the time critical nature of the Markets I felt it was more important to put this out at this juncture.
The markets globally have started to feel instability.
Markets over recent weeks have been stable as there has been no action by central banks in Europe and US. Article 50 for the negotiations to start on Britain leaving the EU has been parked to March 2017. UK Stocks in the majority reporting strong earnings and FTSE pushing up from 6300 to 6900+ area. The markets this summer are contrary to previous summers where they needed constant intervention by central banks. Now they are a happier place if left alone. Amazing how things can move full circle.
Is it possible to be too cautious? I think I am learning the hard way this year that being too cautious is very possible and can be expensive. I have had a really tough year with Returns (or rather, lack of) and although a big chunk of this has been down to a sucession of Profit Warnings from big Positions, another aspect has been down to me taking a very cautious stance this year. It has hurt in 2 ways - the most obvious is the drag I have suffered from large Short Positions and the other impact comes from me failing to “Buy the Dips” when Markets were low (although at the Brexit Vote Lows back in June I did close half my Shorts which was in effect the same as Buying the Market in a big way).
This is a bit of a cathartic blog for me, cleansing the WheelieSoul (no, not the WheelieAr**hole, that’s a different part of the WheelieAnatomy and best avoided…..)
I was out in my garden this afternoon trying to dodge the Showers (that never actually came but that’s another yarn for another day) and I was rolling Brexit thoughts around the WheelieBrain and thinking about how I need to handle things in the next couple of Weeks (or less). As I shoved my Sweetcorn Plants into the freshly Horse Pooed soil, the thought kept hitting me that Brexit looks a real possibility - and what does this mean for my Stocks and Strategy?
I don’t want this Blog to be a Political Rant or anything - quite frankly there is far too much of that around at the moment and I am sure Reader’s know my view (and how I Voted) and it is up to each and every one of us to make our own decisions about how we Vote. I will just tell you how I see things and it is up to you to do whatever you want - as of course you should always do - this is just my Personal Diary of my Trading - I am not making any Recommendations or anything.
A few weeks back I wrote a ‘Week Ahead’ update on a Sunday night and I included a fair chunk of text on how Negative Interest Rate Policy (NIRP) was perhaps not one of the brightest ideas from the Central Banks. I am not sure why but I omitted a pretty key piece of information about the implications of NIRP for Cash and so I thought I would just knock this text up to address this serious deficiency !!
The previous Blog including my bit on NIRP can be found here - it might be worth reading this first, or refreshing if you have not read it for a while (it was written as one of the usual Weekly Charts Blogs but contains the NIRP stuff near the beginning): |
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