Summer is in full swing and I really am not doing much with regards to the Markets - I can’t see much point. This is enabling me to get on with the Paintwork on my BMW Z3 and I have pretty much finished the Front Bumper and I have now filled the Dent above the Boot and put on Primer so it is now waiting to ‘cure’ before I go for a Topcoat of BMW Black Sapphire Metallic but needless to say I need to visit my good friends at Halfords HFD again as I have run out of Paint (I am sure the staff at Maidenhead HFD will soon start saying, “Hi Wheelie Pete, you back again?”……. On top of this I have three 10p Piece sized areas on the Bonnet to Topcoat and then it is pretty much all done.
There is however some Paintwork on the Rear Wing on the Passenger side that I had a go at a few years back but I didn’t do a very good job of it. I was looking at it today and thinking with the improved Painting Skills I have now taught myself it probably wouldn’t be too difficult to correct the mess and if the good Weather continues and I am in the mood I might attack that bit. I will do the other areas first and see how I am feeling - perhaps this is a task for Next Summer (it may look pants close up but at least it is Black and there is no Rust or anything involved) !!
In line with my relaxed Approach to the Markets and my willingness to exploit the ‘Freedom’ I have from not Working to really enjoy the Summer, on Friday I had a really enjoyable Afternoon at the British Motor Museum at Gaydon where I met up with the Tweeting Legend @SmallCappy who I have been regularly conversing with for many Years now but I had never actually managed to meet him - this is partly because he is in Sheffield and I am in Windsor and neither of us are great at Travelling.
It was really good fun to meet up with Cappy and his good lady Wife and in addition we managed to fit in a look around a new part of the Museum where they have built a new ‘Shed’ since I was last there 10 Years ago and this bit had every Jaguar you can think of on the Ground Floor and then a mixture of stuff Upstairs (luckily for me there is a Lift !!) which included such gems as the Last Ever Proper Mini to come off the Production Line (a sweet little Red Cooper) and the last ever Metro and Montego !!
They also had some right horrowshow stuff like a Morris Marina Experimental thing which was to do with Safety of Pedestrians and it was essentially a Marina (that’s bad enough !!!) with a Triumph TR7 Wedge front end - unbelievable. The Jaguar bit is excellent - they start off with a Brough Superior Motorbike and Sidecar (because Jags started as Swallow Sidecars) and they have pretty much every Jaguar you can imagine - and one of the standouts for me was Mark Webber’s F1 Car from something like 2004. They also had the Prototype of the XJ220 from 1988 and one of the Cars from the very limited Production Run. Of course there is an E-Type and all the usuals like the XK120 etc. It really is very good.
Anyway, besides meeting up with Cappy I had an ulterior motive because it had struck me that the Museum would make a great Venue for a ‘Summer Meet-up’ like we did at Duxford recently but before arranging anything (don’t get too excited - any Meet-up will be Summer 2019 most likely - but of course before then there is the ‘WheelieBash’ in Windsor on Saturday 15th September which everyone is invited to - see the Homepage) I wanted to make sure it was suitable. As it happens it looks to me pretty much like the perfect Venue and it is very Central to Peeps all over the Country (Junction 12 of the M40 near Banbury) and has everything we need like a decent Canteen type of thing and absolutely acres of space. Obviously there is a long time before anything will happen but my thinking at the moment is that we can probably go for a Saturday in June as that would enable People who have Jobs to attend - if not it would be a Friday I think.
The Museum’s Website is here and it definitely is worth a visit:
There really isn’t much happening in the Markets and very little News coming out but of course that doesn’t mean that one of my Stocks can’t come out with Bad News and that was exactly what happened with MPAC managing to Warn on Profits. As a result my Portfolio got hit 1.1% Overall but that figure was actually helped a little by Gains on my two Unit Trusts which have a heavy exposure to the US and this resulted in them doing well with the Pound falling.
The MPAC Warning really came as a surprise and I feel a little sorry for Simon Thompson of the Investors Chronicle who actually tipped them as a ‘Buy’ again the Day before !! It comes back to what I say time and again that Profit Warnings and similar ‘Black Swan’ events are entirely unpredictable and can often catch you out. I got really spanked here because MPAC was a very big Position for me so it had a disproportionate negative impact on the Portfolio. This plays to the dangers of having ‘Conviction’ Stocks and this idea that you should go really heavy on your Highest Conviction Holdings strikes me as very unwise - at best it could be worth going slightly heavier than usual on your ‘Favourite’ Stocks but going really gangbusters on them is potentially going to hurt a lot.
I often find that the Stock in my Portfolio which I expect to do best in a given Year actually is awful but one I totally didn’t even consider turns out as being a superb Stock !!
I am very happy sticking with MPAC because even after the problems of Cash Outflow that will impact them over the course of this Financial Year, they should still have something like £22m in Cash at Year End and with a current Market Cap of £30.5m much of the Share Price today is backed by Cash. ShareScope is saying that the Net Asset Value (NAV) is £42.9m and the Tangible Net Asset Value is £41.9m - of course these are raw figures and I have not done any sanity checking or anything but it gives an indication that MPAC is very much a true ‘Value’ play - the ‘Break-up’ Value would be above the current Market Cap if the worst came to the worst and the Company was split up and sold off.
MPAC clearly has issues around Trading and Order Intake (my suspicion is that some of the Order Delays are due to the overall Economic and Political Environment with Brexit Uncertainty likely to be making Businesses very cautious with Investment Decisions like buying New Machinery off of MPAC), but the Cash Pile gives a high ‘Margin of Safety’ and even though we might get more Profit Warnings before things improve a lot, the potential for Recovery is very high.
A Takeover Bid is pretty likely as well when you consider the clear Discount to the Assets.
As Theresa May loves to say, “Nothing has changed………Nothing has changed…..” although hopefully I am a lot more convincing and telling the Truth 100% when I say this with regards to my Approach to the Markets now.
As I have talked about continually on my Blogs and on the Tweets, Brexit could not be going worse and the ability for the Government and Parliament to screw this up is remarkable - they probably could not have done it this bad if they had actually deliberately tried to Balls it up (although clearly there are many ‘Remainers‘ who actually do want it to go very wrong). There are so many moving parts and just one of many potential problems is that Theresa May gets kicked out by the Tory Party and this is probably the most immediate issue as nothing will happen on the Negotiations with the EU as Europe closes down for August. She has an amazing ability to survive a regular flow of ‘Crunch Points’ but my hunch is that she could go at any time - things can move very fast in Politics especially when it comes to who leads the Conservative Party and there are plenty of Candidates lining up to jump into her slot. Another help for her is that Parliament is shut down for the Summer so she won’t have to worry about getting Votes through for a bit.
After that the big worry is of course a so-called ‘No Deal’ Brexit - I see this as having 2 basic types - one that is where we ‘Crash’ out of the EU and it all happens in a haphazard and sudden way and one where there is a Mutual Agreement with the EU that we will leave on such ‘No Deal’ Terms and with appropriate extensions to the end of our current EU Relationship to ensure the impact on both the UK and the EU Economies is pretty limited.
As I type this I have the Andrew Marr Show Repeat playing on my TV and they just mentioned the IMF Report that came out this Week on Brexit and apparently their view is that in a Crash ‘No Deal’ Brexit, the UK would see its GDP fall by 4% - in light of what happened in the Credit Crunch where I think it fell as much as 8% at one point, this might be a little bit softer - but of course this is an ugly prospect and the IMF in truth have no clue what will really happen !!!
With a Planned ‘No Deal’ Brexit the impact would be minimal and the UK might even see its GDP continue to grow as the Economic Backdrop coming from the US is extremely strong.
The point is that all this ‘Deal or No Deal’ stuff will come to a head around November or maybe slightly earlier - so this coincides a treat with the usual Autumn softness in the Markets and on this basis I think the potential for Big Trouble in the Markets around the Autumn is huge and it is simply because of this that I am being extremely cautious and I am looking to build my Cash Pile and to lower my Overall Exposure, particularly in my Long Spreadbet Positions.
Autumn is well known as an iffy time for the Markets and there is very much a Seasonal Pattern to this. I have no evidence whatsoever for this but I sometimes wonder if various ‘Powers that Be’ in The City and Wall Street return from their long Summer Break and deliberately engineer a situation where Markets Sell-off heavily. It is classic Conspiracy Theory stuff but the temptation must be huge for Major Investment Banks to create a situation where Stocks suddenly get very cheap so that they can load up in advance of the Winter which is the strongest part of the Year and of course this means they get lovely Bonuses for their Annual Performance. This would be very easy to orchestrate - the Autumn Effect is very well-known and the vast majority of Market Participants will be on edge and looking for signs of trouble - a prevailing Narrative that plays out in all the Media and particularly Bloomberg and CNBC would feed the Fear. As I say, I have no evidence for this and it is probably more about my Paranoia but it has often struck me how easily Markets could be spooked by Huge Players who have the ability to start a Fire.
While I think of it, I keep hearing various Politicians and Ex-Politicians going on about a ‘People’s Vote’ but I just can’t see that this makes much sense. The simple problems (apart from the fact that the Public will be very peed off with Parliament if such a thing were to take place) are that Brexiteers in Parliament would not allow any Question that had a choice to Remain in the EU and the idea by Justine Greening that we have 3 Options on a Referendum is nuts because it could easily mean that a Minority View prevails. If there is to be some sort of Public Decision, I suspect it would much more likely be a General Election but that would be problematic for Markets as well.
Of course something we cannot know is the extent to which all this Brexit Bad News is factored into Market Prices. My hunch would be that a large amount of it is (and this is evidenced by the lack of Takeover Deals that are going on at the moment - take a look at the weekly Investors Chronicle page on Deals - there are barely any. Note also that it is often the case that when Markets are at the Peak of a Bull Market there is a huge frenzy of Mergers & Acquisitions - this is clearly not so now despite so many ‘Experts’ saying we are at a Market Top. Also it is strange that with the Pound so low there are not more Takeovers - I suspect Summer is part of the reason as Staff at Potential Acquirers will be on Hols, and also I think it is simply the Uncertainty is delaying any kind of Large Investment - that applies to Businesses and Individuals) but even so a ‘Crash’ ‘No Deal’ Exit could probably cause some serious turmoil for Stocks - although of course with the Pound likely to fall off a Cliff it is hard to be sure how much Stocks will get hit. The simple fact is when so much is unclear it is best to stand aside and be ready for the Worst, and be in a position where you can exploit any Bargains once things get on the mend.
As I mentioned, this is pretty much a continuation of my Strategy that I have been following for Months now and I see no reason to change - if anything, I perhaps ought to put more focus on lowering my Exposure. On top of this, we have the ESMA Regulatory Changes coming in on the 1st of August and even though Existing Positions won’t be affected, it is another good reason to get my Long Spreadbet Exposure down a bit. I might put on some small Hedging Shorts if I see a need to.
Incredibly we are almost at August now with pretty much just one Full Week of July left now and therefore I better grab my Ancient Copy of the UK Stockmarket Almanac (mine is from 2016 but the Averages and Figures in it won’t be hugely out compared to the latest Version) and see what they have to say about such an August Month…….
They start off by talking about the ‘Summer Doldrums’ (tell me about it !!) and on this basis say that August is very much like July. August is the 7th Best Month (pretty much in the middle then) with the Average Return for the FTSE100 being 0.5% and there is a 58% Probability of that happening. On an International basis August has a bad reputation and is the 2nd Worst Month for 70 World Equity Markets. A typical August sees the FTSE100 drop away for the first 2 Weeks but then recover in the last 2 Weeks.
Interestingly August is the busiest Month for Interim Results Announcements with my Copy of the Almanac from 2016 saying that 43 FTSE100 Companies were reporting and 93 FTSE250 Companies - so at least we might get some Results news.
Last Week I published the Second Part of the Blogs which were in effect a Review of the Naked Trader’s ‘Trade like a Shark’ Book and the Third bit should come out this Week. I have had a few People mention to me how useful they have found the Quotes from this Book and how it has made them think - which is really the idea behind all my Blogs - to make you think.
The Guest Blogs I have been promising with regard to Short Term Trading are now pretty much finished and once the ‘Trade like a Shark’ Blogs are finished, I will move on to getting these published - I think Reader’s will really enjoy these and find them extremely useful even if they have a Long Term Investor approach.
I made a tentative start on some Blogs about focusing our efforts regarding Control onto things that we actually can Control - because of course so much about the Markets is entirely Uncontrollable by ourselves. At the moment this is a pretty embryonic start on the Blogs but hopefully I can turn it into something worth reading - but with Summer distracting me I am not rushing to get it done. I had intended to work on it last Night but I ended up spraying Primer on my Car even at 10pm when it was Dark so not much got done to the Blog !!
However, I do have a couple of other Blogs in pretty good shape so the flow of Regular Weekly Blogs should be maintained and of course I will be bashing something out every Weekend like I normally do.
A Chemically Treated Blast from the Past
It is not my normal thing to include a Blog about a Stock I have Bought in this ‘Trip down Memory Lane’ bit but I have a tiny Position in Accsys Technologies AXS which I bought a few Years ago and over time they have been growing Revenues very nicely and the key issue has been the lack of Supply of their Treated Timber Products because they simply did not have the Capacity. However, last Week we got more Good News about this with them getting more Funding from a New Shareholder and this means they can increase Production at their Arnhem Plant and they can also put more efforts into exploiting Accoya and Tricoya in the US and Asia - it is small and risky but I think this could work out rather well. It is not one to buy now as like all tiny Stocks it moves up and down over time to a large degree but I myself am tempted to buy more and I will be looking for Opportunities to do so but probably not until we have got any Autumn Troubles out of the way.
I am simply putting this Blog in so that Readers can learn about what AXS actually does and this Blog should make it clear exactly why I am interested. Of course the Numbers in it will be totally irrelevant now (I hope you like the picture as well !!):
Better do some Charts then………..
Dow Jones Industrials Index (DOW)
As always the Charts I show are from the brilliant ShareScope Software that I use and if you use SharePad you should be able to set them up to look very similar. If you click on the Images then they should grow larger so you can see more detail.
My Chart below is very similar to one I showed Last Week but obviously we have moved on a little bit. My Red Arrow is pointing to a Small Doji Candle from Friday and note that even though the DOW had turned down from a High at just over 25200 from Last Wednesday, there is Support on Friday at just under 25000 and this is obviously an important psychological Number. Note also that the Price Candles managed to ‘Break-out’ of the Green Downtrend Resistance Line (Green Arrow) which I showed Last Week and since that it has pulled back but the Candle on Friday is sitting on that Green Line - it might find Support here and turn up again. There is a lot of Support just below the Current Price Level as well.
25402 is clearly an Important Resistance Level that must be got over but other than that the Chart is pretty much the same as Last Week - if you have a poor memory or did not see it or want more clarity, then I suggest you go to the Blog I did Last Sunday and this will give a lot more explanation around the Features of this chart. For what it’s worth, this is really a Bullish looking Chart in the Longer Term although we might get a Pullback soon.
This is interesting and worth noting. In the Bottom Window on the Screen below we have the RSI (Relative Strength Index) for the DOW Daily. On a current Reading of RSI 56 this is not particularly high (RSI 70 is usually seen as the ‘Overbought’ Level for most things) but note where my Thick Blue Line is (Blue Arrow) where the RSI on the DOW in recent Months has turned down from Levels that are not particularly high.
This doesn’t look so good. Below we have the Weekly Candles for the DOW and my Yellow Circle is highlighting the Candle we got Last Week which looks really like a ‘Gravestone Doji’ - clearly this is not a good thing !! I suspect we might get a Pullback on the DOW but there is good Support down around the 200 Day Moving Average (the Light Blue Line) at about 24500.
On the Chart below we have the Daily Candles of the DOW with the Blue Wiggly Bollinger Bands above and below. My Yellow Circle is showing how the Price Candles have dropped back from the Upper Band - there is no certainty it will continue to drop but that would certainly follow the Pattern of recent Months.
Next we have the Heiken Ashi Candlesticks for the DOW - remember these are entirely different to the usual Candles I show. My Blue Arrow is pointing to where the HA Candles have turned Red and this is not too good. However, that Red Candle is quite small and it is only when you get a Big Red Down Candle that you need to get really worried.
I won’t show the S&P500 as it is pretty much the same as the DOW and the Nasdaq Composite Index (US Tech) is also showing similar signs of turning over.
Looking at these has got me thinking - with the first 2 Weeks of August often being weak and with signs the US Markets might ease back, it might be worth doing a Short on the S&P500. I won’t do anything tonight as the Sunday Spreadbet Markets can be very unrealistic and choppy but I will look at how things lie Tomorrow Night for a possible Small Short. Remember also that the Almanac says August is particularly bad for International Markets.
I mentioned on a Tweet a couple of Days ago that I could see an Upwards Pointing Flat-Top Triangle over One Month on the FTSE100 Daily and I will start off by showing this.
I have used a ‘clean’ Chart to show this and if you look at the Black Line (marked by the Black Arrow) that is the ‘Flat Top’ bit of the Triangle and the Key Level here is 7716 which must be broken over and the Green Line (Green Arrow) shows the Bottom Line of the Triangle and note how this Line is squeezing the Candles up against the Black Line - this Squeeze is likely to mean that the Price pops out of the Top.
Note also my Yellow Circle which is showing the 50/200 Day Moving Average ‘Golden Cross’ - this is a very Bullish thing. The other thing to note is that if the Green Line of the Triangle fails, then there is important Horizontal Support at 7500 - that must hold.
Next we have one of my fave things (I nearly got all Mary Poppins there…….) - my Blue Arrow is showing where we got a 13/21 Day Exponential Moving Average (EMA) ‘Golden Cross’ - this usually means the FTSE100 will rise for a few Weeks.
OK, I have to leave it there as time is moving on. I hope things go well for you next Week and make sure you get out and enjoy the Summer while it’s here !!
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